SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13D-1(A) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13D-2(A)
(AMENDMENT NO. ___)*
CONVERGENCE COMMUNICATIONS, INC.
(Name of Issuer)
Common Stock, par value $0.001 per share
(Title of Class of Securities)
None
(CUSIP Number)
Michael E. Cahill, Esq.
Managing Director & General Counsel
The TCW Group, Inc.
865 South Figueroa Street, Ste. 1800
Los Angeles, California 90017
(213) 244-0000
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
October 18, 1999
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check
the following box. ( )
NOTE: schedules filed in paper format shall include a signed original and
five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 28 Pages)
*The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities
Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the
Act (however, see the Notes).
SCHEDULE 13D
CUSIP No. None Page 2 of 28 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
THE TCW GROUP, INC.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ( )
(b) (X)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Nevada
NUMBER OF 7 SOLE VOTING POWER
SHARES
8 SHARED VOTING POWER
BY 2,000,000
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
10 SHARED DISPOSITIVE POWER
PERSON WITH 2,000,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,000,000 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
(X)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.6% (See Item 5)
14 TYPE OF REPORTING PERSON*
HC, CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SCHEDULE 13D
CUSIP No. None Page 3 of 28 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
ROBERT A. DAY
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ( )
(b) (X)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
NUMBER OF 7 SOLE VOTING POWER
SHARES
8 SHARED VOTING POWER
BY 2,000,000
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
10 SHARED DISPOSITIVE POWER
PERSON WITH 2,000,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,000,000 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
(X)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.6% (See Item 5)
14 TYPE OF REPORTING PERSON*
IN, HC
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SCHEDULE 13D
CUSIP No. None Page 4 of 28 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
TCW INVESTMENT MANAGEMENT COMPANY
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ( )
(b) (X)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
CALIFORNIA
NUMBER OF 7 SOLE VOTING POWER
SHARES
8 SHARED VOTING POWER
BY 2,000,000
9 SOLE DISPOSITIVE POWER
EACH
REPORTING 10 SHARED DISPOSITIVE POWER
2,000,000
PERSON WITH
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,000,000 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
(X)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.6% (See Item 5)
14 TYPE OF REPORTING PERSON*
HC, CO, IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SCHEDULE 13D
CUSIP No. None Page 5 of 28 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
TCW ADVISORS, INC.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ( )
(b) (X)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
NUMBER OF 7 SOLE VOTING POWER
SHARES
8 SHARED VOTING POWER
BY 2,000,000
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
10 SHARED DISPOSITIVE POWER
PERSON WITH 2,000,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,000,000 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
(X)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.6% (See Item 5)
14 TYPE OF REPORTING PERSON*
HC, CO, IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SCHEDULE 13D
CUSIP No. None Page 6 of 28 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
TCW PRIVATE EQUITY HOLDINGS CORP.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ( )
(b) (X)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
WC
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NEW YORK
NUMBER OF 7 SOLE VOTING POWER
SHARES
8 SHARED VOTING POWER
BY 2,000,000
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
10 SHARED DISPOSITIVE POWER
PERSON WITH 2,000,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,000,000 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
(X)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.6% (See Item 5)
14 TYPE OF REPORTING PERSON*
HC, CO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SCHEDULE 13D
CUSIP No. None Page 7 of 28 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
BAEZA & CO., L.L.C.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ( )
(b) (X)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
NUMBER OF 7 SOLE VOTING POWER
SHARES
8 SHARED VOTING POWER
BY 2,000,000
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
10 SHARED DISPOSITIVE POWER
PERSON WITH 2,000,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,000,000 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
(X)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.6% (See Item 5)
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SCHEDULE 13D
CUSIP NO. NONE PAGE 8 OF 28 PAGES
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
MARIO L. BAEZA
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ( )
(b) (X)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not Applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
NUMBER OF 7 SOLE VOTING POWER
SHARES
8 SHARED VOTING POWER
BY 2,000,000
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
10 SHARED DISPOSITIVE POWER
PERSON WITH 2,000,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,000,000 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
(X)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.6% (See Item 5)
14 TYPE OF REPORTING PERSON*
IN, HC
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SCHEDULE 13D
CUSIP No. None Page 9 of 28 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
TCW/LATIN AMERICA MANAGEMENT PARTNERS, LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ( )
(b) (X)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER
SHARES 8 SHARED VOTING POWER
2,000,000
BY 9 SOLE DISPOSITIVE POWER
EACH
10 SHARED DISPOSITIVE POWER
REPORTING 2,000,000
PERSON WITH
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,000,000 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
(X)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.6% (See Item 5)
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SCHEDULE 13D
CUSIP No. None Page 10 of 28 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
TCW/LATIN AMERICA PRIVATE EQUITY PARTNERS, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ( )
(b) (X)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO, AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER
SHARES
8 SHARED VOTING POWER
BY 2,000,000
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
10 SHARED DISPOSITIVE POWER
PERSON WITH 2,000,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,000,000 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
(X)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.6% (See Item 5)
14 TYPE OF REPORTING PERSON*
PN
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SCHEDULE 13D
CUSIP No. None Page 11 of 28 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
TCW/LATIN AMERICA PARTNERS, LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ( )
(b) (X)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER
SHARES
8 SHARED VOTING POWER
BY 2,000,000
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
10 SHARED DISPOSITIVE POWER
PERSON WITH 2,000,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,000,000 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
(X)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.6% (See Item 5)
14 TYPE OF REPORTING PERSON*
00
*SEE INSTRUCTIONS BEFORE FILLING OUT!
SCHEDULE 13D
CUSIP No. None
Page 12 of 28 Pages
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
TCW/CCI HOLDING LLC
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) ( )
(b) (X)
3 SEC USE ONLY
4 SOURCE OF FUNDS*
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) ( )
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
NUMBER OF 7 SOLE VOTING POWER
SHARES
8 SHARED VOTING POWER
BY 2,000,000
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
10 SHARED DISPOSITIVE POWER
PERSON WITH 2,000,000
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,000,000 (See Item 5)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
(X)
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.6% (See Item 5)
14 TYPE OF REPORTING PERSON*
OO
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Item 1. Security and Issuer
This Statement relates to the Common Stock, par value $0.001 per share (the
"Common Stock"), of Convergence Communications, Inc., a Nevada corporation
(the "Issuer"). The address of the principal executive office of the
Issuer is 102 West 500 South, Suite 320, Salt Lake City, Utah 84101.
Item 2. Identity and Background
This Statement is filed on behalf of
(1) The TCW Group, Inc., a Nevada corporation ("TCWG");
(2) Robert A. Day, an individual;
(3) TCW Investment Management Company, a California corporation and
wholly-owned subsidiary of TCWG ("TIMCO");
(4) TCW Advisors, Inc., a New York corporation and wholly-owned
subsidiary of TIMCO ("TCW Advisors");
(5) TCW Private Equity Holdings Corp., a New York corporation and
wholly owned subsidiary of TCW Advisors ("TCW PEH");
(6) Baeza & Co., L.L.C., a Delaware limited liability company wholly
owned by Mario L. Baeza ("Baeza & Co.");
(7) Mario L. Baeza, an individual;
(8) TCW/Latin America Partners, L.L.C., a Delaware limited liability
company, the two members of which are TCW PEH and Baeza & Co.
("TCW/LAP");
(9) TCW/Latin America Management Partners, L.L.C., a Delaware limited
liability company, the managing member of which is TCW/LAP
("TCW/LAMP");
(10) TCW/Latin America Private Equity Partners, L.P., a Delaware
limited partnership of which TCW/LAMP is the general partner,
acting through TCW/LAP ("TCW/LAPEP");
(11) TCW/CCI Holding LLC, a Delaware limited liability company, wholly
owned by TCW/LAPEP ("TCW/CCI");
TCWG, Robert Day, TIMCO, TCW Advisors and TCW PEH are referred to herein as
the "TCW Related Entities". The TCW Related Entities and Baeza & Co.,
TCW/LAP, TCW/LAMP, TCW/LAPEP and TCW/CCI are hereinafter collectively
referred to as the "Reporting Persons".
Mr. Day acts as Chairman of the Board and Chief Executive Officer of TCWG.
Additionally, Mr. Day may be deemed to control TCWG, although he disclaims
control and disclaims beneficial ownership of any securities owned by the
Reporting Persons.
Mr. Baeza acts as Chairman and Chief Executive Officer and is the sole
owner of Baeza & Co. Mr. Baeza disclaims beneficial ownership of any
securities owned by the Reporting Persons.
TCWG is a holding company of entities involved in the principal business of
providing investment advice and management services. TIMCO is an
investment advisor and provides investment advice and management services
to institutional and individual investors. TCW Advisors is an investment
advisor and provides investment advice and management services to
institutional and individual investors. TCW PEH is a holding company which
holds TCW's interest in TCW LAP. TCW/LAMP, acting through TCW/LAP, is the
general partner of TCW/LAPEP. TCW/LAPEP is a limited partnership which is
set up to invest in private equities of Latin America companies. TCW/CCI is
the investment vehicle used to purchase securities of the Issuer. The
address of the principal business and principal office for the TCW Related
Entities other than Robert Day, TCW Advisors and TCW PEH is 865 South
Figueroa Street, Suite 1800, Los Angeles, California 90017. The address of
the principal business and principal office for the other Reporting Persons
is 200 Park Avenue, Suite 2100, New York, New York 10166.
(a)-(c) & (f)
(i) The executive officers of TCWG are listed below. The principal
business address for each executive officer is 865 South Figueroa Street,
Suite 1800, Los Angeles, California 90017, except that the principal
business address for Robert A. Day is 200 Park Avenue, Suite 2100, New
York, New York 10166. Each executive officer is a citizen of the United
States of America unless otherwise specified below:
Executive Officers
------------------
Robert A. Day Chairman of the Board & Chief Executive Officer
Ernest O. Ellison Vice Chairman of the Board
Marc I. Stern President
Alvin R. Albe, Jr. Executive Vice President, Finance & Administration
Thomas E. Larkin, Jr. Executive Vice President & Group Managing Director
Michael E. Cahill Managing Director, General Counsel & Secretary
William C. Sonneborn Managing Director, Chief Financial Officer &
Assistant Secretary
Schedule I attached hereto and incorporated herein sets forth with respect
to each director of TCWG his name, residence or business address,
citizenship, present principal occupation or employment and the name,
principal business and address of any corporation or other organization in
which such employment is conducted.
(ii) The executive officers and directors of TIMCO are listed below.
The principal business address for each executive officer and director is
865 South Figueroa Street, Suite 1800, Los Angeles, California 90017,
except that the principal business address for Robert A. Day is 200 Park
Avenue, Suite 2100, New York, New York 10166. Each executive officer and
director is a citizen of the United States of America unless otherwise
specified below:
Directors
---------
Alvin R. Albe, Jr. Director
Robert A. Day Director, Chairman
Thomas E. Larkin, Jr. Director
Marc L. Stern Director
Executive Officers
------------------
Robert A. Day Chairman of the Board & Chief Executive Officer
Thomas E. Larkin, Jr. Vice Chairman
Marc L. Stern Vice Chairman
Alvin R. Albe, Jr. President
Ernest O. Ellison Chairman, Investment Policy Committee
Michael E. Cahill Managing Director, General Counsel & Secretary
William C. Sonneborn Managing Director, Chief Financial Officer &
Assistant Secretary
(iii) The executive officers and directors of TCW Advisors are listed
below. The principal business address for each executive officer and
director is 865 South Figueroa Street, Suite 1800, Los Angeles, California
90017, except that the principal business address for Robert A. Day is 200
Park Avenue, Suite 2100, New York, New York 10166. Each executive officer
and director is a citizen of the United States of America unless otherwise
specified below:
Directors
---------
Alvin R. Albe, Jr. Director
Robert A. Day Director, Chairman
Thomas E. Larkin, Jr. Director
Marc I. Stern Director
Executive Officers
------------------
Robert A. Day Chairman of the Board & Chief Executive Officer
Thomas E. Larkin, Jr. Vice Chairman
Marc I. Stern Vice Chairman
Alvin R. Albe, Jr. Executive Vice President, Finance & Administration
Michael E. Cahill Managing Director, General Counsel & Secretary
William C. Sonneborn Managing Director, Chief Financial Officer &
Assistant Secretary
(iv) The executive officers and directors of TCW PEH are listed
below. The principal business address for each executive officer and
director is 865 South Figueroa Street, Suite 1800, Los Angeles, California
90017. Each executive officer and director is a citizen of the United
States of America unless otherwise specified below:
Directors
---------
Alvin R. Albe, Jr. Director
Marc I. Stern Director
Executive Officers
------------------
Marc I. Stern President
Alvin R. Albe, Jr. Executive Vice President, Finance & Administration
William C. Sonneborn Managing Director, Chief Financial Officer, and
Treasurer
Michael E. Cahill Managing Director, General Counsel and Assistant
Secretary
(v) The sole managing member of Baeza & Co. is Mario L. Baeza, who is
also the sole executive officer and director. The principal business
address for Mr. Baeza is 123 Hillside Avenue, Englewood, NJ 07631. Mr.
Baeza is a citizen of the United States of America.
Executive Officer
-----------------
Mario L. Baeza Chairman, CEO & Director
(vi) The executive officers and members of the Management Committee
of TCW/LAP are listed below. The principal business address for each
executive officer and member is 200 Park Avenue, Suite 2100, New York, New
York 10166. Each executive officer and member is a citizen of the United
States of America unless otherwise specified below:
Executive Officers and Members of the Management Committee
----------------------------------------------------------
Carlos Christensen Managing Director and Member of the Management
Committee
Alfonso Bahamonde Managing Director and Member of the Management
Committee
Mario Baeza Chairman and CEO and Member of the Management
Committee
Marc Stern Member of the Management Committee
Raymond Henze Member of the Management Committee
(vii) The executive officers of TCW/LAMP are listed below. The
principal business address for each executive officer is 200 Park Avenue,
Suite 2100, New York, New York 10166. Each executive officer is a citizen
of the United States of America unless otherwise specified below.
Executive Officers
------------------
Carlos Christensen Managing Director
Alfonso Bahamonde Managing Director
Mario Baeza Chairman and CEO
The managing member of TCW/LAMP is TCW/LAP.
(viii) TCW/LAPEP is a limited partnership whose general partner is
TCW/LAMP, acting through TCW/LAP as managing general partner.
(ix) The executive officers of TCW/CCI are listed below. The
principal business address for each executive officer is 200 Park Avenue,
Suite 2100, New York, New York 10166. Each executive officer is a citizen
of the United States of America unless otherwise specified below:
Executive Officers
------------------
Carlos Christensen Managing Director
Alfonso Bahamonde Managing Director
Mario Baeza Chairman and CEO
Giorgio Boero Managing Director
The sole member of TCW/CCI is TCW/LAPEP.
(d)-(e)
During the last five years, none of the Reporting Persons, nor, to the best
of their knowledge, any of their respective executive officers, directors
and general partners (i) has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors); or (ii) has been a
party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceedings was or is
subject to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or state
securities laws or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration
On October 18, 1998 the Issuer sold 2,000,000 shares of the Issuer's Series
C Convertible Preferred Stock, par value $0.001 per share to TCW/CCI (the
"TCW/CCI Preferred Stock") at a purchase price of $7.50 per share for an
aggregate amount of $15,000,000 in cash. Substantially all the funds for
the acquisition of the TCW/CCI Preferred Stock were obtained from the
limited partners of TCW/LAPEP.
Item 4. Purpose of Transaction
The Reporting Parties have obtained their interest in the Issuer as an
investment, having only those rights to participate in the management of
the Issuer set forth in the CCI Shareholders Agreement, dated as of October
18, 1999 (the "Shareholders Agreement"), entered into by the Issuer,
TCW/CCI and certain other shareholders of the Issuer in connection with
their acquisition of securities of the Issuer. The Shareholders Agreement
is described in Section 6. Also described in Section 6 are various
agreements between the Issuer and TCW/CCI and, in some cases, others
providing for the acquisition by TCW/CCI of additional securities of the
Issuer. Except as set forth elsewhere in this Schedule 13D, TCW/CCI and
the other Reporting Parties have made no proposals and have entered into no
agreements which would be related to or would result in any of the matters
described in Items 4(a)-(j) of Schedule 13D; however, as part of their
ongoing review of investment alternatives, the Reporting Parties may
consider such matters in the future and, subject to applicable laws, may
formulate a plan with respect to such matters subject to applicable law,
and, from time to time, the Reporting Parties may hold discussions with or
make formal proposals to management or the Board of Directors of the
Issuer, other stockholders of the Issuer or other third parties regarding
such matters.
Item 5. Interest and Securities of the Issuer
(a) As of the date of this Schedule 13D, TCW/CCI holds 2,000,000
shares of Convertible Preferred Stock ("TCW/CCI Preferred Stock") and no
shares of Common Stock. The Convertible Preferred Stock votes on a
one-for-one basis with the Common Stock and is convertible at the option
of the holder on a one-for-one basis (subject to certain anti-dilution
adjustments) into shares of Common Stock, and is subject to mandatory
conversion on the same basis upon the occurrence of either of the
following: (i) all the parties to the Shareholders Agreement (as defined
in Item 6, below), acting together transfer their Issuer securities for
cash or publicly traded securities, or (ii) there occurs a registered
public offering of the Issuer's securities meeting certain requirements.
The TCW/CCI Preferred Stock, if converted into Common Stock, would
represent approximately 14.6% of the Common Stock and, assuming the other
shares of the Issuer's Series C Convertible Preferred Stock were also
converted into Common Stock, would represent approximately 11.0% of the
Common Stock.
Each of the Reporting Parties, other than TCW/CCI, as a parent corporation
or partnership or as a general partner or member of other Reporting
Parties, may be deemed to beneficially own the TCW/CCI Preferred Stock.
Each of TCWG, Robert Day, TIMCO, TCW Advisors, TCW PEH, Baeza & Co. and
Mario L. Baeza disclaim beneficial ownership of the TCW/CCI Preferred Stock
and any Common Stock reported herein and the filing of this Statement shall
not be construed as an admission that such entities and individuals are the
beneficial owners of any securities covered by this Statement.
Pursuant to Rule 13d-5(b)(1) promulgated under the Securities Exchange Act
of 1934 (the "Exchange Act"), to the extent a "group" is deemed to exist by
virtue of the Stockholders Agreement, each of the Reporting Persons would
be deemed to have beneficial ownership, for purposes of Sections 13(g) and
13(d) of the Exchange Act, of all of the equity securities of the Issuer
beneficially owned by the other parties to the Stockholders Agreement.
Accordingly, the Reporting Persons would be deemed to beneficially own an
aggregate of 17,738,277 shares of Common Stock, or approximately 89.9% of
the outstanding shares of Common Stock (assuming the conversion of all the
outstanding Series C Preferred Stock held by the parties to the
Shareholders Agreement to Common Stock).
The filing of this Statement shall not be construed as an admission, for
the purposes of Sections 13(g) and 13(d) and Regulation 13D-G of the
Exchange Act nor for any other purpose or under any other provision of the
Exchange Act or the rules promulgated thereunder, that any of the Reporting
Persons is the beneficial owner of any securities owned by any other party
to the Stockholders Agreement.
(b) TCW/LAP as the person acting on behalf of TCW/LAMP, the general
partner of TCW/LAPEP, and TCW/LAPEP, as the sole member of TCW/CCI, have
the power to vote and dispose of the TCW/CCI Preferred Stock held by
TCW/CCI. Therefore, TCW/LAP, TCW/LAMP, TCW/LAPEP and TCW/CCI collectively
have the power to vote and dispose of the TCW/CCI Preferred Stock. In
addition, TCW PEH and Baeza & Co., as the 50% owners of TCW/LAP, and Mr.
Baeza, as the sole owner of Baeza & Co., may be deemed to beneficially own
the TCW/CCI Preferred Stock. TCW PEH, Baeza & Co. and Mr. Baeza each
disclaims beneficial ownership of the shares of the TCW/CCI Preferred
Stock and any Common Stock reported herein and the filing of this
Statement shall not be construed as an admission that any such entity is
the beneficial owner of any securities covered by this statement.
TIMCO, as the parent corporation of TCW Advisors, TCW Advisors as the
parent corporation of TCW PEH, TCWG, as the parent corporation of TIMCO,
and Robert Day, the Chairman of the Board of TCWG, may be deemed to
beneficially own the TCW/CCI Preferred Stock. TCW Advisors, TIMCO, TCWG and
Mr. Day each disclaims beneficial ownership of the shares of the TCW/CCI
Preferred Stock and any Common Stock reported herein and the filing of this
Statement shall not be construed as an admission that any such entity is
the beneficial owner of any securities covered by this statement.
(c) Except for the purchase of the TCW/CCI Preferred Stock described
herein, none of the Reporting Parties, and to the best of their knowledge,
none of their respective executive officers, directors, general partners
or managing members has effected transactions involving the Series C
Convertible Preferred Stock or the Common Stock during the last 60 days.
The TCW Related Entities, Baeza & Co. and Mr. Baeza, and each of the
individuals listed in Item 2, disclaim beneficial ownership of the TCW/CCI
Preferred Stock and any Common Stock reported herein and the filing of
this Statement shall not be construed as an admission that any such person
is the beneficial owner of any securities covered by this Statement.
(d) None
(e) Not applicable
Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer
The Shareholders Agreement provides that the parties thereto may not
transfer securities of the Issuer owned by them (other than to affiliates)
unless (i) all such parties acting together transfer their Issuer
securities for cash or publicly traded securities, or (ii) there occurs a
registered public offering of the Issuer's securities meeting certain
requirements. After a public offering referred to in clause (ii), the
parties may transfer their securities of the Issuer, subject to tag-along
rights on the part of the other parties, except in the case of transfers to
affiliates. The Shareholders Agreement provides for a board of directors
of five members (to be expanded to ten members) and permits each of five
groups of parties to the Shareholders Agreement to designate a director
(two directors after the board is expanded), with all parties agreeing to
vote for such designees. Certain actions by the Company require the vote
of the designated directors of any three of the groups, certain other
actions require the vote of the designated directors of any four of the
groups, and certain other actions require the vote of the designated
directors of all five groups.
The Issuer, TCW/CCI and certain other shareholders of the Issuer have
entered into the Amended and Restated Registration Rights Agreement, dated
as of October 18, 1999 (the "Registration Rights Agreement"), with respect
to the shares of Common Stock which such shareholders own or have the right
to acquire, including Common Stock issuable to TCW/CCI on the conversion of
the TCW/CCI Preferred Stock or the exercise of the Warrant described in the
last paragraph of this Item 6, and shares issuable with respect to any such
Common Stock through stock splits, stock dividends, reclassifications and
similar transactions (the "Registrable Securities"). The Registration
Rights Agreement provides that one or more of the shareholders party
thereto owning 20% or more of the Registrable Securities may demand
registration of their Registrable Securities under the Securities Act of
1933 (but the Company need not provide more than three such demand
registrations), and each shareholder party to the Registration Rights
Agreement has unlimited piggy-back registration rights and unlimited
demand registration rights with respect to registrations on Form S-2 and S-
3.
The Issuer and TCW/CCI have entered into the Stock Purchase Agreement,
dated October 18, 1999, pursuant to which TCW/CCI acquired the TCW/CCI
Preferred Stock. Pursuant to such Agreement, the parties have agreed that
within five business days of the satisfaction of certain conditions (the
"Subsequent Closing Date"), including the expiration or early termination
of the waiting period requirements under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Condition"), the Issuer
shall sell to TCW/CCI, at the same price per share for which the TCW/CCI
Preferred Stock was purchased, an additional 1,333,333 shares of
Convertible Preferred Stock.
The Issuer, TCW/CCI and certain other shareholders of the Issuer have
entered into the Option Agreement, dated October 18, 1999, pursuant to
which TCW/CCI was granted an option to purchase from the Issuer, until July
18, 2000, an additional 1,333,333 shares of Convertible Preferred Stock, at
the same price per share for which the TCW/CCI Preferred Stock was
purchased. Exercise of the option is subject to the satisfaction of the
HSR Condition.
The Issuer has granted to TCW/CCI a warrant (the "Warrant"), entitling
TCW/CCI to purchase from the Issuer 500,000 shares of Common Stock at a
purchase price to be determined pursuant to a formula set forth therein.
The Warrant is exercisable upon the occurrence of either of the following:
(i) all the parties to the Shareholders Agreement acting together transfer
their Issuer securities for cash or publicly traded securities, or (ii)
there occurs a registered public offering of the Issuer's securities
meeting certain requirements, provided that if neither such event occurs
prior to October 18, 2003, the exercise price shall be $.01 per share of
Common Stock. Pursuant to a Participation Agreement, dated as of October
15, 1999, between the Issuer, TCW/CCI and certain other shareholders of the
Issuer, upon the occurrence of the Subsequent Closing Date, the Issuer will
grant to TCW/CCI an additional warrant to purchase 333,333 shares of Common
Stock of the Issuer, containing the same terms and conditions as the
Warrant.
The foregoing descriptions of agreements to which TCW/CCI is a party are
qualified in their entirety by reference to such agreements, copies of
which are filed as Exhibits hereto and incorporated herein by reference.
Item 7. Material to be Filed as Exhibits
The following are filed herewith as Exhibits to this Schedule 13D:
Exhibit A Joint Acquisition Statement pursuant to Rule 13(d)-(f)(1).
Exhibit B Stock Purchase Agreement by and between Convergence
Communications, Inc., and TCW/CCI Holding LLC. dated
October 18, 1999.
Exhibit C Option Agreement by and among Convergence Communications,
Inc., Telematica EDC, C.A., TCW/CCI Holding LLC,
International Finance Corporation, Glacier Latin-America
Ltd., Fondelec Essential Services Growth Fund, L.P. and
Internexus S.A. dated October 18, 1999.
Exhibit D Warrant For The Purchase of Shares of Common Stock of
Convergence Communications, Inc. dated October 15, 1999
issued to TCW/CCI Holding LLC.
Exhibit E CCI Shareholders' Agreement by and among Telematica EDC,
C.A., TCW/CCI Holding LLC, International Finance
Corporation, Glacier Latin-America Ltd., The Estate of
George D'Ambrosio, Lance D'Ambrosio and Troy D'Ambrosio,
Fondelec Group, Inc., Pegasus Fund, L.P., Fondelec
Essential Services Growth Fund, L.P., Internexus S.A. and
Convergence Communications, Inc. dated October 18, 1999.
Exhibit F Amended and Restated Registration Rights Agreement by and
among Convergence Communications, Inc., Pegasus Group,
L.P., Fondelec Essential Services Growth Fund, L.P.,
Internexus S.A., Telematica EDC, C.A., TCW/CCI Holding LLC,
International Finance Corporation, Glacier Latin-America
Ltd. and Lance D'Ambrosio, Troy D'Ambrosio and the Estate
of George S. D'Ambrosio dated October 18, 1999.
Exhibit G Participation Agreement among Convergence Communications,
Inc., Telematica EDC, C.A., TCW/CCI Holding LLC,
International Finance Corporation, Glacier Latin-America
Ltd., Fondelec Essential Services Growth Fund, L.P.,
Internexus S.A. and Lance D'Ambrosio, Troy D'Ambrosio and
the Estate of George S. D'Ambrosio dated October 18, 1999.
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certify that the information set forth in this Statement is
true, complete and correct.
Dated as of this 28th day of October, 1999.
THE TCW GROUP, INC.
By: /s/ Susan Marsch
---------------------------------
Name: Susan Marsch
Title: Authorized Signatory
TCW INVESTMENT MANAGEMENT CO.
By: /s/ Susan Marsch
---------------------------------
Name: Susan Marsch
Title: Authorized Signatory
TCW ADVISORS, INC.
By: /s/ Susan Marsch
---------------------------------
Name: Susan Marsch
Title: Authorized Signatory
ROBERT A. DAY
By: /s/ Susan Marsch
---------------------------------
Name: Susan Marsch
Title: Under Power of Attorney dated March 31, 1999, on file with
Schedule 13G for Hibbett Sporting Goods, Inc., dated April 9,
1999
TCW PRIVATE EQUITY HOLDINGS CORP.
By: /s/ Susan Marsch
---------------------------------
Name: Susan Marsch
Title: Authorized Signatory
BAEZA & CO. L.L.C.
By: /s/ Mario L. Baeza
---------------------------------
Name: Mario L. Baeza
Title: Authorized Signatory
MARIO L. BAEZA
/s/ Mario L. Baeza
---------------------------------
Mario L. Baeza
TCW/LATIN AMERICA PARTNERS, L.L.C.
By: TCW PRIVATE EQUITY HOLDINGS CORP.
By: /s/ Susan Marsch
---------------------------------
Name: Susan Marsch
Title: Authorized Signatory
By: BAEZA & CO. L.L.C.
By: /s/ Mario L. Baeza
---------------------------------
Name: Mario L. Baeza
Title: Authorized Signatory
TCW/LATIN AMERICA MANAGEMENT PARTNERS, L.L.C.
By: TCW/LATIN AMERICA PARTNERS, L.L.C.
By: TCW PRIVATE EQUITY HOLDINGS CORP.
By: /s/ Susan Marsch
---------------------------------
Name: Susan Marsch
Title: Authorized Signatory
By: BAEZA & CO. L.L.C.
By: /s/ Mario L. Baeza
---------------------------------
Name: Mario L. Baeza
Title: Authorized Signatory
TCW/LATIN AMERICA PRIVATE EQUITY PARTNERS
By: TCW/LATIN AMERICA PARTNERS, L.L.C.
By: TCW PRIVATE EQUITY HOLDINGS CORP.
By: /s/ Susan Marsch
---------------------------------
Name: Susan Marsch
Title: Authorized Signatory
By: BAEZA & CO. L.L.C.
By: /s/ Mario L. Baeza
---------------------------------
Name: Mario L. Baeza
Title: Authorized Signatory
TCW/CCI HOLDING L.L.C.
By: /s/ Mario L. Baeza
---------------------------------
Name: Mario L. Baeza
Title: Authorized Signatory
SCHEDULE I
BOARD OF DIRECTORS
OF
TCW GROUP, INC.
All of the following individuals are directors of TCW Group, Inc. Each
director is a citizen of the United States of America unless otherwise
specified below:
JOHN M. BRYAN
-------------
Partner
Bryan & Edwards
600 Montgomery St., 35th Floor
San Francisco, California 94111
ROBERT A. DAY
-------------
Chairman of the Board,
Chairman and Chief Executive Officer
Trust Company of the West
200 Park Avenue, Suite 2100
New York, New York 10166
DAMON P. DE LASZLO, ESQ.
------------------------
Managing Director of Harwin
Engineers S.A., Chairman & D.P.
Advisers Holdings Limited
Byron's Chambers
A2 Albany, Piccadilly
London W1V 9RD - England
(Citizen of United Kingdom)
WILLIAM C. EDWARDS
------------------
Partner - Bryan & Edwards
3000 Sand Hill Road, Suite 190
Menlo Park, California 94025
ERNEST O. ELLISON
-----------------
Vice Chairman
Trust Company of the West
865 South Figueroa St., Suite 1800
Los Angeles, California 90017
HAROLD R. FRANK
---------------
Chairman of the Board
Applied Magnetics Corporation
75 Robin Hill Rd.
Goleta, California 93017
CARLA A. HILLS
--------------
1200 19th Street, N.W.
5th Floor
Washington, DC 20036
DR. HENRY A. KISSINGER
----------------------
Chairman
Kissinger Associates, Inc.
350 Park Ave., 26th Floor
New York, New York 10022
THOMAS E. LARKIN, JR.
---------------------
President
Trust Company of the West
865 South Figueroa St., Suite 1800
Los Angeles, California 90017
KENNETH L. LAY
--------------
Enron Corp.
1400 Smith Street
Houston, Texas 77002-7369
MICHAEL T. MASIN, ESQ.
----------------------
Vice Chairman
GTE Corporation
One Stamford Forum
Stamford, Connecticut 06904
EDFRED L. SHANNON, JR.
----------------------
Investor/Rancher
1000 S. Fremont Ave.
Alhambra, California 91804
ROBERT G. SIMS
--------------
Private Investor
11828 Rancho Bernardo, Box 1236
San Diego, California 92128
MARC I. STERN
-------------
President
The TCW Group, Inc.
865 South Figueroa St., Suite 1800
Los Angeles, California 90017
Exhibit A
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13d - (f) (1)
The undersigned acknowledge and agree that the foregoing statement on
Schedule 13D is filed on behalf of each of the undersigned and that all
subsequent amendments to this statement on Schedule 13D shall be filed on
behalf of each of the undersigned without the necessity of filing
additional joint acquisition statement. The undersigned acknowledge that
each shall be responsible for the timely filing of such amendments, and for
the completeness and accuracy of the information concerning him, her or it
contained therein, but shall not be responsible for the completeness and
accuracy of the information concerning the other entities or persons,
except to the extent that he, she or it knows or has reason to believe that
such information is inaccurate.
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certify that the information set forth in this Statement is
true, complete and correct.
Dated as of this 28th day of October, 1999.
THE TCW GROUP, INC.
By: /s/ Susan Marsch
------------------------------------------
Name: Susan Marsch
Title: Authorized Signatory
TCW INVESTMENT MANAGEMENT CO.
By: /s/ Susan Marsch
------------------------------------------
Name: Susan Marsch
Title: Authorized Signatory
TCW ADVISORS, INC.
By: /s/ Susan Marsch
------------------------------------------
Name: Susan Marsch
Title: Authorized Signatory
ROBERT A. DAY
By: /s/ Susan Marsch
------------------------------------------
Name: Susan Marsch
Title: Under Power of Attorney dated
March 31, 1999, on file with
Schedule 13G for Hibbett
Sporting Goods, Inc., dated
April 9, 1999
TCW PRIVATE EQUITY HOLDINGS CORP.
By: /s/ Susan Marsch
------------------------------------------
Name: Susan Marsch
Title: Authorized Signatory
BAEZA & CO. L.L.C.
By: /s/ Mario L. Baeza
------------------------------------------
Name: Mario L. Baeza
Title: Authorized Signatory
MARIO L. BAEZA
By: /s/ Mario L. Baeza
------------------------------------------
Name: Mario L. Baeza
TCW/LATIN AMERICA PARTNERS, L.L.C.
By: TCW PRIVATE EQUITY HOLDINGS CORP.
By: /s/ Susan Marsch
-------------------------------------
Name: Susan Marsch
Title: Authorized Signatory
By: BAEZA & CO. L.L.C.
By: /s/ Mario L. Baeza
-------------------------------------
Name: Mario L. Baeza
Title: Authorized Signatory
TCW/LATIN AMERICA MANAGEMENT PARTNERS, L.L.C.
By: TCW/LATIN AMERICA PARTNERS, L.L.C.
By: TCW PRIVATE EQUITY HOLDINGS CORP.
By: /s/ Susan Marsch
--------------------------------
Name: Susan Marsch
Title: Authorized Signatory
By: BAEZA & CO. L.L.C.
By: /s/ Mario L. Baeza
--------------------------------
Name: Mario L. Baeza
Title: Authorized Signatory
TCW/LATIN AMERICA PRIVATE EQUITY PARTNERS
By: TCW/LATIN AMERICA PARTNRS, L.L.C.
By: TCW PRIVATE EQUITY HOLDINGS CORP.
By: /s/ Susan Marsch
---------------------------------
Name: Susan Marsch
Title: Authorized Signatory
By: BAEZA & CO. L.L.C.
By: /s/ Mario L. Baeza
--------------------------------
Name: Mario L. Baeza
Title: Authorized Signatory
TCW/CCI HOLDINGS L.L.C.
By: /s/ Mario L. Baeza
-------------------------------------
Name: Mario L. Baeza
Title: Authorized Signatory
Exhibit B
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into
as of October 18, 1999, by and between CONVERGENCE COMMUNICATIONS, INC., a
corporation organized under the laws of the State of Nevada, United States
of America (the "Company") and TCW/CCI HOLDING LLC., a Delaware limited
liability company (the "Investor"). The Company and the Investor are
referred to collectively herein as the "Parties" and singularly as a
"Party". Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed thereto in that certain Participation Agreement,
dated as of October 15, 1999, among the Company, Telematica EDC, C.A.,
TCW/CCI Holding LLC, International Finance Corporation, Glacier
Latin-America Ltd., Fondelec Essential Services Growth Fund, L.P. and
Internexus S.A. (the "Participation Agreement").
WHEREAS, the Company and the Investor are parties to the
Participation Agreement, pursuant to which the Investor has agreed to
invest in the Company through the purchase of shares of the Company's
Series C Preferred Stock and other securities of the Company, as one of a
series of transactions set out in the Participation Agreement; and
WHEREAS, the Company and the Investor desire to establish the
terms for the purchase by the Investor, at the Closing and/or Subsequent
Closing as set forth below, of such shares by entering into this Agreement
and intend this Agreement to be the "CCI Stock Purchase Agreement"
referenced in the Participation Agreement.
NOW, THEREFORE, in consideration of the premises,
representations, warranties, covenants and the mutual promises contained
herein and in the Participation Agreement, the Parties agree as follows:
1. Purchase and Sale of Securities.
(a) The Transaction. On and subject to the terms and conditions of
this Agreement and the Participation Agreement, the Investor
hereby purchases from the Company, and the Company hereby sells
to the Investor: (i) at the Closing, a total of two million
(2,000,000) shares of the Company's Series C Convertible
Preferred Stock, par value $.001 per share, for a purchase
price per share of Seven and 50/100 United States Dollars (U.S.
$7.50), for the aggregate consideration specified in Section
1(b)(i); and (ii) at the Subsequent Closing, a total of one
million three hundred and thirty three thousand three hundred
and thirty three (1,333,333) shares of the Company's Series C
Convertible Preferred Stock, par value $.001 per share, for a
purchase price per share of Seven and 50/100 United States
Dollars (U.S. $7.50), for the aggregate consideration specified
in Section 1(b)(ii). The Series C Convertible Preferred Stock
acquired by the Investor at the Closing and Subsequent Closing
will be referred to herein as the Investor's "Series C Shares."
The Series C Shares shall have the rights and preferences set
out in Schedule 1 hereto.
(b) Purchase Price. The Investor shall pay and contribute to the
Company, in exchange for its Series C Shares, the following:
(i) at the Closing, the amount of Fifteen Million United States
Dollars (U.S. $15,000,000) by delivery of cash payable by wire
transfer or delivery of other immediately available funds; and
(ii) at the Subsequent Closing, the amount of Ten Million
United States Dollars (U.S. $10,000,000) by delivery of cash
payable by wire transfer or delivery of other immediately
available funds. The amounts paid by the Investor under this
Section 1(b) shall be referred to collectively as the "Purchase
Price."
(c) Delivery of Shares. At the Closing, the Company shall deliver
to the Investor one or more certificates representing the
Series C Shares described in Section 1(a)(i), and, at the
Subsequent Closing, the Company shall deliver to the Investor
one or more certificates representing the Series C Shares
described in Section 1(a)(ii). The Series C Share certificates
will be in the form attached hereto as Exhibit A.
2. Application of Purchase Price. The Purchase Price shall be applied by
the Company in the manner set out in Schedule 3 to the Participation
Agreement.
3. Rights and Obligations Part of Series of Transactions. The Parties
acknowledge and agree that the rights and obligations provided for in
this Agreement are part of a series of transactions which, pursuant
to the Participation Agreement, are subject to certain conditions
precedent as provided therein, and are being entered into in reliance
on certain representations and warranties and covenants of
indemnification set out in the Participation Agreement (which
indemnification obligations shall be deemed incorporated herein).
Thus, unless and until such conditions are satisfied or waived, and
these representations and warranties are made, all in the manner
provided for in the Participation Agreement, no Party shall have any
rights or obligations hereunder.
4. No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their
respective successors.
5. Succession. This Agreement shall be binding upon and inure to the
benefit of the Parties named herein and their respective successors.
6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument. For
purposes of this Agreement, the delivery of a counterpart signature
by telephonic facsimile transmission shall be deemed the equivalent
of the delivery of an original counterpart signature.
7. Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
8. Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be provided in
the manner, and shall be deemed effective, as set forth for providing
notices in the Participation Agreement. Any Party may change the
address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, United States of
America, without giving effect to any choice or conflict of law
provision or rule that would cause the application of the laws of any
jurisdiction other than the State of New York. All disputes arising
under or in relations to this Agreement shall first be subject to
conciliation in accordance with the Rules of Conciliation of the
International Chamber of Commerce and, failing conciliation, be
finally settled under the Rules of Arbitration of the International
Chamber of Commerce by three arbitrators appointed in accordance with
said Rules. The place of arbitration shall be New York, New York. The
language of the arbitration shall be English. In the event any
dispute under the Participation Agreement relates in any way to the
validity, performance or interpretation of this Agreement and an
arbitral is constituted pursuant to Section 11(n) of the
Participation Agreement, all Parties to any dispute hereunder agree
(i) to be joined to the procedures initiated pursuant to Section
11(n) of the Participation Agreement; (ii) to have any proceeding
initiated hereunder consolidated with proceedings initiated pursuant
to Section 11(n) of the Participation Agreement and (iii) to be bound
by any ruling of the arbitral tribunal constituted pursuant to
Section 11(n) of the Participation Agreement or any interim or final
award thereof. Submission of disputes to arbitration pursuant to the
Rules of Arbitration of the International Chamber of Commerce, in
consolidation with any disputes submitted to arbitration pursuant to
Section 11(n) of the Participation Agreement as provided above, shall
be the sole method of resolving disputes between the Parties hereto.
Judgment upon an arbitration award may be entered in any court having
jurisdiction.
10. Amendments and Waivers. This Agreement may not be amended, extended
or modified unless an amendment, extension or modification has been
expressly approved by a writing signed by all the parties to the
Participation Agreement, and then only to the extent of such
approval.
11. Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other
jurisdiction.
12. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity
or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the Parties and no presumption
or burden of proof shall arise favoring or disfavoring any Party by
virtue of the authorship of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
COMPANY:
Convergence Communications, Inc.
By: /s/ Lance D'Ambrosio
----------------------------------
Name: Lance D'Ambrosio
Title:Chairman and CEO
INVESTOR:
TCW/CCI Holding LLC
By: /s/ Mario L. Barza
-----------------------------------
Name: Mario L. Barza
Title:Chairman and CEO
Exhibit C
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is entered into as of the 18th
day of October, 1999, between Convergence Communications, Inc., a Nevada
corporation ("Grantor") in favor of Telematica EDC, C.A. ("Telematica"),
TCW/CCI Holding LLC ("TCW"), International Finance Corporation ("IFC"),
Glacier Latin-America Ltd. ("Glacier"), FondElec Essential Services Growth
Fund, L.P. ("FondElec") and Internexus S.A. ("Internexus"). Each of
Telematica, TCW, IFC, Glacier, FondElec and Internexus is sometimes
referred to as a "Grantee" and collectively as the "Grantees". The Grantor
and the Grantees are referred to collectively herein as the "Parties" and
singularly as a "Party". Capitalized terms used and not otherwise defined
herein shall have the meanings ascribed thereto in that certain
Participation Agreement dated as of October 15, 1999, to which the Grantor
and Grantees are parties (the "Participation Agreement").
WHEREAS, pursuant to the terms of the Participation Agreement,
Telematica, TCW, IFC and Glacier have each agreed to purchase Series C
Shares, and FondElec and Internexus have each agreed to convert certain
debt of the Grantor into Series C Shares;
WHEREAS, the Grantees wish to reserve for themselves the right to
acquire further Series C Shares and the Grantor is prepared to grant such
right under this Agreement; and
WHEREAS, the execution of this Agreement is one of a series of
transactions set out in the Participation Agreement which are to occur
simultaneously at the Closing.
NOW, THEREFORE, the Parties agree as follows:
1. Grant of Option. Grantor hereby grants to each Grantee, and each
Grantee hereby accepts from Grantor, an option (the "Option") to
acquire, during the period set forth in paragraph 3, up to the
number of shares of the Grantor's Series C Preferred Stock, par
value $.001 per share (collectively, the "Option Shares"), as is
set forth below:
(a) to Telematica, 40% of the aggregate number of Series C
Shares actually acquired by it under the terms of the
Participation Agreement, which shall be 1,333,333 Option
Shares, if Telematica purchases all of the Series C Shares
allocated to it under the Participation Agreement;
(b) to TCW, 40% of the aggregate number of Series C Shares
actually acquired by it under the terms of the Participation
Agreement, which shall be 1,333,333 Option Shares, if TCW
purchases all of the Series C Shares allocated to it under
the Participation Agreement;
(c) to IFC, 40% of the number of Series C Shares actually
acquired by it under the terms of the Participation
Agreement, which shall be 266,667 Option Shares, if IFC
purchases all of the Series C Shares allocated to it under
the Participation Agreement;
(d) to Glacier, 40% of the aggregate number of Series C Shares
actually acquired by it under the terms of the Participation
Agreement, which shall be 160,000 Option Shares, if Glacier
purchases all of the Series C Shares allocated to it under
the Participation Agreement;
(e) to FondElec, 40% of the aggregate number of Series C Shares
actually acquired by it under the terms of the Participation
Agreement, which shall be 266,666 Option Shares if FondElec
purchases all of the Series C Shares allocated to it under
the Participation Agreement; and
(f) to Internexus, 40% of the aggregate number of Series C
Shares actually acquired by it under the terms of the
Participation Agreement, which shall be 531,564 Option
Shares, if Internexus purchases all of the Series C Shares
allocated to it under the Participation Agreement.
2. Exercise of Option. Subject to the satisfaction of the condition
precedent set forth in Section 6(c)(iii) of the Participation
Agreement in the case of any exercise by Telematica or TWC of its
Option, a Grantee may, at any time and from time to time during the
term of its Option, as set forth in paragraph 3 below, exercise its
Option in whole or in part by delivering written notice to Grantor
designating the number of Option Shares that it elects to purchase,
together with the full purchase price therefor in immediately
available funds. The purchase price for each Option Share shall be,
subject to adjustments as provided in paragraph 7 below, Seven and
50/100 United States Dollars (U.S. $7.50). Any Option Shares
acquired by a Grantee hereunder shall be entitled to the benefit of
the Registration Rights Agreement among Grantor and Grantees of
even date herewith, and shall be subject to the rights and duties
imposed thereunder. Upon the delivery to Grantor of the
consideration for the Option Shares so exercised, Grantor shall
deliver to the exercising Grantee a certificate or certificates
representing the Option Shares containing restrictive legends
substantially in the form of those legends set forth in Section 3
of the Participation Agreement. Upon their issuance, the Option
Shares shall be deemed validly issued and fully paid and
non-assessable shares of Grantor's Series C Convertible Preferred
Stock, subject to no liens, charges or encumbrances other than
those arising under the terms of the Participation Agreement and
the CCI Shareholders' Agreement entered into pursuant to the
Participation Agreement.
3. Term of Option. Each Grantee's Option shall terminate at 5:00 PM
U.S. Eastern Time on July 18, 2000.
4. Representations and Warranties. Each exercising Grantee shall be
deemed, by its exercise, to affirm the representations and
warranties set forth in Sections 3(e), 3(f) and 3(g) of the
Participation Agreement as to the Option Shares as to which its
Option is exercised and, upon issuance of the Series C Preferred
Stock pursuant to any such exercise, the Grantor shall be deemed to
affirm the representations and warranties set forth in Sections
4(a), 4(b), 4(c), 4(d), 4(f) (except that an expenditure in
accordance with the Business Plan, or Budget or as approved by the
Grantor's board of directors, shall not be considered a material
adverse change), 4(j), 4(k), 4(t) and, to the extent the exercise
relates to the IFC, 4(z).
5. Reservation of Stock. Grantor shall, at all times while the Options
are effective, reserve and keep available out of the designated
Series C Convertible Preferred Stock of Grantor, for the purpose of
issuance on the exercise of the Options provided for herein, such
number of shares of such Series C Convertible Preferred Stock as
shall, from time to time, be sufficient to permit the exercise of
each Option in whole.
6. Restrictions on Exercise. No Option may be exercised unless such
exercise is in compliance with U.S. Securities Law.
7. Adjustment. If an Option is exercised subsequent to any stock
dividend, split-up, recapitalization, merger, consolidation,
combination or exchange of shares, separation, reorganization or
liquidation of the Grantor occurring after the date hereof, as a
result of which shares of any class shall be issued in respect of
outstanding shares of capital stock of the Grantor (or shall be
issuable in respect of securities convertible into shares of
capital stock) or upon exercise of rights (other than the Options)
to purchase shares of capital stock, or shares of such capital
stock shall be changed into the same or a different number of
shares of Series C Convertible Preferred Stock or another class or
classes, the Grantee exercising the Option shall receive, for the
aggregate price paid upon such exercise, the aggregate number and
class of shares which such Grantee would have received if this
Option had been exercised immediately prior to such stock dividend,
split-up, recapitalization, merger, consolidation, combination or
exchange of shares, separation, reorganization or liquidation.
8. Non-Transferability of the Option and Rights of Grantee. A
Grantee's Option may be exercised only by that Grantee, and no
Grantee may transfer its Option in any manner except it may make
such a transfer to a Person who would be permitted to receive a
Transfer of Company Equity from such Grantee under the Shareholders
Agreement. No Grantee shall have any rights as a shareholder with
respect to any Option Shares to be acquired hereunder unless and
until that Grantee exercises its Option with respect to such Option
Shares.
9. Rights and Obligations Part of Series of Transactions. The Parties
acknowledge and agree that the rights and obligations provided for
in this Agreement are part of a series of transactions which,
pursuant to the Participation Agreement, are subject to certain
conditions precedent as provided therein, and are being entered
into in reliance on certain representations and warranties and
covenants of indemnification set out in the Participation Agreement
(which indemnification obligations shall be deemed incorporated
herein). Unless and until such conditions are satisfied or waived,
and these representations and warranties are made, all in the
manner provided for in the Participation Agreement, no Party shall
have any rights or obligations hereunder.
10. Further Assurances. At the request of any Party hereto, each Party
to this Agreement hereby agrees, without the payment of additional
consideration, to execute, deliver, file and verify any and all
documents, instruments or agreements necessary or appropriate to
effectuate the intent of the parties in entering into this
Agreement.
11. Notices. Any notice required or permitted hereunder shall be
effected (and deemed effected) in the manner set forth for giving
notice in the Participation Agreement.
12. Governing Law; Dispute Resolution. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York, United States of America, without giving effect to any choice
or conflict of law provision or rule that would cause the
application of laws of any jurisdiction other than the State of New
York except to the extent this Agreement would require the
mandatory application of the corporate law of the State of Nevada.
All disputes arising under or relation to this Agreement shall
first be subject to conciliation in accordance with the Rules of
Conciliation of the International Chamber of Commerce and, failing
conciliation, be finally settled under the Rules of Arbitration of
the International Chamber of Commerce by three arbitrators
appointed in accordance with said Rules. The place of arbitration
shall be New York, New York. The language of the arbitration shall
be English. In the event any dispute under the Participation
Agreement relates in any way to the validity, performance or
interpretation of this Agreement and an arbitral tribunal is
constituted pursuant to Section 11(n) of the Participation
Agreement, all parties to any dispute hereunder agree (i) to be
joined to the procedures initiated pursuant to Section 11(n) of the
Participation Agreement; (ii) to have any proceedings initiated
hereunder consolidated with proceedings initiated pursuant to
Section 11(n) of the Participation Agreement and (iii) to be bound
by any ruling of the arbitral tribunal constituted pursuant to
Section 11(n) of the Participation Agreement or any interim or
final award thereof. Submission of disputes to arbitration pursuant
to the Rules of Arbitration of the International Chamber of
Commerce, in consolidation with any disputes submitted to
arbitration pursuant to Section 11(n) of the Participation
Agreement as provided above, shall be the sole method of resolving
disputes between the Parties hereto. Judgment upon an arbitration
award may be entered in any court having jurisdiction.
IN WITNESS WHEREOF, each party has executed this Agreement as of
the date set forth above.
CONVERGENCE COMMUNICATIONS, INC.
By: /s/ Lance D'Ambrosio
Name: Lance D'Ambrosio
Title: Chairman and CEO
TELEMATICA EDC, C.A.
By: /s/ Norberto Corredor
Name: Norberto Corredor
Title: Duly Authorized
TCW/CCI HOLDING LLC
By: /s/ Mario L. Baeza
Name: Mario L. Baeza
Title: Chairman and CEO
INTERNATIONAL FINANCE CORPORATION
By: /s/
Name:
Title:
GLACIER LATIN-AMERICA LTD.
By: /s/ David Leivman
Name: David Leivman
Title: Assistant Treasurer
FONDELEC ESSENTIAL SERVICES
GROWTH FUND, L.P.
By: FondElec E.S.G.P. Corp.
Its: General Partner
By: /s/ Gaston Acosta Rua
Name: Gaston Acosta Rua
Title: Director
INTERNEXUS S.A.
By: /s/ Peter Schiller
Name: Peter Schiller
Title: Duly Authorized
Exhibit D
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO THE SECURITIES
OR "BLUE SKY" LAWS OF ANY STATE. SUCH SECURITIES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE ASSIGNED IN THE UNITED
STATES, EXCEPT PURSUANT TO (i) A REGISTRATION STATEMENT WITH RESPECT TO
SUCH SECURITIES WHICH IS EFFECTIVE UNDER SUCH ACT, (ii) RULE 144 OR RULE
144A UNDER SUCH ACT, OR (iii) ANY OTHER EXEMPTION FROM REGISTRATION UNDER
SUCH ACT, PROVIDED THAT, IF REQUESTED BY THE COMPANY, AN OPINION OF COUNSEL
REASONABLY SATISFACTORY IN FORM AND SUBSTANCE IS FURNISHED TO THE COMPANY
THAT AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT IS
AVAILABLE.
Series C
Warrant No. 2 For the Purchase of 500,000
Shares of Common Stock
WARRANT FOR THE PURCHASE OF
SHARES OF COMMON STOCK
OF
CONVERGENCE COMMUNICATIONS, INC.
(A NEVADA CORPORATION)
Convergence Communications, Inc., a Nevada corporation ("Company"),
hereby certifies that TCW/CCI Holding LLC ("Investor"), or its registered
assigns of this Warrant ("Registered Holder"), is entitled, subject to the
terms set forth below, to purchase from the Company Five Hundred Thousand
(500,000) fully paid and nonassessable shares of common stock (subject to
adjustment as set forth in Section 5 below), $.001 par value ("Common
Stock"), of the Company at an exercise price determined as set out in
Section 2 below, subject to adjustment as set forth in Section 5 below. The
shares of Common Stock issuable upon exercise of this Warrant ("Warrant"),
and the exercise price hereunder for each of such shares, each as adjusted
from time to time pursuant to the provisions of this Warrant, are
hereinafter referred to as the "Warrant Shares" and the "Per Share Exercise
Price", respectively.
The issue of this Warrant is one of a series of transactions
contemplated to occur under a certain Participation Agreement among the
Company, Investor, and certain other parties thereto and dated October 15,
1999 ("Participation Agreement"). Capitalized terms used in this Warrant
and not otherwise defined herein shall have the meaning given them in the
Participation Agreement.
1. Exercise.
(a) This Warrant may be exercised by the Registered Holder, in
whole or in part, at any time and from time to time during
the period from the date hereof through 5:00 p.m. New York
time on October 18, 2003 (the "Exercise Period"), provided
that events have occurred that permit the Per Share Exercise
Price to be determined as set out in Section 2, by
surrendering this Warrant, with the purchase form appended
hereto as Exhibit A duly executed by the Registered Holder,
at the principal office of the Company, or at such other
office or agency as the Company may designate, together with
the purchase price for such shares, which may be paid in
cash, or in the manner provided for in Section 3, provided,
however, that if the Per Share Exercise Price is determined
as set out in Section 2(c), then the Warrant shall be deemed
to be exercised in its entirety on the last day of the
Exercise Period, and within 10 Business Days thereafter or,
if later, within five Business Days after the Company's
demand therefor, the Registered Holder shall surrender this
Warrant, with the purchase form appended hereto as Exhibit A
duly executed by the Registered Holder, at the principal
office of the Company, or at such other office or agency as
the Company may designate, together with the purchase price
for such shares, which may be paid in cash, or in the manner
provided for in Section 3.
(b) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the
day on which the Warrant shall have been exercised as
provided in subsection 1(a) above. At such time, the Person
or Persons in whose name or names any certificates for
Warrant Shares shall be issuable upon such exercise as
provided in subsection 1(c) below, shall be deemed to have
become the holder or holders of record of the Warrant Shares
represented by such certificates.
(c) As soon as practicable after the exercise of this Warrant in
whole or in part, and in any event within 20 calendar days
after the Per Share Exercise Price shall have been paid, the
Company at its expense will cause to be issued in the name
of, and delivered to, the Registered Holder, or, subject to
the terms and conditions hereof, as such Registered Holder
(upon payment by such Registered Holder of any applicable
transfer taxes) may direct:
(i) a certificate or certificates for the number of full
Warrant Shares to which such Registered Holder shall
be entitled upon such exercise plus, in lieu of any
fractional share to which such Registered Holder
would otherwise be entitled, cash in an amount
determined pursuant to Section 6 hereof; and
(ii) in case such exercise is in part only, a new warrant
(dated the date hereof) of like tenor, calling in
the aggregate on the face thereof for a number of
Warrant Shares equal to the number of such shares
called for on the face of this Warrant, minus the
number of such shares previously issued pursuant to
any exercise of the Warrant.
2. Determination of Exercise Price.
The Per Share Exercise Price shall be determined as follows, in
each case, subject to adjustment as set out in Section 5:
(a) If a Realized Valuation Event occurs prior to the last day
of the Exercise Period then, if the value per share of the
Common Stock as evidenced by the Realized Valuation Event
(without taking into consideration the number of shares of
Common Stock issuable under this or the other Series C
Warrants, but taking into consideration the number of such
shares issuable under all other warrants, convertible
securities and options then outstanding) (the "Realized
Value Before") is an amount that, when discounted to the
Going-In Value from the date of the Realized Valuation Event
to the Closing Date (based on a 365 day year), yields a
return equal to the daily equivalent of 45% per annum or
greater, then the Per Share Exercise Price shall be equal to
the Realized Value Before. Otherwise, the Per Share Exercise
Price shall be determined as provided in Section 2(b).
(b) If the Realized Value Before is not sufficient to provide
the yield as set out in Section 2(a), then the Per Share
Exercise Price shall be a price less than the Realized Value
Before, which price (the "Lower Price") shall be determined
such that:
(i) the sum of (A) the number of shares of Common Stock
into which all of the Series C Preferred Stock
acquired by the Investor at the Closing is
convertible multiplied by the value of the Common
Stock as evidenced by the Realized Valuation Event
(taking into consideration the number of shares of
Common Stock issuable under this and all other
warrants, convertible securities and options then
outstanding) (the "Realized Value After"), plus (B)
the number of Warrant Shares multiplied by the
difference between the Realized Value After and the
Lower Price,
(ii) when discounted from the date of the Realized
Valuation Event to the Closing Date (based on a 365
day year for the number of days elapsed) to an
amount equal to the aggregate purchase price of all
the Series C Preferred Stock acquired by the
Investor at the Closing, yields a return equal to
the daily equivalent of 45% per annum, provided that
the Lower Price shall not be greater than the
Realized Value After nor less than U.S. $0.01. An
example of such a calculation is set out as Schedule
1 to this Warrant.
(c) If a Realized Valuation Event fails to occur prior to the
last day of the Exercise Period, then the Per Share Exercise
Price shall be U.S.$0.01.
3. Cashless Exercise.The Registered Holder may elect to pay the Per
Share Exercise Price (a) by surrender to the Company of shares of
Common Stock which have been held by the Registered Holder for at
least six months, and which have a fair value, on the date of
exercise, equal to the Per Share Exercise Price for the number of
Warrants exercised, (b) by surrender to the Company of shares of
Series C Convertible Preferred Stock with a Realized Value After,
determined on an as converted basis, equal to the Per Share
Exercise Price for the number of Warrant Shares exercised, (c) by
surrender to the Company of this Warrant (as provided in Section 4
below) or (d) by a combination of cash and/or any of the securities
described in clauses (b), (c) or (d) of this Section 3.
4. Conversion Rights. The Registered Holder shall have the right to
convert Warrant or any portion thereof (the "Conversion Right")
into Warrant Shares as provided in this Section, but only if this
Warrant shall otherwise be exercisable hereunder.
Upon exercise of the Conversion Right with respect to a particular
number of Warrant Shares (the "Converted Warrant Shares"), the
Company shall deliver to the Registered Holder (without payment by
the Registered Holder of any cash or other consideration) a number
of Warrant Shares determined as follows:
(a) a quotient is obtained by dividing
(i) the difference between (A) the Realized Value After
(but, if the Conversion Right is exercised after the
date on which the Realized Valuation Event occurs,
the higher of the Realized Value After and the fair
value of the Common Stock as of the date of
exercise) and (B) the Per Share Exercise Price, by
(ii) the Realized Value After (or, if the Conversion
Right is exercised after the date on which the
Realized Valuation Event occurs, the higher of the
Realized Value After and the fair value of the
Common Stock), and
(b) then the quotient is multiplied by the number of Converted
Warrant Shares.
5. Adjustments. The number and kind of securities issuable upon the
exercise of this Warrant and the Per Share Exercise Price shall be
subject to adjustment from time to time in accordance with the
following provisions.
(a) Certain Definitions. For purposes of this Warrant:
(i) The term "Additional Shares of Common Stock" shall
mean all shares of Common Stock issued, or deemed to
be issued by the Company pursuant to subsection (e)
of this Section 5, after the Subsequent Closing
Date, as that term is defined in the Participation
Agreement or, if no Subsequent Closing, as defined
in the Participation Agreement, takes place, the
first date of issuance of this Warrant (the
"Original Issue Date") except:
(A) issuances of Common Stock, convertible
Securities and/or Options to officers,
employees, consultants or directors; provided
that such issuances pursuant to this clause
(A) in the aggregate do not exceed more than
10% of the shares of Common Stock
outstanding, as determined on a fully-diluted
basis (the "Management Securities"); and
(B) issuances of Common Stock, Convertible
Securities, warrants and/or Options granted
or approved to be granted by the Board on or
prior to the Original Issue Date.
(ii) The term "Common Stock" shall mean (A) the Common
Stock and (B) the stock of the Company of any class,
or series within a class, whether now or hereafter
authorized, which has the right to participate in
the distribution of either earnings or assets of the
Company without limit as to the amount or
percentage.
(iii) The term "Convertible Securities" shall mean any
evidence of indebtedness, shares or other securities
(other than the Series C Warrants, the
FundElec/Internexus Warrants and the Series C
Shares) convertible into or exercisable or
exchangeable for Common Stock.
(iv) The term "Options" shall mean any and all rights,
options or warrants (other than the Management
Securities, the Series C Warrants, the
FondElec/Internexus Warrants and the Series C
Shares) to subscribe for, purchase or otherwise in
any manner acquire Common Stock or Convertible
Securities.
(b) Merger or Subdivision or Combination of Shares. In the event
of a merger or consolidation to which the Company is a party
prior to a given exercise of this Warrant, the securities
issuable upon the exercise of this Warrant shall, after such
merger or consolidation, be exercisable into such kind and
number of shares of stock and/or other securities, cash or
other property which the Registered Holder would have been
entitled to receive if the Registered Holder had exercised
this Warrant prior to such consolidation or merger. If
outstanding shares of Common Stock are subdivided, or a
record is taken of the holders of Common Stock for the
purpose of so subdividing, prior to a given exercise of this
Warrant, the Per Share Exercise Price applicable to the
shares issuable upon such exercise shall be reduced
proportionately and the number of shares issuable pursuant
to this Warrant shall be proportionately increased. If
outstanding shares of Common Stock are combined, or a record
is taken of the holders of Common Stock for the purpose of
so combining, prior to a given exercise of this Warrant, the
Per Share Exercise Price applicable to the shares issuable
upon such exercise shall be increased proportionately and
the number of shares issuable pursuant to this Warrant shall
be proportionately decreased.
(c) Stock Dividends. If shares of Common Stock are issued as a
dividend or other distribution on the Common Stock (or such
dividend or distribution is declared or a record is taken of
the holders of Common Stock for the purpose of receiving
such dividend or distribution), prior to a given exercise of
this Warrant, the Per Share Exercise Price applicable to the
Warrant Shares issuable upon such exercise shall be adjusted
to an amount determined by multiplying the Per Share
Exercise Price otherwise applicable by a fraction (i) the
numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to the declaration or
payment of such dividend or other distribution, and (ii) the
denominator of which shall be the total number of shares of
Common Stock outstanding immediately after the declaration
or payment of such dividend or other distribution and the
number of Warrant Shares issuable pursuant to this Warrant
shall be adjusted to a number determined by multiplying the
number of Warrant Shares by the inverse of that fraction. In
the event that the Company shall declare or pay any dividend
on the Common Stock payable in any right to acquire Common
Stock for no consideration, then the Company shall be deemed
to have made a dividend payable in Common Stock in an amount
of shares equal to the maximum number of shares issuable
upon exercise of such rights to acquire Common Stock.
(d) Issuance of Additional Shares of Common Stock. If the
Company issues any Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be
issued pursuant to subsection (e) below) prior to a given
exercise of this Warrant (other than as provided in the
foregoing subsections (b) and (c)), for no consideration or
for a consideration per share less than the Per Share
Exercise Price otherwise applicable to the shares issuable
upon such exercise, the Per Share Exercise Price shall be
reduced to a price equal to the price at which the
Additional Shares of Common Stock were issued.
(e) Deemed Issue of Additional Shares of Common Stock. If the
Company at any time or from time to time after the date
hereof issues any Convertible Securities or Options or fixes
a record date for the determination of holders of any class
of securities then entitled to receive any such Options or
Convertible Securities, then the maximum number of shares
(as set forth in the instrument relating thereto without
regard to any provisions contained therein designed to
protect against dilution) of Common Stock issuable upon the
exercise of such Options, or, in the case of Convertible
Securities and Options therefor, the conversion or exchange
of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of
such issue of Options or Convertible Securities or, in case
such a record date shall have been fixed, as of the close of
business on such record date, provided that in any such case
in which Additional Shares of Common Stock are deemed to be
issued:
(i) no further adjustments in the Per Share Exercise
Price shall be made by reason of the subsequent
issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or the issue
of Common Stock upon the conversion or exchange of
such Convertible Securities; and
(ii) if such Options or Convertible Securities by their
terms provide, with the passage of time or
otherwise, for any increase or decrease in the
consideration payable to the Company, or increase or
decrease in the number of shares of Common Stock
issuable, upon the exercise, conversion or exchange
thereof, the Per Share Exercise Price computed
taking into account the original issuance of such
Options or Convertible Securities (or upon the
occurrence of a record date with respect thereto),
and any subsequent adjustments based thereon, by
reason of any such increase or decrease becoming
effective, shall be recomputed to reflect such
increase or decrease insofar as it affects such
Options or the rights of conversion or exchange
under such Convertible Securities (provided,
however, that no such adjustment of the Per Share
Exercise Price shall affect Common Stock previously
issued upon exercise of this Warrant).
(f) Determination of Consideration. For purposes of this Section
5, the consideration received by the Company for the issue
of any Additional Shares of Common Stock shall be computed
as follows:
(i) Cash and Property. Such consideration shall:
(A) insofar as it consists of cash, be the
aggregate amount of cash received by the
Company; and
(B) insofar as it consists of property other than
cash, be computed at the fair value thereof
at the time of the issue, as determined in
good faith by the vote of a majority of the
Board, or if the Board cannot reach such
agreement, by a qualified independent public
accounting firm, other than the accounting
firm then engaged as the Company's
independent auditors.
(ii) Options and Convertible Securities. The
consideration per share received by the Company for
Additional Shares of Common Stock deemed to have
been issued pursuant to subsection (e) above,
relating to Options and Convertible Securities,
shall be determined by dividing:
(A) the total amount, if any, received or
receivable by the Company as consideration
for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount
of additional consideration (as set forth in
the instruments relating thereto, without
regard to any provision contained therein
designed to protect against dilution) payable
to the Company upon the exercise of such
Options or the conversion or exchange of such
Convertible Securities, or in the case of
Options for Convertible Securities, the
exercise of such Options for Convertible
Securities and the conversion or exchange of
such Convertible Securities, by
(B) the maximum number of shares of Common Stock
(as set forth in the instruments relating
thereto, without regard to any provision
contained therein designed to protect against
dilution) issuable upon the exercise of such
Options or conversion or exchange of such
Convertible Securities.
(g) Other Provisions Applicable to Adjustment Under this
Section. The following provisions shall be applicable to the
adjustments in Per Share Exercise Price as provided in this
Section 5:
(i) Treasury Shares. The number of shares of Common
Stock at any time outstanding shall not include any
shares thereof then directly or indirectly owned or
held by or for the account of the Company.
(ii) Other Action Affecting Common Stock. If the Company
shall take any action affecting the outstanding
number of shares of Common Stock other than an
action described in any of the foregoing subsections
5(b) through 5(e) hereof, inclusive, which would
have an inequitable effect on the holders of this
Warrant, then the Per Share Exercise Price shall be
adjusted in such manner and at such time as the
Board on the advice of the Company's independent
public accountants may in good faith determine to be
equitable in the circumstances.
(iii) Minimum Adjustment. No adjustment of the Per Share
Exercise Price shall be made if the amount of any
such adjustment would be an amount less than one
percent (1%) of the Per Share Exercise Price then in
effect, but any such amount shall be carried forward
and an adjustment in respect thereof shall be made
at the time of and together with any subsequent
adjustment which, together with such amount and any
other amount or amounts so carried forward, shall
aggregate an increase or decrease of one percent
(1%) or more.
(iv) Certain Adjustments. The Per Share Exercise Price
shall not be adjusted upward except in the event of
a combination of the outstanding shares of Common
Stock into a smaller number of shares of Common
Stock or in the event of a readjustment of the Per
Share Exercise Price.
(h) Adjustment to Lowest Price. The Company acknowledges and
agrees that the foregoing provisions of this Section 5 may
require adjustments to be made in response to various
circumstances, which adjustments may result in varying
calculations of the Per Share Exercise Price, and that,
notwithstanding any of such foregoing provisions, the Per
Share Exercise Price applicable upon a given exercise of
this Warrant shall, in any case, be the lowest of the
amounts so calculable up to the date of exercise.
(i) Notices of Adjustments. Whenever the Per Share Exercise
Price is adjusted as herein provided, an officer of the
Company shall compute the adjusted Per Share Exercise Price
in accordance with the foregoing provisions and shall
prepare a written certificate setting forth such adjusted
Per Share Exercise Price and showing in detail the facts
upon which such adjustment is based, and such written
instrument shall promptly be delivered to the recordholders
of this Warrant.
6. Fractional Shares. The Company shall not be required upon the
exercise of this Warrant to issue any fractional shares, but shall
make an adjustment therefor in cash on the basis of the mean
between the low bid and high asked prices for the Warrant Shares on
the over-the-counter market as reported by the National Association
of Securities Dealers, Inc. or the closing market price of the
Warrant Shares on a national securities exchange on the trading day
immediately prior to the date of exercise, whichever is applicable,
or if neither is applicable, then on the basis of the then fair
market value of a Warrant Share as shall be reasonably determined
by the Board.
7. Limitation on Sales, etc. The Registered Holder acknowledges that
this Warrant and the Warrant Shares have not been registered under
the Securities Act of 1933, as amended (the "Act"), and agrees,
except as specified in the proviso hereto, not to sell, pledge,
distribute, offer for sale, transfer or otherwise dispose of this
Warrant or any Warrant Shares issued upon its exercise in the
absence of (a) an effective registration statement under the Act as
to this Warrant or the Warrant Shares issued upon its exercise or
both, as the case may be, and registration or qualification of this
Warrant or such Warrant Shares under any applicable Blue Sky or
state securities law then in effect, or (b) an opinion of counsel,
satisfactory to the Company, that such registration and
qualification are not required; provided that the Registered Holder
may transfer this Warrant at any time to any of its affiliates.
Without limiting the generality of the foregoing, unless the
offering and sale of the Warrant Shares to be issued upon the
exercise of the Warrant shall have been effectively registered
under the Act and unless the sale is to an affiliate of the
Registered Holder, the Company shall be under no obligation to
issue the shares covered by such exercise unless and until the
Registered Holder shall have executed an investment letter in form
and substance reasonably satisfactory to the Company, including a
warranty at the time of such exercise that it is acquiring such
shares for its own account, for investment and not with a view to,
or for sale in connection with, the distribution of any such
shares, in which event a legend in substantially the following form
shall be endorsed upon the certificate(s) representing the Warrant
Shares issued pursuant to such exercise:
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
pursuant to the securities or "Blue Sky" laws of any state.
Such securities may not be offered, sold, transferred,
pledged, hypothecated or otherwise assigned, except pursuant
to (i) a registration statement with respect to such
securities which is effective under such Act, (ii) Rule 144
or Rule 144A under such Act, or (iii) any other exemption
from registration under such Act, provided that, if
requested by the Company, an opinion of counsel reasonably
satisfactory in form and substance is furnished to the
Company that an exemption from the registration requirements
of such Act is available.
8. Valid Issuance; Reservation of Stock. All shares of Common Stock
issuable upon the exercise of this Warrant shall, upon issuance by
the Company, be validly issued, fully paid and nonassessable, free
from preemptive rights and free from all taxes, liens or charges
with respect thereto created or imposed by the Company. The Company
will at all times reserve and keep available, solely for issuance
and delivery upon the exercise of this Warrant, such Warrant Shares
and other stock, securities and property, as from time to time
shall be issuable upon the exercise of this Warrant and shall, if
required to effect the purposes of this Warrant, use its best
efforts to cause the authorization of additional capital stock of
the Company through the amendment of the Company's articles of
incorporation or otherwise.
9. Replacement of Warrants. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and (in the case of loss, theft or
destruction) upon delivery of an indemnity agreement in an amount
reasonably satisfactory to the Company, or (in the case of
mutilation) upon surrender and cancellation of this Warrant, the
Company will issue, in lieu thereof, a new Warrant of like tenor.
10. Transfers, etc. The Registered Holder acknowledges and agrees that
this Warrant and its underlying securities are subject to certain
restrictions on transfer set forth in the CCI Shareholders'
Agreement, as that term is defined in the Participation Agreement,
and that any transfer of this Warrant shall be subject to the
Registered Holder's compliance with such transfer restrictions. The
Company will maintain a register containing the names and addresses
of the Registered Holders of this Warrant. Any Registered Holder
may change its, his or her address as shown on the warrant register
by written notice to the Company requesting such change. Until any
transfer of this Warrant is made in the warrant register, the
Company may treat the Registered Holder of this Warrant as the
absolute owner hereof for all purposes and shall not be bound to
recognize any equitable or other claim to or interest in this
Warrant on the part of any other person; provided, however, that if
and when this Warrant is properly assigned in blank, the Company
may (but shall not be obligated to) treat the bearer hereof as the
absolute owner hereof for all purposes, notwithstanding any notice
to the contrary.
11. Registration Rights. This Warrant shall entitle the Registered
Holder of this Warrant to the registration, holdback, piggyback and
other rights set forth in the Amended and Restated Registration
Rights Agreement dated as of the date hereof by and among the
Holder, certain other Persons, and the Company, by which the
Registered Holder agrees to be bound.
12. Mailing of Notices, etc. All notices and other communications from
the Company to the Registered Holder of this Warrant shall be
mailed by first-class certified or registered mail, postage
prepaid, sent by reputable overnight delivery or by facsimile to
the address furnished to the Company in writing by the last
Registered Holder of this Warrant who shall have furnished an
address to the Company in writing. All notices and other
communications from the Registered Holder of this Warrant or in
connection herewith to the Company shall be mailed by first-class
certified or registered mail, postage prepaid, sent by reputable
overnight delivery or by facsimile (801-532-6060) to the Company at
its offices at 102 West 500 South, Suite 320, Salt Lake City, Utah
84101, to the attention of President, or such other address, or to
the attention of such other officer, as the Company shall so notify
the Registered Holder.
13. No Rights as Stockholders. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any
rights by virtue hereof as a stockholder of the Company.
14. Change or Waiver. Any term of this Warrant may be changed or waived
only by an instrument in writing signed by the party against whom
enforcement of the change or waiver is sought.
15. Headings. The headings of this Warrant are for purposes of
reference only and shall not limit or otherwise affect the meaning
of any provision of this Warrant.
16. Governing Law. This Warrant will be governed by and construed in
accordance with the law of the State of New York including Section
5-1401 of the New York General Obligations Law. All disputes
arising under or relation to this Warrant shall first be subject to
conciliation in accordance with the Rules of Conciliation of the
International Chamber of Commerce and, failing conciliation, be
finally settled under the Rules of Arbitration of the International
Chamber of Commerce by three arbitrators appointed in accordance
with said Rules. The place of arbitration shall be New York, New
York. The language of the arbitration shall be English. In the
event any dispute under the Participation Agreement relates in any
way to the validity, performance or interpretation of this Warrant
and an arbitral tribunal is constituted pursuant to Section 11(n)
of the Participation Agreement, all parties to any dispute
hereunder agree (i) to be joined to the procedures initiated
pursuant to Section 11(n) of the Participation Agreement; (ii) to
have any proceedings initiated hereunder consolidated with
proceedings initiated pursuant to Section 11(n) of the
Participation Agreement and (iii) to be bound by any ruling of the
arbitral tribunal constituted pursuant to Section 11(n) of the
Participation Agreement or any interim or final award thereof.
Submission of disputes to arbitration pursuant to the Rules of
Arbitration of the International Chamber of Commerce, in
consolidation with any disputes submitted to arbitration pursuant
to Section 11(n) of the Participation Agreement as provided above,
shall be the sole method of resolving disputes between the Parties
hereto. Judgment upon an arbitration award may be entered in any
court having jurisdiction.
Dated: October 18, 1999 CONVERGENCE COMMUNICATIONS, INC.
By: /s/ Lance D'Ambrosio
----------------------------
Name: Lance D' Ambrosio
Title: Chairman and CEO
Exhibit E
CCI SHAREHOLDERS' AGREEMENT
THIS CCI SHAREHOLDERS' AGREEMENT is made as of October 18, 1999,
(this "Agreement"), by and among TELEMATICA EDC, C.A., a Venezuelan
sociedad anonima, ("Telematica"), TCW/CCI HOLDING LLC, a Delaware limited
liability company ("TCW"), INTERNATIONAL FINANCE CORPORATION, an
international organization established by Articles of Agreement among its
member countries ("IFC"), GLACIER LATIN-AMERICA LTD., a British Virgin
Islands International Business Company ("Glacier"), THE ESTATE OF GEORGE
D'AMBROSIO, LANCE D'AMBROSIO and TROY D'AMBROSIO (the latter three
sometimes in the aggregate referred to as the "D'Ambrosio Parties"),
FONDELEC GROUP INC., a Delaware corporation ("FondElec Group"), PEGASUS
FUND, L.P., a New York limited partnership ("Pegasus"), FONDELEC ESSENTIAL
SERVICES GROWTH FUND, L.P., a Cayman Islands limited partnership ("FESGF",
together with FondElec Group and Pegasus sometimes in the aggregate
referred to as "FondElec"), INTERNEXUS S.A., an Argentine sociedad anonima
("Internexus"), and CONVERGENCE COMMUNICATIONS, INC., a Nevada corporation
(the "Company", all the foregoing sometimes referred to collectively as the
"Parties" and individually as a "Party").
R E C I T A L S
WHEREAS, Telematica, TCW, IFC, Glacier, the D'Ambrosio Parties,
FondElec and Internexus (each a "Shareholder Party" and collectively the
"Shareholder Parties") are shareholders of the Company, each of Telematica,
TCW, IFC and Glacier having acquired its interests in the Company, and each
of FondElec and Internexus having acquired certain of its interests in the
Company, pursuant to a certain Participation Agreement (the "Participation
Agreement") among them, the D'Ambrosio Parties and the Company dated
October 15, 1999, and the entering into this Agreement being also
contemplated in the Participation Agreement;
WHEREAS, the Parties intend that this Agreement cover (i) the shares
of stock of the Company held, legally or beneficially, by any Shareholder
Party as of the date hereof, which shares are as set out in Schedule 1 (the
"Present Shares"), (ii) the shares of stock of the Company acquired by any
Shareholder Party on the exercise of any warrant, option or other similar
right, held legally or beneficially by any Shareholder Party as of the date
hereof, which warrant, option or other rights are as set out in Schedule 1
(the "Share Rights"), and (iii) any shares of stock of the Company that are
presently outstanding and which may be acquired directly or indirectly from
time to time by any Shareholder Party (the "Further Shares"). The Present
Shares, the Further Shares and the shares of stock acquired by any
Shareholder Party from time to time on the exercise of any Share Rights are
referred to herein in the aggregate as the "Company Shares", and the
Company Shares, together with the Share Rights, are referred to in the
aggregate as the "Company Equity".
WHEREAS, as an inducement for Telematica, TCW, IFC, Glacier, FondElec
and Internexus to acquire interests in the Company pursuant to the
Participation Agreement, the Parties have agreed as to the manner in which
the Company shall be managed and the manner in which the Shareholder
Parties may dispose of their interests in Company Equity; and
WHEREAS on December 23, 1998, the D'Ambrosio Parties (or their
predecessors in interest), Pegasus, FESGF and Internexus entered into a
certain Stockholders' Agreement (the "Prior Agreement") among them with
respect to the same matters, and they now wish to substitute the Prior
Agreement in its entirety with this Agreement.
NOW, THEREFORE, the Parties agree as follows:
1. Definitions.
Capitalized Terms used herein but not defined herein shall have the
meaning given to them in the Schedule of Definitions to the
Participation Agreement, being Schedule 1 thereto.
2. Restriction on Transfer Prior to Realized Valuation Event. No
Shareholder Party may Transfer (as that term is defined in Section 4
below) the entirety or any part of its Company Equity, unless and
until there has occurred one of the following events (each, a
"Realized Valuation Event"):
(a) all the Shareholder Parties, acting together, Transfer their
Company Equity for cash consideration, or for securities of
another company that are registered and freely tradeable
pursuant to a registration statement filed with and declared
effective by the SEC under U.S. Securities Law and listed on
a Recognized Exchange ("Publicly Traded Securities") (such a
Transfer being herein referred to as a "Qualified
Disposition"), or
(b) there occurs a registered public offering of the Company's
securities under U.S. Securities Law, the shares of a class
of the Company's securities so registered are approved for
listing on a Recognized Exchange, the net proceeds of the
offering obtained by the Company are not less than Seventy
Five Million United States Dollars (U.S. $75,000,000) and the
offering is managed by a lead underwriter of international
standing (a "Qualified Public Offering").
3. Tag-Along Rights. Upon the happening of a Qualified Disposition, this
Agreement shall terminate as contemplated in Section 18, and thus the
Shareholder Parties shall have no further restrictions on the
Transfer of their respective Company Equity. However, if there occurs
a Qualified Public Offering, the Parties shall have the following
rights and obligations with respect to the Transfer of any of their
Company Equity, for a period of three years following the Qualified
Public Offering.
(a) Notice. If a Shareholder Party ("Transferor") intends to
Transfer any of its Company Shares ("Tag Shares") to any
Person, the Transferor shall give each other Shareholder
Party ("Optionee") notice of the Transferor's intent to so
transfer, setting out in reasonable detail the terms and
conditions of the proposed transaction.
(b) Exercise. Any Optionee may elect to exercise its rights under
this Section 3 by its written notice to the Transferor given
not more than 15 Business Days after receipt of the notice
given as required in Section 3(a), setting out the number of
its Company Shares that such Optionee desires to transfer
pursuant to this Section 3. Thereupon, the Transferor shall
be obligated to cause its intended transferee to acquire from
the Optionee, and the Optionee shall be obligated to transfer
to the intended transferee, on the same terms and conditions
and at the same time as any of the Tag Shares are
transferred, (except that any Optionee may elect to transfer
rights to acquire Company Shares on the exercise of warrants,
provided that it does not receive any premium therefor) the
lesser of (A) the number of Company Shares specified in the
Optionee's notice, or (B) a number of Company Shares equal to
the product of a fraction having as its numerator the number
of Company Shares that the Optionee owns or has the right to
acquire on the exercise of warrants and as its denominator
the aggregate of Company Shares that the Transferor, and all
Optionees having elected to exercise rights under this
Section 3 owns or has the right to acquire on the exercise of
warrants, multiplied by the number of Tag Shares.
(c) Closing on Tag Transaction. Upon the closing of any transfer
by an Optionee as contemplated in this Section 3, the
Optionee shall deliver the instruments representing the same,
duly endorsed so as to effect transfer thereof by delivery.
(d) Excluded Transfers. A Shareholder Party may Transfer, free
and clear of the provisions of this Section 3: (i) any
Company Shares pursuant to an effective registration
statement, provided such Company Shares are sold on a
Recognized Exchange; and provided further that no
negotiations have occurred between such Shareholder Party or
its agents and any proposed buyer or their respective agents,
including without limitation, an underwriter; (ii) such
number of its Company Shares as is permitted to be disposed
of by "affiliates" under Rule 144 of the U.S. Securities
Laws, in each case, subject to the volume and other
limitations set forth in Rule 144; or (iii) rights under
warrants for the purchase of Company Shares.
4. Provisions Generally Applicable to Transfers.
(a) Applicability of Sections 2 and 3. The rights, obligations
and restrictions set out in Sections 2 and 3:
(i) apply to Company Equity (or, in the case of Section
3, to Company Shares) presently owned or hereafter
acquired by a Shareholder Party, or by the successor
of any Shareholder Party or a Related Party;
(ii) apply (subject to the limitations of clauses (iii)
and (iv) below) to any direct or indirect
disposition, including, within that concept and
without limitation, a sale, bequest, exchange,
assignment or gift, the creation of any security
interest or other encumbrance, a transfer in
connection with a receivership, bankruptcy,
insolvency, dissolution, liquidation, judicial
determination of incompetency or similar proceeding,
and any other disposition of any kind, whether
voluntary or involuntary, and however accomplished
(including, among other means, by way of merger,
recapitalization, share exchange or other
extraordinary corporate action), affecting title to
or possession of any Company Equity ("Transfer");
(iii) do not apply (A) to transfers to be made by a
Shareholder Party to a Control Affiliate, or (B) (1)
in the case of a transfer by FondElec or a successor
to FondElec, to an entity that has as a general
partner, a Person that is Controlled by, FondElec
Group or an entity which Controls, is Controlled by
or under Common Control with FondElec Group, (2) in
the case of a transfer by TCW or a successor to TCW,
to an entity that has as a general partner, a Person
that is Controlled by, TCW/Latin America Partners LLC
or an entity which Controls, is Controlled by or
under Common Control with TCW/Latin America Partners
LLC, (3) in the case of a transfer by Telematica to
an entity that is a Control Affiliate of Corporacion
EDC, C.A. or of C.A. Electricidad de Caracas and, (4)
in the case of a transfer by Glacier or a successor
to Glacier, to an entity that has as an investment
advisor, Fenway Capital Ltd. or an entity which
Controls, is Controlled by or under Common Control
with Fenway Capital Ltd. (in any case, such Control
having been evidenced to the reasonable satisfaction
of the other Shareholder Parties), or (C) in the case
of Internexus, to transfers of interests in
Internexus made to a spouse, or to a relative within
the first degree of consanguinity, of any of the
current holders of Internexus or to trusts or similar
estate planning vehicles for the benefit of any of
them, or (D) in the case of any of the D'Ambrosio
Parties, to transfers made to a spouse or to a
relative within the first degree of consanguinity, or
to trusts or similar estate planning vehicles for the
benefit of any of them (any entity or person
described in this clause (iii), a "Related Party");
and
(iv) do not apply to the transfer of Common Stock upon
exercise by the optionee of the "Diamond D Options"
or of the "Continental LLC Option" which are
described in Schedule 1 hereto.
(b) Restructure or Disassociation.
(i) If, during the term of this Agreement, a Shareholder
Party (the "Proposing Party") in its reasonable
discretion determines that its continued investment
in the Company and/or the Company's subsidiaries, as
the investment may be structured from time to time,
exposes the Proposing Party to substantial claims
from third parties or other legal or regulatory
process that results in substantial burdens or
liability arising from arrangements or circumstances
existing as of the date hereof or changes in law or
regulation after the date hereof, (a "Trigger Event")
then, at the Proposing Party's request, the other
Shareholder Parties (the "Responding Parties") and
the Proposing Party shall exercise reasonable,
diligent and timely efforts to restructure their
respective investments so as to remove or mitigate
the risk of liability to the Proposing Party while
preserving the Proposing Party's investment, provided
that the Responding Parties need not agree to the
restructuring if it would (a) reduce the rights or
preferences that the Responding Parties had prior to
the restructuring, (b) change the relative aggregate
ownership interests in the enterprise that the
Responding Parties had prior to the restructuring,
(c) reduce the rights of representation or
participation in corporate governance that the
Responding Parties enjoy by virtue of the CCI
Shareholders' Agreement, (d) create any substantial
liability on the Responding Parties for which that
the Proposing Party does not agree to be responsible,
(e) reduce the overall value of the Responding
Parties' investment, (f) substantially reduce the
likelihood of a Qualified Disposition or a Qualified
Public Offering, or (g) otherwise adversely affect
the Company, any Subsidiary or the Responding
Parties, except in immaterial respect.
(ii) If the Proposing Party makes, in its sole discretion,
a good faith determination that a restructuring, as
contemplated by the preceding paragraph, would
involve terms and conditions (economic or otherwise)
not satisfactory to the Proposing Party, then the
Proposing Party may cease to be obligated to continue
funding the Company or any of its subsidiaries and
may dispose of the entirety of its interest in the
Company (the "Proponent's Interest") as provided in
the following clauses (A) through (D): (A) if the
Proposing Party holds any direct equity right or
interest or an interest or right convertible or
exchangeable into an equity interest in a subsidiary
of the Company; the Proposing Party first, with the
good faith cooperation of the Company, shall have
exchanged such interest for Common Stock of the
Company at fair value (as determined pursuant to
Section 12 (b)) or otherwise caused the transferee to
acquire only Common Stock of the Company; (B) the
Proposing Party shall negotiate to dispose of its
interest in the following order, in each case for a
reasonable time, first, to the Company, then, on a
pro rata basis, to the other Shareholder Parties or
such of them as wish to purchase the entirety of the
Proponent's Interest, next, to the third party
designated by the majority of the other Shareholder
Parties, and last, to one or more third parties,
except that if the transfer to a third party is
proposed to occur on terms and conditions
substantially equal or more favorable to the third
party than negotiated with any of the other
Shareholder Parties or their designee, the
Shareholder Parties may elect to purchase at that
price, or their designee may do so; (C) each
transferee of the Proponent's Interest adheres to the
CCI Shareholders' Agreement in its entirety (and
shall have the benefit of all the rights and
privileges available to the Proposing Party with
respect to its Company Equity, including the
Registration Rights Agreement and the other
Transaction Documents, except that if the transferee
is a Shareholder Party, it shall not have the benefit
of designating a greater number of directors than it
had prior to the transfer); and (D) each transferee,
in the good faith opinion of the Responding Parties,
is reputable, creditworthy and not a substantial
competitor of the Company or its Subsidiaries. The
tag along rights under Section 3 of the CCI
Shareholders Agreements shall not apply to a transfer
under this Agreement.
(iii) The Parties acknowledge and agree that the Proposing
Party shall have no liability to the other Parties
under any Transaction Document for any (i) loss or
damages to or suffered by the other Parties flowing
from the Proposing Party's need to restructure or
sell pursuant to this Section, or the restructuring
or sale itself, or (ii) the consequences of the
restructuring or sale, including any loss or damages
to or suffered by other Parties flowing from or that
result from such restructuring or sale, such as the
loss of funding commitments associated with the
Proposing Shareholder, the loss of the Proposing
Party's ability to support the Company and its
subsidiaries, and loss of reputation and prestige
associated therewith, provided that the Proposing
Party shall indemnify the Responding Parties for the
reasonable out-of-pocket expenses incurred by the
Responding Parties, and any out-of-pocket damages
against the Responding Parties assessed against them,
as a result of claims by third parties who may bring
the substantial claims or other legal process
referred to above. The Parties further acknowledge
and agree that the restructuring or mere
disassociation of the Proposing Party from all or a
part of its investment as originally structured will
not, in and of itself, be or be deemed to result in
any loss to the other Parties or be taken into
account in determining whether the overall value of
the Responding Parties' investment has been reduced
for purposes of clause (e) of the first paragraph of
this Section.
(iv) In no event shall the Proposing Party be liable for
damages other than direct out-of-pocket damages, and
therefore will not be responsible for other damages
such as loss of profits, indirect, consequential,
special or punitive damages.
(v) If a Qualified Disposition Event occurs at any time
after a Trigger Event, then, except for transactions
previously consummated under this Section 4(b), the
right to restructure under Section 4(b)(i) and the
right to dispose under Section 4(b)(ii) will expire,
but not the other rights under this Section 4(b),
including the right to cease funding under Section
4(b)(ii) and the provisions of Sections 4(b)(iii) and
4(b)(iv).
(c) Acknowledgment of Agreement Required. Prior to making any
Transfer of Company Equity to a Related Party other than
pursuant to the provisions of paragraph 3(d), the
transferring Shareholder Party shall cause the transferee to
execute, and deliver to each other Party, a copy of this
Shareholders' Agreement so as to bind the transferee as a
Shareholder Party for all purposes of this Shareholders'
Agreement, and to assume all of the obligations and
liabilities of the transferring Shareholder Party, from and
after the date of the Transfer.
(d) Certain Transfers Void. Any purported Transfer of Company
Equity contrary to this Agreement shall be null and void, and
the Shareholder Parties shall cause the Company not to
recognize the Transfer.
5. Formation of Board of Directors. The Parties shall take such actions
as are necessary or appropriate so that upon the Closing the board of
directors of the Company ("Board of Directors") is constituted of
five members and, as promptly as practicable following the Closing,
the Company's Articles of Incorporation are amended so as to provide
that the Board of Directors shall be constituted of ten members. At
each election of directors, each Shareholder Party shall vote its
Company Shares for the election as members of the Board of Directors
of the following:
(a) one person, while the Board of Directors is constituted of
five members, and two persons, when the Board of Directors is
constituted of ten members, designated by FondElec, Pegasus,
FESGF and, if any, the immediate or subsequent Related Party
transferees thereof, as they may agree among themselves (the
"FondElec Group");
(b) one person, while the Board of Directors is constituted of
five members, and two persons, when the Board of Directors is
constituted of ten members, designated by Internexus, and, if
any, the immediate or subsequent Related Party transferees
thereof, as they may agree among themselves (the "Internexus
Group");
(c) one person, while the Board of Directors is constituted of
five members, and two persons, when the Board of Directors is
constituted of ten members, designated by the Estate of
George S. D'Ambrosio, Lance D'Ambrosio and Troy D'Ambrosio
and, if any, the immediate or subsequent Related Party
transferees thereof as they may agree among themselves (the
"D'Ambrosio Group");
(d) one person, while the Board of Directors is constituted of
five members, and two persons, when the Board of Directors is
constituted of ten members, designated by Telematica and, if
any, the immediate or subsequent Related Party transferees
thereof, as they may agree among themselves (the "Telematica
Group"); and
(e) one person, while the Board of Directors is constituted of
five members, and two persons, when the Board of Directors is
constituted of ten members, designated by TCW and, if any,
the immediate or subsequent Related Party transferees
thereof, as they may agree among themselves (the "TCW
Group").
Each Shareholder Party agrees to vote its Company Shares, and take such
other actions as are necessary, so as to elect and thereafter continue in
office as members of the Board of Directors the designees set forth above
(the "Designated Directors", each group of shareholders described in any of
Sections 5(a) through 5(e) being referred to as a "Group"). Further, as to
each of IFC and Glacier, so long as it does not Transfer (other than
pursuant to Section 4(a)(iii)) any Company Equity received pursuant to the
transactions contemplated by the Participation Agreement, it shall be
entitled to receive notices of all meetings of the Board of Directors, and
copies of the minutes thereof, and be permitted to designate a person from
time to time by notice to the Company to be present so as to observe (but
not participate in) such meetings.
Immediately prior to any Qualified Public Offering (or, if no
Qualified Public Offering has occurred prior to the seventh anniversary of
the Closing, immediately prior to such seventh anniversary), the
Shareholder Parties shall take all actions necessary or appropriate so that
the terms of the members of the Board of Directors are staggered in a
manner such that four directors serve three-year terms, three
directors serve two-year terms and three directors serve one-year terms,
and so that one director designated by each of the Internexus Group, the
Telematica Group, the TCW Group and the D'Ambrosio Group comprise the
directors serving three-year terms, two directors designated by the
FondElec Group, and one director designated by the Telematica Group,
comprise the directors serving two-year terms, and one director designated
by each of the Internexus Group, the TCW Group and the D'Ambrosio Group
comprise the directors serving one-year terms.
6. Corporate Governance.
(a) Ordinary Matters. The Board of Directors of the Company shall
make all decisions with respect to the business or operations
of the Company by a simple majority vote of the directors
present at a meeting duly called and continuing as to all
matters, except that, as to those matters described in
Section 6(b) through Section 6(e), the Company shall take no
action with respect thereto until it has obtained the
approval as described in those sections.
(b) Extraordinary Matters. The Company shall not proceed with any
of the following matters unless a director designated by each
of the number of Groups indicated following the description
of the matter are among the directors approving the matter:
(i) the selection of the persons to fill the positions of
chief executive officer, chief technical officer,
chief operating officer and chief financial officer
of the Company or any Subsidiary, and the
continuation of any of such person in his or her
position after any Shareholder Party has expressed
reservations, set out in writing and with reasonable
substantiating information supporting its position,
to the effect that the person has failed to carry out
the duties of the position in a competent manner,
three Groups;
(ii) the adoption of an annual budget for the operation of
the Company and its Subsidiaries (the Parties
confirming their agreement to the adoption of the
Budget attached to the Participation Agreement as the
budget for the 12 month period following the date
hereof and confirming also that (1) while the Budget
assumes greenfield development of expansion
opportunities, if any such opportunities can more
efficiently be carried out by acquisition, they are
agreeable to an acquisition structure and that (2)
each budget shall include a provision for
transactions not specifically foreseen in the
budget), or the approval of any transaction or
related series of transactions, not provided for in
the current budget or that varies from the current
budget by a significant degree, including, without
limitation:
(A) entering into or amending Material Contracts,
except for those that substitute for earlier
contracts or licenses on similar terms;
(B) making capital expenditures or other investments
(a variance of 10% of budgeted cost, or, if
less, $500,000, being deemed significant);
(C) disposing of any assets (a variance of 10% of
the budgeted disposition value or, if less,
$500,000, being deemed significant);
(D) incurring any debt or granting any guarantee or
lien for fair value (a variance of 10% of
budgeted principal or guaranteed or secured
amount, or, if less, $500,000, being deemed
significant);
(E) entering into a merger, consolidation or other
restructuring, or a joint venture, profit
sharing agreement or similar arrangement in any
case other than a Transaction Resulting in a
Change of Interest;
(F) issuing or failing to issue dividends or making
pro rata stock repurchases or other prorata
distributions; and
(G) engaging in any business activity outside the
scope of business contemplated in the then
current budget,
(H) entering into any transaction described in
subsections (B), (C) and (D) above not provided
for in the current budget or varying therefrom
in any amount which would cause the aggregate
variance with respect to such transactions to
exceed $1,000,000.
or the decision to decline any corporate opportunity that is
identified in the then current budget, four Groups;
(iii) issuing securities for fair value, three Groups;
unless the same constitutes a Transaction Resulting
in a Change of Interest, in which case approval as
provided in Section 6(b)(vi) or 6(c)(i) shall be
required;
(iv) the adoption of a change in accounting principles
affecting the Company or any Subsidiary having a
significant effect on financial results, except to
the extent required by GAAP or Applicable Law, four
Groups;
(v) the approval to conduct a Qualified Public Offering,
four Groups, unless the purchase price of the
Company's securities in such offering evidences a
value per share of Common Stock (taking into account
the number of shares issuable in connection with such
offering and all warrants and options remaining
outstanding upon the effectiveness of the offering)
equal to or greater than the Target Value, in which
case the number of Groups shall be three;
(vi) a Transaction Resulting in a Change of Interest or
the sale of all or substantially all of the assets of
the Company or any Subsidiary, provided that, as a
result thereof, the Shareholder Parties Transfer all
of their Company Equity, and each receives, in
consideration thereof, a prorata portion of cash
and/or Publicly Traded Securities, four Groups, if
the value per share of Common Stock as evidenced by
such transaction (taking into consideration the
number of shares issuable in connection with the
transaction and all warrants and options remaining
outstanding upon the effectiveness of the
transaction) is less than the Target Value, or three
Groups, if such value per share equals or exceeds the
Target Value.
(c) Consensus Matters. The Company shall not proceed with any of
the following matters unless a director designated by each
Group is among the directors approving the matter as provided
in Section 6(a):
(i) a Transaction Resulting in a Change of Interest or a
Transfer of all or substantially all of the assets of
the Company or any Subsidiary other than as
contemplated in Section 6(b)(v) or 6(b)(vi), or any
fundamental change in the nature of the business of
such company;
(ii) any transaction with any person or entity having a
significant relationship with any Shareholder Party,
other than on a reasonably arms' length basis;
(iii) the appointment or removal of the independent
auditors of the Company or any Subsidiary, which
should, in any case, be an internationally recognized
accounting firm;
(iv) the issuing of any securities other than for fair
value, or the taking of any action that creates,
increases or reduces a preference for one or more,
but not all, series or classes of capital stock of
the Company or any Subsidiary;
(v) increases or decreases in the size of the Board of
Directors in a manner that affects the rights of
representation set forth in this Agreement;
(vi) incurring any debt, granting any guarantee,
transferring assets or permitting any Encumbrance
thereon, or acting as a surety or guarantor for any
third party, in any such case other than for fair
value received;
(vii) making stock repurchases or other distributions other
than on a prorata basis;
(viii) taking any action that would amend, modify or restate
the Articles of Incorporation or Bylaws of the
Company or any Subsidiary or entering into any voting
or management agreement regarding the governance of
any Subsidiary other than to effect a transaction
expressly provided for in Section 6(b); and
(ix) the determination to cease to be a reporting company
under the provisions of the United States Securities
and Exchange Act of 1934, as amended.
(d) Related Party Transactions. If a transaction is sought to be
approved that will significantly benefit or involve any
Shareholder Party or any Affiliate of a Shareholder Party,
then, in addition to the approval requirements that may be
applicable pursuant to Sections 6(a), 6(b), or 6(c), as
appropriate, that matter will also require the approval of
one director designated by each Group constituting a majority
(without taking into account any Group having any
relationship to the transaction being approved).
(e) Calling of Meetings. The Board of Directors will not consider
any matter at a given meeting unless such matter was
described in sufficient detail to give reasonable notice
thereof in the notice of that meeting, or unless Designated
Directors corresponding to all the Groups are present at the
meeting and agree that the matter should be taken up.
(f) Governance of Subsidiaries. The Company will cause each
controlled Subsidiary to refrain from taking any action that
is described in Sections 6(a), 6(b) or 6(c) above, unless and
until the action has been approved by the Board of Directors
in the manner described in the appropriate section.
(g) Advisory Agreements. Promptly and diligently following the
Closing, the Company shall negotiate (i) with Telematica the
terms and conditions of a definitive agreement providing for
an experienced and skilled person designated by Telematica to
act as the Company's advisor with respect to strategic
planning, and (ii) with TCW the terms and conditions of a
definitive agreement providing for an experienced and skilled
person designated by TCW to act as the Company's advisor with
respect to technical matters, in each case providing for a
term continuing until a Qualified Disposition occurs or until
the third anniversary of a Qualified Public Offering (or, if
earlier, until the fifth anniversary of the Closing Date),
and in the case of Telematica, providing for annual
compensation not greater than $135,000 and, in the case of
TCW, annual compensation commensurate with the advisor's
scope of work.
(h) Interest in CCI Salvador. As of the completion of the
transactions contemplated by the Participation Agreement to
occur on the Subsequent Closing with respect to CCI Salvador,
Fondelec will hold (i) the Salvador Note (having a remaining
principal balance of U.S.$1,269,491), (ii) 27.87% of the
issued and outstanding common stock of CCI Salvador (the
rights therein being affected by the transfer of voting
rights pursuant to, and FondElec having the other obligations
and rights as provided in, the Salvador Shareholders'
Agreement), (iii) rights under a certain Special
Shareholders' Agreement dated as of December 10, 1998, and
(iv) rights under a certain Warrant granted by CCI Salvador
dated March 3, 1999 (collectively the "FondElec Salvador
Interests"). The Parties acknowledge and agree that it is in
the Company's best interests that the FondElec Salvador
Interests be transferred to the Company for fair
consideration, and the Shareholder's Parties agree further to
cause the Company to negotiate diligently and in good faith
with FondElec the terms and conditions for such transfer, and
FondElec also agrees so to negotiate, with an aim that the
closing of such transaction should occur simultaneously with
the expiration of the period provided for the exercise of
options under the Option Agreement. This Section 6(i) should
be interpreted to be an expression of intent only, and a
commitment to negotiate diligently and in good faith, the
obligations of the Company to acquire the FondElec Salvador
Interests, and of FondElec to transfer the same, being set
out, if at all, only in the definitive documentation between
them incorporating the terms and conditions to such transfer
as are acceptable to them in their discretion.
(i) No Waiver. No provision of Section 6 shall be deemed to
waive, abrogate or otherwise modify any dissenters' rights
granted under state law to the holders of Company Equity, if
such holders do not vote in favor of that matter.
(j) Increasing Authorized Shares. The Parties agree that if the
number of the Company's authorized and unissued shares of
Common Stock or other authorized securities shall ever be
insufficient to permit the Company to satisfy (i) its
obligation to issue Indemnity Shares pursuant to Section 7 of
the Participation Agreement, (ii) its obligation to issue and
deliver any securities upon the exercise by a Shareholder
Party of any Share Rights or (iii) to satisfy other
obligations to any Shareholder Party, they shall take such
actions (and, with respect to the Shareholder Parties, cast
such votes or grant such consents) as shall be required to
amend the Company's Articles of Incorporation to increase (as
necessary) the number of shares of Common Stock or other
securities, as appropriate which the Company is authorized to
issue.
7. Removal of Directors. Neither the Company nor any Shareholder Party
may attempt to remove a Designated Director unless the Group who
designated such Designated Director so votes, and if such Group so
votes, then the other Shareholder Parties shall likewise so vote,
except that if there is just cause to remove a Designated Director,
because of improper acts or similar reason, the Designated Director
may be removed. If a Designated Director ceases to serve as a
director for any reason, the vacancy resulting thereby shall be
filled as promptly as practicable by the Board of Directors in a
manner consistent with the provisions of this Agreement.
8. Fiduciary Obligations. The Shareholder Parties acknowledge that any
person who serves as a director of the Company will be obligated as a
fiduciary to the Company and its shareholders, as is more
specifically provided by the corporate statutes of the State of
Nevada, which require that directors satisfy a duty of care and
loyalty to the corporation on whose board they serve.
9. Joint Sale Agreement. If any third party offers to acquire all of the
Company Equity of all of the Shareholder Parties, in a bona-fide
arm's-length transaction for cash consideration in United States
Dollars, which transaction evidences that the value per share of
Common Stock (taking into account all warrants and options remaining
outstanding upon the effectiveness of the transaction) is equal to or
greater than the Target Value, and after reasonable consultation
among such Shareholder Parties three out of Telematica, TCW, the
D'Ambrosio Parties, FondElec and Internexus agree to such transaction
(or if the transaction evidences that such value per share is less
than the Target Value, four out of Telematica, TCW, the D'Ambrosio
Group, FondElec and Internexus agree to such transaction), all of the
Shareholder Parties shall be obligated to participate in the
transaction, and shall with respect to itself cause the same to
occur, provided that the third party acquires all of the Company
Equity of each Shareholder Party on the same terms and conditions
each as the other, and at the same time. Without limiting the
obligation of the Parties to consummate the transaction described in
the foregoing section, the Parties will consult reasonably with each
other in connection with the timing of such transactions.
10. Cooperation with an Underwriting. If the Board of Directors of the
Company, acting in the manner provided for in Section 6(a) and
clauses (v) or (vi) of Section 6(b), or the Shareholder Parties
acting in the manner provided for in Section 9, determine to proceed
with a given transaction, all the Shareholder Parties shall cooperate
as necessary or appropriate to cause such transaction to be
effective, including, without limitation, cooperating with the
requirements of the lead underwriter in any connection with any
Qualified Public Offering.
11. Option to Sell or Purchase Interest in Subsidiaries.
(a) Right to Election. If the Board of Directors of the Company,
acting in the manner provided for in Section 6(a) and clause
(v) or (vi) of Section 6(b), or the Shareholder Parties
acting in the manner provided for in Section 9, determine to
carry out a transaction that they anticipate will result in a
Qualified Disposition and if at that time, Telematica has a
50% or greater equity interest in any Subsidiary or has a
right, whether by conversion of debt or otherwise, to acquire
a 50% or greater equity interest in any subsidiary (such
equity or right to acquire being herein referred to as a
"Shareholder Interest"), the Company shall provide Telematica
a written notice of the Company's good faith estimation of
the value of the aggregate of all equity interests in the
Subsidiary (the "Subsidiary Value"). Within 20 Business Days
following receipt of such notice, Telematica shall make an
irrevocable election, by its written notice to the Company,
either to purchase the Company's equity interest in the
Subsidiary (the "Company Interest"), or to sell to the
Company the Shareholder Interest in the Subsidiary, in each
case pursuant to this Section 11 (the "Put-Call Notice"). If
that 20 Business Day period elapses without Telematica's
having delivered a Put-Call Notice, it shall be deemed to
have irrevocably elected to sell to the Company the
Shareholder Interest, and a Put-Call Notice to that effect
shall be deemed to have been given on the close of business
of the 20th day of such period.
(b) Election to Purchase. If Telematica makes an election to
purchase the Company Interest, the Company shall be obligated
to sell, and Telematica shall be obligated to purchase, all
of the Company Interest for an amount equal to the product of
a fraction having as its numerator the number of shares of
common stock to which the Company Interest is equivalent, and
as its denominator the total number of shares of common stock
of the Subsidiary to which the Subsidiary's equity then
issued and outstanding is equivalent, multiplied by the
Subsidiary Value ("Company Sale Price"), and Telematica shall
be obligated to purchase all of the Company Interest for the
Company Sale Price, payable in cash in United States Dollars.
(c) Election to Sell. If Telematica makes an election to sell the
Shareholder Interest, then, the Company shall be obligated to
purchase, and Telematica shall be obligated to sell, the
Shareholder Interest simultaneously with the closing of the
Qualified Disposition that was contemplated when the notice
of the Subsidiary Value was given (the "Exit Closing"), for a
consideration ("Company Purchase Consideration") equal to a
fraction of each item of consideration received by the
Company at the Exit Closing, which fraction:
(i) has as its numerator the product of the number of
shares of common stock to which the Owner's equity
interest in the Subsidiary is equivalent multiplied
by the Subsidiary Value; and
(ii) as its denominator the product of the total number of
shares of common stock of the Subsidiary to which the
Subsidiary's equity then issued and outstanding is
equivalent multiplied by the value of the
consideration received at the Exit Closing,
and the Owner shall be obligated to sell to the Company the
Shareholder Interest for such consideration.
(d) Purchase and Sale Agreement. The Company and Telematica
shall, beginning upon the giving of the Put-Call Notice,
negotiate diligently and in good faith the terms and
conditions of a definitive agreement providing for the
purchase and sale of the relevant interest in a Subsidiary,
with an aim to entering into such definitive agreement within
30 calendar days following the Put-Call Notice. Such
agreement shall include provisions consistent with the
foregoing:
(i) the selling party shall have no obligation to make
any representations or warranties to the purchasing
Party with respect to the assets, liabilities,
business or prospects of the Subsidiary;
(ii) the respective obligations of the Company and
Telematica to buy or sell shall be unconditional,
except that:
(A) a Party's performance shall depend on the other
Party's delivery of the appropriate
consideration;
(B) in the case of a transaction as described in
Section 11(b), Telematica may condition its
obligation to purchase on the occurrence of the
Exit Closing within six months following the
giving of the Put-Call Notice, and
(C) in the case of a transaction as described in
Section 11(c), each party's respective
obligations shall be conditioned on the
occurrence of the Exit Closing within six months
following the giving of the Put-Call Notice;
(iii) the closing of the purchase and sale of the relevant
interest shall occur:
(A) in the case of a transaction as described in
Section 11(b), within 60 days following the
giving of the Put-Call Notice, or, if the
occurrence of the Exit Closing is a condition to
Telematica's obligation to purchase, on the Exit
Closing, and
(B) in the case of a transaction described in
Section 11(c), simultaneously with the Exit
Closing; and
(iv) the respective obligations of the Company and
Telematica to buy or sell shall be terminated prior
to the closing of the purchase and sale of the
relevant interest:
(A) in the case of a transaction as described in
Section 11(b), if Telematica has conditioned its
obligations to purchase on the occurrence of the
Exit Closing, if the Board of Directors of the
Company determines to abandon the transaction
that was contemplated at the time the notice of
Subsidiary Value was given as provided in
Section 11(a), and
(B) in the case of a transaction as described in
Section 11(c), if the Board of Directors of the
Company makes such determination; and
(v) if, in the case of a transaction as described in
Section 11(b), Telematica has conditioned its
obligation to purchase on an Exit Closing, then,
simultaneously with the execution of the purchase and
sale agreement:
(A) Telematica shall deliver to the Company a
commitment of Corporacion EDC, C.A., or other
instrument reasonably acceptable to the Company,
in support of Telematica's obligation to pay the
Company Sale Price; and
(B) the Company shall deposit the certificates
evidencing the Company Interest with an escrow
agent reasonably acceptable to both Telematica
and the Company, as security for its obligation
to sell the Company Interest;
and otherwise the purchase and sale agreement shall be on
terms as are customary in similar transactions. The
provisions of this Section 11(d) shall not limit the
obligation of the Parties to effect the transaction described
in Section 11(b) and 11(c).
12. Exchange of Subsidiary Interests. The provisions of this Section 12
are intended to apply to Telematica's interest in any Subsidiary in
which it has a less than 50% interest (whether the same is an equity
interest or a right, by conversion of debt or otherwise, to acquire
an equity interest), upon the occurrence of a Qualified Disposition,
and to Telmatica's interest in any Subsidiary (whether the same is an
equity interest or a right, by conversion of debt or otherwise, to
acquire an equity interest) from and after the expiration of any
lock-up period imposed by the Company's underwriter upon the
occurrence of a Qualified Public Offering through the third
anniversary of the Qualified Public Offering (any such interest being
hereafter referred to as a "Roll-Up Interest" and the time at or
during which this Section 12 applies being hereafter referred to as
the "Applicable Time").
(a) Agreement to Exchange. At or during the Applicable Time,
Telematica may require that the Company acquire the entirety
of any Roll-Up Interest by exchanging the Roll-Up Interest
for Common Stock, according to the fair value that the
Roll-Up Interest represents to the fair value of the Company
("Exchange Percentage") as determined in Section 12(b).
Telematica shall provide the Company with reasonable notice
of its intent to exercise its rights under this Section 12,
taking into account the time necessary for the determination
of fair values as provided for in Section 12(b).
(b) Determination of Exchange Percentage. The Exchange Percentage
shall be determined as of the date of closing of the exchange
transaction provided for in Section 12(a) according to the
following method: (A) first, the Company shall, at its
expense, engage an investment advisor of international
reputation as selected by the Company, to determine the
Exchange Percentage; (B) second, if the value is not
acceptable to Telematica, it shall, at its expense, engage an
investment advisor of international reputation as selected by
Telematica, to determine the Exchange Percentage, and if that
value is within 10% of the value determined in the first
step, then the average of the two values obtained in the
first and second steps shall be the Exchange Percentage; and
(C) third, if the value determined in the second step is not
within 10% of the value determined in the first, the Company
and Telematica shall select a third investment advisor of
international reputation, whose fees will be paid in equal
parts by the Company and Telematica, and the Exchange
Percentage shall be the average of the two nearest values
obtained in the first, second or third steps.
(c) Exchange Transaction. Upon the occurrence of the Qualified
Dispositions (or, if the exchange occurs after a Qualified
Public Offering, promptly following the determination of
Exchange Percentage), the Company shall issue to Telematica a
number of shares of Common Stock that correspond (taking into
account such issuance) to the Exchange Percentage. The issue
shall be without warranty except for customary warranties as
to authorization and title.
13. Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement shall bind and inure to the benefit of the
Parties and their respective successors or heirs and personal
representatives and permitted assigns. The Parties express their
intention that this Agreement is entered into for the benefit of the
Parties hereto (or their respective successors or permitted assigns),
and that no other person shall be or be deemed to be a third-party
beneficiary of any Party's rights under this Agreement.
14. Relationship to Agreement. This Agreement supersedes all prior
arrangements or understandings with respect to the subject matter
hereof, including the Prior Agreement, and the Parties that are
parties thereto confirm that the same is terminated and of no further
force and effect. The entering into of this Agreement is one of a
series of transactions contemplated to occur under the Participation
Agreement.
15. Notices. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained
in a written instrument delivered in person, by telecopy or
recognized international courier, addressed or telecopied to such
party at the address or telecopier number set forth in the
Participation Agreement, or such other address or telecopier number
as may hereafter be designated in writing by the addressee in a
notice complying as to delivery with the terms of this Section 15.
All such notices, requests, consents and communications shall be
deemed to have been given (a) in the case of personal or courier
delivery, on the date of actual delivery, or (b) in the case of telex
or telecopier transmission, on the date on which the sender receives
machine confirmation of such transmission.
16. Changes. The terms and provisions of this Agreement may not be
modified or amended, or any of the provisions hereof waived,
temporarily or permanently, except pursuant to express written
agreement executed by all the Parties.
17. Confidentiality. Each Party will hold in confidence and not disclose,
and cause its Affiliates, employees and agents (and, in the case of
IFC and Vision, their observers designated pursuant to Section 5) to
hold in confidence and not disclose, all of the Confidential
Information of each other Shareholder Party or the Company or any
Subsidiary or any affiliate of the other, and refrain from using any
such information except in furtherance of the business of the Company
and its Subsidiaries. As used herein, "Confidential Information"
means any information concerning the business and affairs of any
Shareholder Party or their Affiliates or of the Company or its
Subsidiaries that is not already known by or generally available to
the public. If any Party is requested or required (by oral question
or request for information or documents in any legal proceeding,
interrogatory, subpoena, civil investigative demand, or similar
process) to disclose any Confidential Information, that Party will
notify the others promptly of the request or requirement so that the
others may seek an appropriate protective order or waive compliance
with the provisions of this Section.
18. Term. This Agreement is effective from and after the Closing, and
shall continue in effect until the earlier to occur of (a) the tenth
anniversary of the Closing (except, that IFC, by its written notice
to the other Parties delivered prior to the fifth anniversary of the
Closing, may elect that the Agreement should expire as to itself on
such fifth anniversary; provided, however, that any Transfer of
Company Shares by IFC after such expiration but prior to termination
of this Agreement shall be subject to a right of first refusal (i.e.,
prior to Transfer IFC shall first receive a bona fide offer, notify
other Parties of the terms and conditions thereof and provide the
other Parties the right to acquire such Company Equity on such terms
and conditions for a period of at least 45 days)) or (b) a Qualified
Disposition. If a Qualified Public Offering occurs, (a) the
provisions of Sections 5, 6, 7, 9 and 10 shall be of no force and
effect from and after the happening of a Qualified Public Offering
(except that the advisory agreements entered into pursuant to Section
6(h) shall continue for the term provided for in such section), and
(b) this Agreement shall otherwise continue in effect until the third
anniversary of the Qualified Public Offering. Upon the seventh
anniversary of the Closing, the provisions of Section 5, 6, 7, 9 and
10 shall be of no further force and effect. Notwithstanding any
termination pursuant to Section 18, the provisions of Section 17
shall continue for a period of two years following such termination.
19. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall
constitute but one agreement.
20. Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
21. Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability.
Such prohibition or unenforceability in any one jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
22. Governing Law; Dispute Resolution. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
York, United States of America, without giving effect to any choice
or conflict of law provision or rule that would cause the application
of laws of any jurisdiction other than the State of New York except
to the extent this Agreement would require the mandatory application
of the corporate law of the State of Nevada. All disputes arising
under or relating to this Agreement shall first be subject to
conciliation in accordance with the Rules of Conciliation of the
International Chamber of Commerce and, failing conciliation, be
finally settled under the Rules of Arbitration of the International
Chamber of Commerce by three arbitrators appointed in accordance with
said Rules. The place of arbitration shall be New York, New York. The
language of the arbitration shall be English. In the event any
dispute under the Participation Agreement relates in any way to the
validity, performance or interpretation of this Agreement and an
arbitral tribunal is constituted pursuant to Section 11(n) of the
Participation Agreement, all parties to any dispute hereunder agree
(i) to be joined to the procedures initiated pursuant to Section
11(n) of the Participation Agreement; (ii) to have any proceedings
initiated hereunder consolidated with proceedings initiated pursuant
to Section 11(n) of the Participation Agreement and (iii) to be bound
by any ruling of the arbitral tribunal constituted pursuant to
Section 11(n) of the Participation Agreement or any interim or final
award thereof. Submission of disputes to arbitration pursuant to the
Rules of Arbitration of the International Chamber of Commerce, in
consolidation with any disputes submitted to arbitration pursuant to
Section 11(n) of the Participation Agreement as provided above, shall
be the sole method of resolving disputes between the Parties hereto.
Judgment upon an arbitration award may be entered in any court having
jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
CONVERGENCE COMMUNICATIONS, INC.
By: /s/ Lance D'Ambrosio
Name: Lance D'Ambrosio
Title: Chairman and CEO
TELEMATICA EDC, C.A.
By: /s/ Norberto Corredor
Name: Norberto Corredor
Title: Duly Authorized
TCW/CCI HOLDING LLC
By: /s/ Mario L. Baeza
Name: Mario L. Baeza
Title: Chairman and CEO
INTERNATIONAL FINANCE CORPORATION
By: /s/
Name:
Title:
GLACIER LATIN-AMERICA LTD.
By: /s/ David Leivman
Name: David Leivman
Title: Assistant Treasurer
FONDELEC ESSENTIAL SERVICES
GROWTH FUND, L.P.
By: FondElec E.S.G.P. Corp.
Its: General Partner
By: /s/ Gaston Acosta Rua
Name: Gaston Acosta Rua
Title: Director
FONDELEC GROUP, INC.
By: /s/ Gaston Acosta Rua
Name: Gaston Acosta Rua
Title: Director
PEGASUS FUND, L.P.
By: Pegasus Management Corp.
Its: General Partner
By: /s/ Gaston Acosta Rua
Name: Gaston Acosta Rua
Title: Director
INTERNEXUS S.A.
By: /s/ Peter Schiller
Name: Peter Schiller
Title: Duly Authorized
LANCE D'AMBROSIO
By: /s/ Lance D'Ambrosio
Name: Lance D'Ambrosio
Title: Personal Capacity
TROY D'AMBROSIO
By: /s/ Lance D'Ambrosio
Name: Lance D'Ambrosio
Title: Personal Capacity
ESTATE OF GEORGE S. D'AMBROSIO
By: /s/ Lance D'Ambrosio
Name: Lance D'Ambrosio
Title: Representative of Estate
of George S. D'Ambrosio
Exhibit F
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT, dated as of
October 18, 1999 (this "Agreement"), is entered into by and among
CONVERGENCE COMMUNICATIONS, INC., a Nevada corporation (the "Company"),
PEGASUS GROUP, L.P., ("Pegasus"), FONDELEC ESSENTIAL SERVICES GROWTH FUND,
L.P., a Cayman Islands limited partnership ("FESGF"), INTERNEXUS S.A., an
Argentine sociedad anonima ("Internexus"), TELEMATICA EDC, C.A., a
Venezuelan compania anonima ("Telematica"), TCW/CCI HOLDING LLC, a Delaware
limited liability company ("TCW"), INTERNATIONAL FINANCE CORPORATION, an
international organization established by Articles of Agreement among its
member countries ("IFC"), GLACIER LATIN-AMERICA LTD., a British Virgin
Islands International Business Company ("Glacier"), and LANCE D'AMBROSIO,
TROY D'AMBROSIO and the ESTATE OF GEORGE S. D'AMBROSIO (collectively, the
"D'Ambrosios"). Pegasus, FESGF, Internexus, Telematica, TCW, IFC and
Glacier are collectively referred to herein as the "Purchasers" and each
may be singularly referred to herein as a "Purchaser."
WHEREAS, Pegasus, FESGF, Internexus and the D'Ambrosios currently
hold shares of the Common Stock of the Company and all such parties other
than the D'Ambrosios currently hold Original Warrants (as defined below) to
acquire additional shares of the Common Stock of the Company, all as more
particularly described on Schedule 1 hereto;
WHEREAS, pursuant to the terms of those certain Registration Rights
Agreements dated February 4, 1997, December 23, 1998, June 15, 1999, August
6, 1999, September 3, 1999 and October 1, 1999 (the "Original Agreements"),
the Company granted Pegasus, FESGF and Internexus certain rights relating
to the registration by the Company of the Common Stock to be acquired by
them under such Original Warrants;
WHEREAS, pursuant to the terms of that certain Participation
Agreement dated October 15, 1999 among the Company and the Purchasers other
than Pegasus (the "Participation Agreement"), the Purchasers other than
FondElec and Internexus have agreed to acquire shares of the Company's
Series C Preferred Stock, options to acquire additional shares of Series C
Preferred Stock, and Series C Warrants (as defined below) for cash, and
FESGF and Internexus have agreed to convert certain amounts due them by the
Company into shares of the Company's Series C Preferred Stock, options to
acquire additional shares of the Company's Series C Preferred Stock, Series
C Warrants (as defined below) and FondElec/Internexus Warrants (as defined
below);
WHEREAS, it is a condition precedent to the acquisition of those
securities by such Purchasers under the Participation Agreement that the
Company provide certain registration rights to them in accordance with the
terms hereof;
WHEREAS, to facilitate the consummation of the transactions
contemplated by the Participation Agreement, the Company also desires to
grant to the D'Ambrosios certain registration rights;
WHEREAS, the parties desire that Telematica, TCW, IFC and Glacier
join in the execution of, and be granted, the registration rights granted
Pegasus, FESGF and Internexus pursuant to the Original Agreements and that,
in connection therewith, this Agreement be substituted in the place of, and
replace in their entirety, the Original Agreements; and
WHEREAS, the parties intend that this Agreement constitute the
"Registration Rights Agreement," as defined in the Participation Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the adequacy and receipt of which
are hereby acknowledged, the parties hereto hereby agree that the Original
Agreements are hereby amended and restated in their entirety as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. The following terms shall have the
meanings ascribed to them below:
"Agreement" means this Agreement, as amended, modified or
supplemented from time to time, in accordance with the terms hereof,
together with any exhibits, schedules or other attachments thereto.
"Business Day" means any day that is not a Saturday, Sunday or
a day on which banking institutions in New York, New York are authorized or
obligated by law, executive order or government decree to be closed.
"CCI Shareholders' Agreement" means the CCI Shareholders'
Agreement, as that term is defined in the Participation Agreement.
"Closing" has the meaning given it in the Participation Agreement.
"Closing Date" has the meaning given it in the Participation
Agreement.
"Commission" means the United States Securities and Exchange
Commission or any other federal agency at the time administering the
Securities Act.
"Common Stock" means the common stock, par value $.001 per
share, of the Company.
"Company" has the meaning ascribed thereto in the introduction
hereof.
"Controlling Person" means a Controlling Person as defined in
Section 4.1.
"Damages" means Damages as defined in Section 4.1.
"Demand Registration" means a Demand Registration as defined in
Section 2.1.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated
thereunder.
"FESGF" has the meaning ascribed thereto in the introduction
hereof.
"FondElec/Internexus Warrants" means the FondElec/Internexus
Warrants, as that term is defined in the Participation Agreement.
"Glacier" has the meaning ascribed thereto in the introduction
hereof.
"Holder" means any Person who now holds or shall hereafter
acquire and hold Registrable Securities.
"IFC" has the meaning ascribed thereto in the introduction hereof.
"Indemnified Party" means an Indemnified Party as defined in
Section 4.3.
"Indemnifying Party" means an Indemnifying Party as defined in
Section 4.3.
"Internexus" has the meaning ascribed thereto in the introduction
hereof.
"Market Price" means, with respect to the shares of Common
Stock, (a) if the shares are listed or admitted for trading on any national
securities exchange or included in The Nasdaq National Market or Nasdaq
SmallCap Market, the last reported sales price as reported on such exchange
or market; (b) if the shares are not listed or admitted for trading on any
national securities exchange or included in The Nasdaq National Market or
Nasdaq SmallCap Market, the average of the last reported closing bid and
asked quotation for the shares as reported on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or a similar
service if NASDAQ is not reporting such information; (c) if the shares are
not listed or admitted for trading on any national securities exchange or
included in The Nasdaq National Market or Nasdaq SmallCap Market or quoted
by NASDAQ or a similar service, the average of the last reported bid and
asked quotation for the shares as quoted by a market maker in the shares
(or if there is more than one market maker, the bid and asked quotation
shall be obtained from two market makers and the average of the lowest bid
and highest asked quotation). In the absence of any available public
quotations for the Common Stock, the Board of Directors of the Company
shall determine in good faith the fair value of the Common Stock, which
determination shall be set forth in a certificate by the Secretary of the
Company. "New Registrable Securities" means (i) the shares of Common Stock
issued or issuable upon exercise of the FondElec/Internexus Warrants or
Series C Warrants or upon the conversion of the Series C Convertible
Preferred Stock (whether acquired by a Purchaser under the terms of the
Participation Agreement at the Closing or Subsequent Closing, pursuant to
the Option, or pursuant to Section 7 of the Participation Agreement), (ii)
the shares of Common Stock held by FondElec and Internexus as of the date
hereof or acquired by either of them in the exercise of the Original
Warrants or options described in Schedule 1 hereto, and (iii) any shares of
Common Stock acquired as a result of stock splits, stock dividends,
reclassifications, recapitalizations, or similar events relating to the
shares described in clauses (i) and (ii) above.
"Old Registrable Securities" means (i) any shares of Common
Stock held by a Holder, as of the date hereof other than New Registrable
Securities, and (ii) any shares of Common Stock acquired as a result of
stock splits, stock dividends, reclassifications, recapitalizations, or
similar events relating to the shares described in clause (i) above.
"Option" means the nine month option to acquire Series C
Preferred Stock issued to Telematica, TCW, IFC, Glacier, FESGF and
Internexus, as described in the Participation Agreement.
"Original Warrants" means the warrants to acquire shares of
Common Stock issued to Pegasus, FESGF and Internexus in connection with the
Original Agreements.
"Pegasus" has the meaning ascribed thereto in the introduction
hereof.
"Person" has the meaning given it in the Participation Agreement.
"Piggy-Back Registration" means a Piggy-Back Registration as
defined in Section 2.3.
"Prospectus" means the prospectus included in any Registration
Statement (including without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective Registration Statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of the
securities covered by such Registration Statement, and all other amendments
and supplements to the prospectus, including post-effective amendments, and
all material incorporated by reference or deemed to be incorporated by
reference in such prospectus.
"Purchase Agreement" has the meaning ascribed thereto in the
introduction hereof.
"Purchasers" has the meaning ascribed thereto in the introduction
hereof.
"Registrable Securities" means New Registrable Securities and
Old Registrable Securities, in each case until such time as (x) a
Registration Statement covering such shares of Common Stock has been
declared effective by the Commission and such shares of Common Stock have
been disposed of pursuant to such effective Registration Statement, or (y)
such shares of Common Stock would be saleable pursuant to Rule 144 under
the Securities Act (or any similar provisions then in force) without regard
to the volume limitations set forth in Rule 144(e), or (z) such shares of
Common Stock have been otherwise transferred and the Company has delivered
a new certificate or other evidence of ownership for such Common Stock not
bearing a restrictive legend and not subject to any stop transfer or
similar restrictive order and all of such Common Stock may be resold by the
Person receiving such certificate without complying with the registration
requirements of the Securities Act.
"Registration Statement" means any registration statement of
the Company filed under the Securities Act which covers any of the
Registrable Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits and all
material incorporated by reference in such registration statement.
"Request" means a Request as defined in Section 2.1(a).
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission promulgated thereunder.
"Selling Holder" means a Holder who is selling Registrable
Securities pursuant to a Registration Statement under the Securities Act.
"Selling Holders' Counsel" means the counsel selected to
represent the Selling Holders as set forth in Section 3.1(c).
"Series C Preferred Stock" means the Series C Convertible
Preferred Stock, par value $.001 per share, of the Company.
"Series C Warrants" means the warrants to acquire shares of
Series C Preferred Stock issued to FESGF, Internexus, Telematica, TCW, IFC
and Glacier under the terms of the Participation Agreement.
"Shareholder Parties" has the meaning given that term in the
CCI Shareholders' Agreement.
"Subsequent Closing" has the meaning given it in the
Participation Agreement.
"TCW" has the meaning ascribed thereto in the introduction hereof.
"Telematica" has the meaning ascribed thereto in the introduction
hereof.
"Underwriter" means a securities dealer who purchases any
Registrable Securities as principal in an underwritten offering and not as
part of such dealer's market-making activities.
ARTICLE II
REGISTRATION RIGHTS
Section 2.1 Performance Part of Series of Transactions. The
Parties acknowledge and agree that the performance provided for in this
Agreement is part of a series of transactions which, pursuant to the
Participation Agreement, are to occur simultaneously and subject to certain
conditions precedent as provided for therein, including the Closing and the
execution of the CCI Shareholders' Agreement which, among other things,
provides for certain restrictions on transfer of the Registrable
Securities. The parties do not intend that this Agreement diminish or
otherwise modify the restrictions on transfer set forth in the CCI
Shareholders' Agreement, and this Agreement shall be construed consistent
with that intent.
Section 2.2 Demand Registration.
(a) Request for Registration. Subject to the limitations
contained in this Section 2.2(a), at any time after the first anniversary
of the Closing Date any Holder or Holders of an aggregate of New
Registrable Securities representing 20% or more of all the New Registrable
Securities may make written requests (individually, a "Request") on the
Company for the registration of the offer and sale of some or all of the
Holders' New Registrable Securities under the Securities Act (such
registration being hereinafter referred to as a "Demand Registration").
Subject to the penultimate sentence of Section 2.2(b), the Company shall
have no obligation to effect more than three (3) Demand Registrations. Any
Request will specify the number of New Registrable Securities proposed to
be sold and the intended method(s) of disposition thereof and shall also
state the intent of the Holder to offer New Registrable Securities for
sale. The Company shall give written notice of such Request within 10 days
after the receipt thereof to all other Holders. Within 20 days after
receipt of such notice by any such Holder, such Holder may request in
writing that all or any portion of its New Registrable Securities be
included in such Registration Statement and the Company shall include in
the Registration Statement for such Demand Registration the New Registrable
Securities of all Holders that requested to be so included. Each such
request by such other Holders shall specify the number of New Registrable
Securities proposed to be sold and the intended method(s) of disposition
thereof and shall also state the intent of the Holder to offer New
Registrable Securities for sale. Notwithstanding the foregoing, the Company
shall not be requested to effect a Demand Registration unless the Request
has been made at least 180 days since the last Registration Statement
(other than a shelf registration under Rule 415 of the Securities Act or a
Registration Statement on Form S-8) was filed by the Company.
(b) Effective Registration. A registration will not be
deemed to have been effected as a Demand Registration unless the
Registration Statement relating thereto has been declared effective by the
Commission and the Company has complied in all material respects with its
obligations under this Agreement with respect thereto; provided that if,
after the Registration Statement has become effective, the offering and/or
sale of New Registrable Securities pursuant to such Registration Statement
is or becomes the subject of any stop order, injunction or other order or
requirement of the Commission or any other governmental or administrative
agency, or if any court or other governmental or quasi-governmental agency
prevents or otherwise limits the offer and/or sale of the New Registrable
Securities pursuant to the Registration Statement, other than in each case
primarily as a result of acts or omissions of the Holder or any agent
thereof, such registration will be deemed not to have been effected. If (i)
a registration requested pursuant to this Section 2.2 is deemed not to have
been effected or (ii) the Registration Statement relating to a Demand
Registration requested pursuant to this Section 2.2 does not remain
effective for a period of at least 180 consecutive days beyond the
effective date thereof or, with respect to an underwritten offering of New
Registrable Securities, until 45 days after the commencement of the
distribution by the Holders of the New Registrable Securities included in
such Registration Statement, then the Company shall continue to be
obligated to effect such New Registration pursuant to this Section 2.2. The
Holders shall be permitted to withdraw all or any part of the New
Registrable Securities from a Registration Statement at any time prior to
the effective date of such Demand Registration Statement; provided that in
the event of such withdrawal, such Holders shall be responsible for the
fees and expenses referred to in Section 3.2(viii) hereof incurred by such
Holders with respect to such Demand Registration prior to such withdrawal.
(c) Limitations. At such time as the New Registrable
Securities may be registered on Form S-2 or Form S-3, as the case may be
(or any similar form or forms promulgated by the SEC), the Holders of New
Registrable Securities shall have unlimited rights to request registration
of their shares on Form S-2 or Form S-3, as the case may be, or any such
similar form. Registrations effected on Form S-2 and Form S-3 shall not be
counted towards the limit on Demand Registrations under Section 2.2(a).
(d) Selection of Underwriter. If a requested registration
pursuant to this Section 2.2 involves an underwritten offering, the
managing Underwriter(s) thereof shall be selected by the Selling Holders
and shall be reasonably acceptable to the Company unless the Company has
theretofore sold shares of Common Stock in an underwritten offering, in
which case the managing Underwriter(s) of a requested registration pursuant
to this Section 2.2 shall be selected by the Company and shall be
reasonably acceptable to the Selling Holders.
(e) Deferral of Registration. Notwithstanding any other
provision of this Section 2, the Company shall not be obligated to effect
the filing of a Registration Statement pursuant to Section 2.2(a) hereof
(i) during any period when there exists an effective Registration Statement
covering any New Registrable Securities, or (ii) for a period not to exceed
90 days, if the Company shall furnish to the Holders requesting a
Registration Statement under Section 2(a) hereof a certificate, signed by
the Company, stating that in the good faith judgment of the Board of
Directors of the Company it would be detrimental to the best interests of
the Company and its stockholders generally for such Registration Statement
to be filed at that time; provided that in such event, the Holders
initiating the request for registration will be entitled to withdraw such
request.
Section 2.3 Piggy-Back Registration. If at any time after the
first anniversary of the Closing Date the Company proposes to file a
Registration Statement under the Securities Act with respect to an offering
by the Company for its own account (including for the purpose of effecting
any transaction approved by the Company's board of directors under the
terms of Section 6(b)(vi) or Section 6(c)(i) of the CCI Shareholders'
Agreement, or which the Shareholder Parties agree to proceed with under the
terms of Section 9 of the CCI Shareholders' Agreement, which the Company
hereby agrees to undertake) or for the account of any of its respective
security holders (other than a Registration Statement on Form S-4 or Form
S-8 or on any other form inappropriate for an underwritten public offering
or related solely to securities to be issued in a merger, acquisition of
the stock or assets of another entity or in a similar transaction (or any
substitute form that may be adopted by the Commission), including a
Registration Statement pursuant to a Demand Registration under Section
2.2), then the Company shall give written notice of such proposed filing to
the Holders as soon as practicable (but in no event less than 30 days
before the anticipated filing date), and such notice shall offer such
Holders the opportunity to register such number of New Registrable
Securities as each such Holder may request (which request shall specify the
New Registrable Securities intended to be disposed of by such Holder and
shall also state the intent of the Holder to offer New Registrable
Securities for sale) (a "Piggy-Back Registration"). The Company shall use
all reasonable efforts to cause the managing Underwriter or Underwriters of
a proposed underwritten offering to permit the New Registrable Securities
requested to be included in a Piggy-Back Registration to be included on the
same terms and conditions as any similar securities of the Company or any
other security holder included therein and to permit the sale or other
disposition of such New Registrable Securities in accordance with the
intended method of distribution thereof. Any Holder shall have the right to
withdraw its request for inclusion of its New Registrable Securities in any
Registration Statement pursuant to this Section 2.3 by giving written
notice to the Company of its request to withdraw, provided that in the
event of such withdrawal (other than pursuant to Section 2.5(c) hereof),
such Holder shall be responsible for the fees and expenses referred to in
Section 3.2(viii) hereof incurred by such Holder prior to such withdrawal
relating to such Registration Statement. The Company may withdraw a
Piggy-Back Registration at any time prior to the time it becomes effective.
No registration effected under this Section 2.3, and no failure
to effect a registration under this Section 2.3, shall relieve the Company
of its obligation to effect a registration upon the request of Holders
pursuant to Section 2.2, and no failure to effect a registration under this
Section 2.3 and to complete the sale of New Registrable Securities in
connection therewith shall relieve the Company of any other obligation
under this Agreement (including, without limitation, the Company's
obligations under Sections 3.2 and 4.1).
Section 2.4 Special Registration. If at any time after the
first anniversary of the Closing Date the registration (whether pursuant to
a Demand Registration or a Piggy-Back Registration) of some or all of a
Holder's Old Registrable Securities under the Securities Act is required or
advisable for the Holders of the Old Registrable Securities to (i)
effectuate any transaction approved by the Company's board of directors
under the terms of Section 6(b)(vi) or Section 6(c)(i) of the CCI
Shareholders' Agreement, (ii) exercise their rights under the provisions of
Section 3(b) of the CCI Shareholders' Agreement, or (iii) effectuate any
transaction that the Shareholder Parties agree to proceed with under the
provisions of Section 9 of the CCI Shareholders' Agreement, then the
Company shall offer to the Holders of such Old Registrable Securities (but
in no event less than 30 days before the anticipated filing date) the
ability to register such number of Old Registrable Securities (subject to
the limitations of clauses (i), (ii) or (iii) above as such Holders may
request (which request shall specify the Old Registrable Securities
intended to be disposed of by such Holders and which shall state the firm
intent of such Holders to offer such Old Registrable Securities for sale).
The Company shall use all reasonable efforts to cause or permit such Old
Registrable Securities to be included on the same terms and conditions as
any similar securities of the Company or any other security holder included
therein and to permit the registration, sale or other disposition of such
Old Registrable Securities in accordance with the intended method of
registration and distribution thereof.
Section 2.5 Reduction of Offering.
(a) Demand Registration. The Company may include in a
Demand Registration pursuant to Section 2.2 securities of the same class as
the Registrable Securities for the account of the Company and any other
Persons who hold securities of the same class as the Registrable Securities
on the same terms and conditions as the Registrable Securities to be
included therein; provided, however, that (i) if the managing Underwriter
or Underwriters of any underwritten offering described in Section 2.2 have
informed the Company in writing that it is their opinion that the total
number of Registrable Securities, and securities of the same class as the
Registrable Securities which Holders, the Company and any other Persons
desiring to participate in such registration intend to include in such
offering is such as to materially and adversely affect the success of such
offering, then the number of shares to be offered for the account of the
Company and for the account of all such other Persons (other than the
Holders) participating in such registration shall be reduced or limited pro
rata in proportion to the respective number of shares requested to be
registered to the extent necessary to reduce the total number of shares
requested to be included in such offering to the number of shares, if any,
recommended by such managing Underwriter or Underwriters, and (ii) if the
offering is not underwritten, no other Person, including the Company, shall
be permitted to offer securities under any such Demand Registration unless
the Selling Holders owning a majority-in-interest of Common Stock to be
sold consent to the inclusion of such shares therein.
(b) Piggy-Back Registration.
(i) Notwithstanding anything contained herein, if
the managing Underwriter or Underwriters of any underwritten offering
described in Section 2.3 have informed, in writing, the Holders
requesting inclusion in such offering that it is their opinion that
the total number of shares which the Company, Holders and any other
Persons holding securities of the same class as the Registrable
Securities desiring to participate in such registration intend to
include in such offering is such as to materially and adversely
affect the success of such offering, then, the Company will include
in such registration (A) first, all the shares the Company offered
for its own account, if any, (B) then, if additional shares may be
included in such registration without materially and adversely
affecting the success of such offering, the shares offered by the
holders of securities as a result of their exercise of "demand"
registration rights by such holders, if any, and (C) then, if
additional shares may be included in such registration without
materially and adversely affecting the success of such offering, the
number of shares offered by the Holders and such other holders of
securities of the same class as the Registrable Securities whose
piggy-back registration rights may not be reduced without violating
their contractual rights (provided such contractual rights were in
existence prior to the date of this Agreement), on a pro rata basis
in proportion to the relative number of Registrable Securities of the
holders (including the Holders) participating in such registration.
(ii) If the managing Underwriter or Underwriters of
any underwritten offering described in Section 2.3 notify the Holders
requesting inclusion in such offering that the kind of securities
that the Holders, the Company and any other Persons desiring to
participate in such registration intend to include in such offering
is such as to materially and adversely affect the success of such
offering, (A) the Registrable Securities to be included in such
offering shall be reduced as described in clause (i) above or (B) if
such reduction would, in the judgment of the managing Underwriter or
Underwriters, be insufficient to substantially eliminate the material
adverse effect that inclusion of the Registrable Securities requested
to be included would have on such offering, such Registrable
Securities will be excluded from such offering.
(c) Withdrawal. If, as a result of the proration
provisions of this Section 2.5, any Holder shall not be entitled to include
all Registrable Securities in a Demand Registration or Piggy-Back
Registration that such Holder has requested to be included, such Holder may
elect to withdraw his request to include Registrable Securities in such
registration; provided, however, that if a Holder withdraws his request
pursuant to this Paragraph 2.5(c), the Company shall be responsible for the
fees and expenses referred to in Section 3.2(viii) hereof.
(d) Holdback Agreements. If any registration of
Registrable Securities shall be in connection with an underwritten public
offering, each Holder agrees not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the Securities Act, of any
Registrable Securities, and not to effect any such public sale or
distribution of any other equity security of the Company or of any security
convertible into or exchangeable or exercisable for any equity security of
the Company (in each case, other than as part of such underwritten public
offering) during the seven (7) days prior to, and during the one hundred
eighty (180) day period beginning on, the effective date of such
Registration Statement (except as part of such registration).
ARTICLE III
REGISTRATION PROCEDURES
Section 3.1 Filings; Information. Whenever the Company is
required to effect or cause the registration of the offer and sale of
Registrable Securities pursuant to Section 2.2 or 2.3 hereof, including
where such registration shall be required in order to (i) effectuate any
transaction approved by the Company's board of directors under the terms of
Section 6(b)(vi) or Section 6(c)(i) of the CCI Shareholders' Agreement, or
(ii) effectuate any transaction that the Shareholder Parties agree to
proceed with under the provisions of Section 9 of the CCI Shareholders'
Agreement, the Company will use its best efforts to effect the registration
of the offer and the sale of such Registrable Securities in accordance with
the intended method(s) of disposition thereof as quickly as practicable,
and in connection with any such request:
(a) Registration Filing. The Company will prepare and
file with the Commission a Registration Statement with respect to the offer
and sale of such securities and use its best efforts to cause such
Registration Statement to become and remain effective until the completion
of the distribution contemplated thereby; provided, however, the Company
shall not be required to keep such Registration Statement effective for
more than 180 days (or such shorter period which will terminate when all
Registrable Securities covered by such Registration Statement have been
sold, but not prior to the expiration of the applicable period referred to
in Section 4(3) of the Securities Act and Rule 174 thereunder, if
applicable); provided, further, that with respect to a Demand Registration,
the Company shall use its best efforts to file with the Commission a
Registration Statement as soon as is practicable after the date of the
Request and in any event no later than 60 days after the date of the
Request for the Demand Registration and shall use its best efforts to cause
such Registration Statement to be declared effective as soon as is
practicable after the date of filing and in any event no later than 180
days after the date of such Request.
(b) Amendments. The Company will prepare and file with
the Commission such amendments and post-effective amendments to the
Registration Statement as may be necessary to keep such Registration
Statement effective for as long as such registration is required to remain
effective pursuant to the terms hereof; cause the Prospectus to be
supplemented by any required Prospectus supplement, and, as so
supplemented, to be filed pursuant to Rule 424 under the Securities Act;
and comply with the provisions of the Securities Act applicable to it with
respect to the disposition of all Registrable Securities covered by such
Registration Statement during the applicable period in accordance with the
intended methods of disposition by the Selling Holders set forth in such
Registration Statement or supplement to the Prospectus.
(c) Copies. The Company, at least ten (10) Business Days
prior to filing a Registration Statement or at least five (5) Business Days
prior to filing a Prospectus or any amendment or supplement to such
Registration Statement or Prospectus, will furnish to (i) each Selling
Holder, (ii) not more than one counsel representing all Selling Holders
("Selling Holders' Counsel"), to be selected by a majority-in-interest of
such Selling Holders, and (iii) each Underwriter, if any, of the
Registrable Securities covered by such Registration Statement copies of
such Registration Statement as proposed to be filed, together with exhibits
thereto, which documents will be subject to review and approval by each of
the foregoing within five (5) Business Days after delivery (except that
such review and approval of any Prospectus or any amendment or supplement
to such Registration Statement or Prospectus must be within three (3)
Business Days after delivery), and thereafter, furnish to such Selling
Holders, Selling Holders' Counsel and Underwriters, if any, such number of
conformed copies of such Registration Statement, each amendment and
supplement thereto (in each case including all exhibits thereto and
documents incorporated by reference therein), the Prospectus included in
such Registration Statement (including each preliminary Prospectus) and
such other documents or information as such Selling Holders, Selling
Holders' Counsel or Underwriters may reasonably request in order to
facilitate the disposition of the Registrable Securities (it being
understood that the Company consents to the use of the Prospectus and any
amendment or supplement thereto by each Selling Holder and the
Underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such Prospectus or any amendment or
supplement thereto).
(d) No Stop Orders. The Company will take all reasonable
actions required to prevent the entry of such stop order or to remove it at
the earliest possible moment if entered.
(e) Blue Sky Filings. On or prior to the date on which
the Registration Statement is declared effective, use its best efforts to
register or qualify such Registrable Securities under such other securities
or "blue sky" laws of such jurisdictions as any Selling Holder, Selling
Holders' Counsel or Underwriter reasonably requests and do any and all
other acts and things which may be necessary or advisable to enable such
Selling Holder to consummate the disposition in such jurisdictions of such
Registrable Securities owned by such Selling Holder; use its best efforts
to keep each such registration or qualification (or exemption therefrom)
effective during the period which the Registration Statement is required to
be kept effective; and use its best efforts to do any and all other acts or
things necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement; provided that the Company will not be required to
(i) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this paragraph (e), (ii) subject
itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction.
(f) Post-Effective Matters. The Company will notify each
Selling Holder, Selling Holders' Counsel and any Underwriter and (if
requested by any such Person) confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has
been filed and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective, (ii) of the
issuance by the Commission of any stop order suspending the effectiveness
of a Registration Statement or the initiation or threatening of any
proceedings for that purpose, (iii) of the issuance by any state securities
commission or other regulatory authority of any order suspending the
qualification or exemption from qualification of any of the Registrable
Securities under state securities or "blue sky" laws or the initiation of
any proceedings for that purpose, and (iv) of the happening of any event
which makes any statement made in a Registration Statement or related
Prospectus or any document incorporated or deemed to be incorporated by
reference therein untrue in a material respect or which requires the making
of any changes in such Registration Statement, Prospectus or documents so
that they will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements in the Registration Statement and Prospectus not
misleading in light of the circumstances in which they were made; and, as
promptly as practicable thereafter, prepare and file with the Commission
and furnish a supplement or amendment to such Prospectus so that, as
thereafter deliverable to the buyers of such Registrable Securities, such
Prospectus will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading.
(g) Earning Statement. The Company will make generally
available an earning statement satisfying the provisions of Section 11(a)
of the Securities Act no later than 90 days after the end of the 12-month
period beginning with the first day of the Company's first fiscal quarter
commencing after the effective date of a Registration Statement, which
earning statement shall cover said 12-month period, and which requirement
will be deemed to be satisfied if the Company timely files complete and
accurate information on Forms 10-Q, 10-K and 8-K under the Exchange Act and
otherwise complies with Rule 158 under the Securities Act.
(h) Underwriting Agreement. The Company will enter into
customary agreements (including, if applicable, an underwriting agreement
in customary form) and take such other actions as are reasonably required
in order to expedite or facilitate the disposition of such Registrable
Securities.
(i) Transfer Agent and Registrar. The Company will
provide for a transfer agent and registrar for all such Registrable
Securities not later than the effective date of such registration
statement, and use its best efforts to cause all such Registrable
Securities to be listed on each securities exchange on which similar
securities issued by the Company are then listed and, if not so listed, to
be listed on the NASDAQ (or other national market reasonably acceptable to
the holders of 66 2/3% or more of the holders of the Registrable
Securities) and, if listed on the NASDAQ, use its best efforts to secure
designation of all such Registrable Securities covered by such registration
statement as a NASDAQ national market system security within the meaning of
Rule 11Aa2-1 of the Commission or, failing that, to secure NASDAQ
authorization for such Registrable Securities and, without limiting the
generality of the foregoing, to arrange for at least two market makers to
register as such with respect to such Registrable Securities with the
NASDAQ.
(j) Information Regarding Distribution. The Company,
during the period when the Prospectus is required to be delivered under the
Securities Act, will file all documents required to be filed with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange
Act.
The Company may require each Selling Holder to promptly furnish in
writing to the Company such information regarding the distribution of the
Registrable Securities as the Company may from time to time reasonably
request and such other information as may be legally required in connection
with such registration including, without limitation, all such information
as may be requested by the Commission or the National Association of
Securities Dealers, Inc.
Each Selling Holder agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section
3.1(f) hereof, such Selling Holder will forthwith discontinue disposition
of Registrable Securities pursuant to the Registration Statement covering
such Registrable Securities until such Selling Holder's receipt of the
copies of the supplemented or amended Prospectus contemplated by Section
3.1(f) hereof, and, if so directed by the Company, such Selling Holder will
deliver to the Company all copies, other than permanent file copies then in
such Selling Holder's possession, of the most recent Prospectus covering
such Registrable Securities at the time of receipt of such notice. In the
event the Company shall give such notice, the Company shall extend the
period during which such Registration Statement shall be maintained
effective (including the period referred to in Section 3.1(a) hereof) by
the number of days during the period from and including the date of the
giving of notice pursuant to Section 3.1(f) hereof to the date when the
Company shall make available to the Selling Holders covered by such
Registration Statement a Prospectus supplemented or amended to conform with
the requirements of Section 3.1(f) hereof.
Section 3.2 Registration Expenses. The Company shall pay all
expenses incident to the Company's performance of or compliance with this
Agreement including, without limitation: (i) all registration and filing
fees, (ii) the fees and expenses of compliance with securities or blue sky
laws (including fees and disbursements of counsel in connection with blue
sky qualifications of the Registrable Securities), (iii) all printing,
messenger and delivery expenses, (iv) the Company's internal expenses
(including, without limitation, all salaries and expenses of its officers
and employees performing legal or accounting duties), (v) the fees and
expenses incurred in connection with the listing or quotation, as
appropriate, of the Registrable Securities, (vi) the fees and disbursements
of counsel for the Company and the fees and expenses for independent
certified public accountants retained by the Company (including the
expenses of any special audit or cold comfort letters), (vii) the fees and
expenses of any special experts retained by the Company in connection with
such registration, and (viii) the fees and expenses of the Selling Holders
Counsel, provided, however, that, notwithstanding the foregoing, any Holder
whose Registrable Securities are included in more than two registration
statements filed pursuant to the provisions of Section 2.2(a) hereof shall
pay his pro rata portion of all the foregoing expenses (based on the number
of shares included) with respect to the third registration statement in
which such Holders' shares are included. The Company shall have no
obligation to pay any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities and any of the expenses
incurred by Selling Holders which are not payable by the Company, such
costs to be borne by the Selling Holder or Selling Holders.
ARTICLE IV
INDEMNIFICATION AND CONTRIBUTION
Section 4.1 Indemnification by the Company. The Company agrees
to indemnify and hold harmless, to the fullest extent permitted by law,
each Selling Holder, its partners, officers, directors, employees, advisors
and agents, and each Person, if any, who controls such Selling Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, together with the partners, officers, directors, employees,
advisors and agents of such controlling Person (collectively, the
"Controlling Persons"), from and against any loss, claim, damage,
liability, attorneys' fees, cost or expense and costs and expenses of
investigating and defending any such claim (collectively, the "Damages")
and any action in respect thereof to which such Selling Holder, its
partners, officers, directors, employees, advisors and agents, and any such
Controlling Person may become subject under the Securities Act, the
Exchange Act or otherwise, insofar as such Damages (or proceedings in
respect thereof) arise out of, or are based upon, any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus or any preliminary Prospectus, or arise out of, or
are based upon, any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are based
upon information furnished in writing to the Company by a Selling Holder
expressly for use therein, and shall reimburse each Selling Holder, its
partners, officers, directors, employees, advisors and agents, and each
such Controlling Person for any legal and other expenses reasonably
incurred by that Selling Holder, its partners, officers, directors,
employees, advisors and agents, or any such Controlling Person in
investigating or defending or preparing to defend against any such Damages
or proceedings. The Company also agrees to indemnify any Underwriters of
the Registrable Securities, their officers and directors and each Person
who controls such Underwriters on substantially the same basis as that of
the indemnification of the Selling Holders provided in this Section 4.1.
Section 4.2 Indemnification by Selling Holders. Each Selling
Holder agrees, severally but not jointly, to indemnify and hold harmless
the Company, its officers, directors, employees, advisors and agents and
each Person, if any, who controls the Company within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, together with
the partners, officers, directors, employees, advisors and agents of such
Controlling Person, to the same extent as the foregoing indemnity from the
Company to such Selling Holder, but only with reference to information
related to such Selling Holder, or its plan of distribution, furnished in
writing by such Selling Holder expressly for use in any Registration
Statement or Prospectus, or any amendment or supplement thereto, or any
preliminary Prospectus; provided, however, that such Selling Holder shall
not be liable in any such case to the extent that prior to the filing of
any such Registration Statement or Prospectus or amendment or supplement
thereto, such Selling Holder has furnished in writing to the Company
information expressly for use in such Registration Statement or Prospectus
or any amendment or supplement thereto which corrected or made not
misleading information previously furnished to the Company. In no event
shall the liability of any Selling Holder be greater in amount than the
dollar amount of the proceeds received by such Selling Holder upon the sale
of the Registrable Securities giving rise to such indemnification
obligation.
Section 4.3 Conduct of Indemnification Proceedings. Promptly
after receipt by any Person in respect of which indemnity may be sought
pursuant to Section 4.1 or 4.2 (an "Indemnified Party") of notice of any
claim or the commencement of any action, the Indemnified Party shall, if a
claim in respect thereof is to be made against the Person against whom such
indemnity may be sought (an "Indemnifying Party"), notify the Indemnifying
Party in writing of the claim or the commencement of such action; provided
that the failure to notify the Indemnifying Party shall not relieve it from
any liability which it may have to an Indemnified Party otherwise than
under Section 4.1 or 4.2 except to the extent of any actual prejudice
resulting therefrom. If any such claim or action shall be brought against
an Indemnified Party, and it shall notify the Indemnifying Party thereof,
the Indemnifying Party shall be entitled to participate therein, and, to
the extent that it wishes, jointly with any other similarly notified
Indemnifying Party, to assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Party. After notice from the Indemnifying
Party to the Indemnified Party of its election to assume the defense of
such claim or action, the Indemnifying Party shall not be liable to the
Indemnified Party for any legal or other expenses subsequently incurred by
the Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation; provided that the Indemnified Party
shall have the right to employ separate counsel to represent the
Indemnified Party and its Controlling Persons who may be subject to
liability arising out of any claim in respect of which indemnity may be
sought by the Indemnified Party against the Indemnifying Party, but the
fees and expenses of such counsel shall be for the account of such
Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii)
in the opinion of counsel to such Indemnified Party, representation of both
parties by the same counsel would be inappropriate due to actual or
potential conflicts of interest between them, it being understood, however,
that the Indemnifying Party shall not, in connection with any one such
claim or action or separate but substantially similar or related claims or
actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (together with appropriate local
counsel) at any time for all Indemnified Parties. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect
any settlement of any claim or pending or threatened proceeding in respect
of which the Indemnified Party is or could have been a party and indemnity
could have been sought hereunder by such Indemnified Party, unless such
settlement includes an unconditional release of such Indemnified Party from
all liability arising out of such claim or proceeding. Whether or not the
defense of any claim or action is assumed by the Indemnifying Party, such
Indemnifying Party will not be subject to any liability for any settlement
made without its consent, which consent will not be unreasonably withheld.
Section 4.4 Contribution. If the indemnification provided for
in this Article 4 is unavailable to the Indemnified Parties in respect of
any Damages referred to herein, then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Damages in such
proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the Selling Holders on the other from the
offering of the Registrable Securities, or if such allocation is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits but also the relative fault of the
Company on the one hand and the Selling Holders on the other in connection
with the statements or omissions which resulted in such Damages, as well as
any other relevant equitable considerations. The relative fault of the
Company on the one hand and of each Selling Holder on the other shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such
party, and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company and the Selling Holders agree that it would not be just
and equitable if contribution pursuant to this Section 4.4 were determined
by pro rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as
a result of the Damages referred to in the immediately preceding paragraph
shall be deemed to include, subject to the limitations set forth above, any
legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 4.4, no Selling Holder shall
be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities of such Selling Holder were
offered to the public exceeds the amount of any damages which such Selling
Holder has otherwise paid by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any Person who was not guilty
of such fraudulent misrepresentation. Each Selling Holder's obligations to
contribute pursuant to this Section 4.4 is several in the proportion that
the proceeds of the offering received by such Selling Holder bears to the
total proceeds of the offering received by all the Selling Holders and not
joint.
ARTICLE V
MISCELLANEOUS
Section 5.1 Participation in Underwritten Registrations. No
Person may participate in any underwritten registration hereunder unless
such Person (a) agrees to sell such Person's securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements, and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents reasonably required under the terms of such
underwriting arrangements and these registration rights.
Section 5.2 Additional Rights. If subsequent to the date hereof
the Company grants to holders or prospective holders of its securities
registration rights which are more favorable than the terms or provisions
of this Agreement are to the Holders of the New Registrable Securities,
this Agreement shall be deemed to be automatically amended (without the
necessity of any action on the part of the Company or the Holders) to grant
to the Holders of the New Registrable Securities such more favorable or
additional rights, in addition to those set forth herein.
Section 5.3 Rule 144 and 144A. The Company covenants that it
will file any reports required to be filed by it under the Securities Act
and the Exchange Act and that it will take such further action as any
Holder may reasonably request, all to the extent required from time to time
to enable Holders to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a)
Rule 144 or Rule 144A under the Securities Act, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any
Holder, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.
Section 5.4 Amendment and Modification. Any provision of this
Agreement may be waived, provided that such waiver is set forth in a
writing executed by the party against whom the enforcement of such waiver
is sought. This Agreement may not be amended, modified or supplemented
other than by a written instrument signed by the holders of at least 66
2/3% of the Registrable Securities (calculated with respect to the Series C
Preferred Stock on an as-converted basis in accordance with the terms and
conditions for such securities under the certificate establishing the
Series C Preferred Stock's rights and preferences); provided, however, that
without the consent of all the Holders, no amendment or modification which
materially and adversely affects any Holders' rights hereunder without the
consent of such Holders. No course of dealing between or among any Persons
having any interest in this Agreement will be deemed effective to modify,
amend or discharge any part of this Agreement or any rights or obligations
of any Person under or by reason of this Agreement.
Section 5.5 Successors and Assigns; Third Party Beneficiaries.
This Agreement and all of the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto, each subsequent Holder and
their respective successors and assigns and executors, administrators and
heirs. Holders are intended third-party beneficiaries of this Agreement and
this Agreement may be enforced by such Holders.
Section 5.6 Entire Agreement. This Agreement sets forth the
entire agreement and understanding between the parties as to the subject
matter hereof and merges and supersedes all prior discussions, agreements
and understandings of any and every nature among them.
Section 5.7 Headings. Subject headings are included for
convenience only and shall not affect the interpretation of any provisions
of this Agreement.
Section 5.8 Notices. Any notice, demand, request, waiver, or
other communication under this Agreement shall be in writing and shall be
deemed to have been duly given on the date of service if personally served
or sent by telecopy, on the business day after notice is delivered to a
courier or mailed by express mail if sent by courier delivery service or
express mail for next day delivery and on the third day after mailing if
mailed to the party to whom notice is to be given, by first class mail,
registered, return receipt requested, postage prepaid and addressed as
follows:
If to the Company to:
Convergence Communications, Inc.
102 West 500 South, Suite 320
Salt Lake City, Utah 84101
Attention: Chief Executive Officer
Telecopier No.: (801) 532-6060
with a copy to:
Parsons Behle & Latimer
201 South Main Street
Suite 1800
Salt Lake City, Utah 84111
Attention: Scott Carpenter, Esq.
Telecopier No.: (801) 536-6111
if to the Purchasers, at the address set forth next to such Purchaser's
name on the signature page hereto.
Section 5.9 Governing Law; Forum; Process. This Agreement shall
be construed in accordance with, and the rights of the parties shall be
governed by, the internal laws of the State of New York, including Section
5-1401 of the New York General Obligations Law. All disputes arising under
or relation to this Agreement shall first be subject to conciliation in
accordance with the Rules of Conciliation of the International Chamber of
Commerce and, failing conciliation, be finally settled under the Rules of
Arbitration of the International Chamber of Commerce by three arbitrators
appointed in accordance with said Rules. The place of arbitration shall be
New York, New York. The language of the arbitration shall be English. In
the event any dispute under the Participation Agreement relates in any way
to the validity, performance or interpretation of this Agreement and an
arbitral tribunal is constituted pursuant to Section 11(n) of the
Participation Agreement, all parties to any dispute hereunder agree (i) to
be joined to the procedures initiated pursuant to Section 11(n) of the
Participation Agreement; (ii) to have any proceedings initiated hereunder
consolidated with proceedings initiated pursuant to Section 11(n) of the
Participation Agreement and (iii) to be bound by any ruling of the arbitral
tribunal constituted pursuant to Section 11(n) of the Participation
Agreement or any interim or final award thereof. Submission of disputes to
arbitration pursuant to the Rules of Arbitration of the International
Chamber of Commerce, in consolidation with any disputes submitted to
arbitration pursuant to Section 11(n) of the Participation Agreement as
provided above, shall be the sole method of resolving disputes between the
Parties hereto. Judgment upon an arbitration award may be entered in any
court having jurisdiction.
Section 5.10 Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, and all of which
together shall constitute a single agreement.
Section 5.11 Severability. In the event that any one or more of
the immaterial provisions contained in this Agreement shall for any reason
be held to be invalid, illegal or unenforceable, the same shall not affect
any other provision of this Agreement, but this Agreement shall be
construed in a manner which, as nearly as possible, reflects the original
intent of the parties.
Section 5.12 No Prejudice. The terms of this Agreement shall not
be construed in favor of or against any party on account of its
participation in the preparation hereof.
Section 5.13 Words in Singular and Plural Form. Words used in the
singular form in this Agreement shall be deemed to import the plural, and
vice versa, as the sense may require.
Section 5.14 Remedy for Breach. The Company hereby acknowledges
that in the event of any breach or threatened breach by the Company of any
of the provisions of this Agreement, the Holder would have no adequate
remedy at law and could suffer substantial and irreparable damage.
Accordingly, the Company hereby agrees that, in such event, the Holder
shall be entitled, without the necessity of proving damages or posting
bond, and notwithstanding any election by any Holder to claim damages, to
obtain a temporary and/or permanent injunction, without proving a breach
therefor, to restrain any such breach or threatened breach or to obtain
specific performance of any such provisions, all without prejudice to any
and all other remedies which any Holder may have at law or in equity.
Section 5.15 Termination of Original Agreements. By executing
this Agreement, each of Pegasus, Internexus, FondElec and the Company
acknowledge and agree that the Original Agreements are superseded and
replaced by this Agreement in their entirety, that the Original Agreements
are of no further force or effect with respect to such parties, and that
the rights of such parties relating to the registration of their
Registrable Securities will be governed by this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
CONVERGENCE COMMUNICATIONS, INC.
By: /s/ Lance D'Ambrosio
----------------------------------------------
Name: Lance D'Ambrosio
Title: Chairman and CEO
Address: 102 West 500 South, Suite 320
Salt Lake City, UT 84101
Fax No.: (801) 532-6060
PEGASUS FUND, L.P.
By: Pegasus Management Corp.
Its: General Partner
By: /s/ Gaston Acosta Rua
----------------------------------------------
Name: Gaston Acosta Rua
Title: Director
Address: 333 Ludlow Street
Stamford, CT 06902
Fax No.: (203) 326-4578
FONDELEC ESSENTIAL SERVICES GROWTH
FUND, L.P.
By: FondElec E.S.G.P. Corp.
Its: General Partner
By: /s/ Gaston Acosta Rua
----------------------------------------------
Name: Gaston Acosta Rua
Title: Director
Address: 333 Ludlow Street
Stamford, CT 06902
Fax No.: (203) 326-4578
INTERNEXUS S.A.
By: /s/ Peter Schiller
----------------------------------------------
Name: Peter Schiller
Title: Duly Authorized
Address: Peron 925, 1er Floor
Buenos Aires 1038, Argentina
Fax No.: 011-5411-4320-7560
TELEMATICA EDC, C.A.
By: /s/ Norberto Corredor
----------------------------------------------
Name: Norberto Corredor
Title: Chairman and CEO
Address: Avenida Vollmer, San Bernardino
Apartado 2299, Caracas
1010-A-Venezuela
Fax No.: 011-582-502-3500
TCW/CCI HOLDING LLC
By: /s/ Mario L. Barza
----------------------------------------------
Name: Mario L. Barza
Title: Chairman and CEO
Address: 200 Park Avenue, Suite 2100
New York, New York 10166
Fax No.: (212) 771-4155
INTERNATIONAL FINANCE CORPORATION
By:
----------------------------------------------
Name:
Title:
Address: 2121 Pennsylvania Avenue, N.W.
Rm. F4K-140
Washington, DC 20433
Fax No.: (202) 974-4403
GLACIER LATIN-AMERICA LTD.
By: /s/ David Leivman
----------------------------------------------
Name: David Leivman
Title: Assistant Treasurer
Address: 2999 N.E. 191 Street
Suite 404
Aventura, Florida 33180
Fax No.: (305) 935-6512
LANCE D'AMBROSIO
By: /s/ Lance D'Ambrosio
----------------------------------------------
Name: Lance D'Ambrosio
Title: Personal Capacity
Address: 3276 East Almira Court
Salt Lake City, Utah 84121
TROY D'AMBROSIO
By: /s/ Troy D'Ambrosio
----------------------------------------------
Name: Troy D'Ambrosio
Title: Personal Capacity
Address: 2914 Nila Way
Salt Lake City, Utah 84124
ESTATE OF GEORGE S. D'AMBROSIO
By: /s/ Lance D'Ambrosio
----------------------------------------------
Name: Lance D'Ambrosio
Title: Representative of Estate of
George S. D'Ambrosio
Address: 5451 South 1410 East
Salt Lake City, Utah 84117
Exhibit G
PARTICIPATION AGREEMENT
AMONG
CONVERGENCE COMMUNICATIONS, INC.,
A NEVADA, UNITED STATES OF AMERICA CORPORATION,
TELEMATICA EDC, C.A.,
A VENEZUELAN COMPANIA ANONIMA,
TCW/CCI HOLDING LLC,
A DELAWARE LIMITED LIABILITY COMPANY,
INTERNATIONAL FINANCE CORPORATION,
AN INTERNATIONAL ORGANIZATION ESTABLISHED BY ARTICLES OF AGREEMENT
AMONG ITS MEMBER COUNTRIES
GLACIER LATIN-AMERICA LTD.,
A BRITISH VIRGIN ISLANDS INTERNATIONAL BUSINESS COMPANY
FONDELEC ESSENTIAL SERVICES GROWTH FUND, L.P.,
A CAYMAN ISLANDS EXEMPT LIMITED PARTNERSHIP,
INTERNEXUS S.A.,
AN ARGENTINE SOCIEDAD ANONIMA,
AND
LANCE D'AMBROSIO, TROY D'AMBROSIO
AND THE
ESTATE OF GEORGE S. D'AMBROSIO
DATED: OCTOBER 15, 1999
TABLE OF CONTENTS
PAGE
1. Definitions.................................................. 2
2. The Transactions............................................. 2
(a) The Transactions..................................... 2
(b) The Closing and the Subsequent Closing............... 5
(c) Deliveries at the Closing............................ 6
(d) Deliveries at the Subsequent Closing................. 9
3. Representations and Warranties of Investors.................. 10
(a) Organization of the Investors........................ 10
(b) Authorization of Transaction......................... 10
(c) Noncontravention..................................... 11
(d) Brokers' Fees........................................ 11
(e) Investment Intent.................................... 11
(f) Restrictive Legend................................... 12
(g) Accredited Investor.................................. 13
(h) HSR Warranty......................................... 13
4. Representations and Warranties of the Company Concerning the
Company and its Subsidiaries................................. 13
(a) Organization, Qualification and Corporate Power...... 14
(b) Authorization of Transaction......................... 14
(c) Capitalization....................................... 14
(d) Noncontravention..................................... 15
(e) Intellectual Property; Permits and Licenses.......... 16
(f) Financial Statements; Financial Condition............ 19
(g) Taxes................................................ 20
(h) Employees and Labor Contracts........................ 20
(i) Environmental Laws and Regulations................... 21
(j) Litigation........................................... 21
(k) Bankruptcy........................................... 21
(l) Ordinary Course...................................... 22
(m) Brokers.............................................. 22
(n) Contracts............................................ 22
(o) Compliance with Laws................................. 22
(p) Business Plan and Use of Proceeds.................... 23
(q) Complete Statements.................................. 23
(r) Reports.............................................. 23
(s) Related Party Transactions........................... 24
(t) Foreign Corrupt Practices Act........................ 24
(u) No Bank Regulation................................... 24
(v) Property; Assets..................................... 24
(w) Employee Benefits.................................... 25
(x) U.S. Employee Plans.................................. 25
(y) Insurance............................................ 26
(z) IFC Policies......................................... 26
(aa) HSR Warranty......................................... 26
5. Pre-Closing Covenants........................................ 26
(a) General.............................................. 27
(b) Notices and Consents................................. 27
(c) Operation of Business................................ 27
(d) Preservation and Conduct of Business................. 27
(e) Full Access.......................................... 27
(f) Notice of Developments............................... 28
6. Conditions to Obligations.................................... 28
(a) Conditions to Obligations of Each Investor at the
Closing.............................................. 28
(b) Conditions to Obligations of the Company at the
Closing.............................................. 29
(c) Conditions to Obligations at the Subsequent
Closing.............................................. 29
7. Indemnity.................................................... 30
8. Termination.................................................. 32
(a) Termination of Agreement............................. 32
(b) Effect of Termination................................ 33
(c) Specific Performance................................. 34
9. D'Ambrosio Participation..................................... 34
10. Removal of Legend;Use of Proceeds............................ 34
11. Miscellaneous................................................ 34
(a) Press Releases and Public Announcements.............. 34
(b) No Third Party Beneficiaries......................... 35
(c) Entire Agreement..................................... 35
(d) Succession and Assignment............................ 35
(e) Counterparts......................................... 35
(f) Headings............................................. 35
(g) Notices.............................................. 35
(h) Governing Law........................................ 38
(i) Amendments and Waivers............................... 38
(j) Severability......................................... 38
(k) Expenses............................................. 39
(l) Construction......................................... 39
(m) Incorporation of Attachments and Exhibits............ 39
(n) Disputes............................................. 39
(o) Special IFC Covenants................................ 40
(p) Reporting to IFC..................................... 41
PARTICIPATION AGREEMENT
THIS PARTICIPATION AGREEMENT (this "Participation Agreement") is
entered into as of October 15, 1999, among CONVERGENCE COMMUNICATIONS,
INC., a Nevada, United States of America corporation (the "Company"),
TELEMATICA EDC, C.A., a Venezuelan compania anonima, ("Telematica"),
TCW/CCI HOLDING LLC, a Delaware, United States of America limited liability
company ("TCW"); INTERNATIONAL FINANCE CORPORATION, an international
organization established by Articles of Agreement among its member
countries, ("IFC"), and GLACIER LATIN- AMERICA LTD., a British Virgin
Islands International Business Company ("Glacier"), FONDELEC ESSENTIAL
SERVICES GROWTH FUND, L.P., a Cayman Islands exempt limited partnership
("FondElec"), INTERNEXUS S.A., an Argentine sociedad anonima
("Internexus"), and, for purposes of Section 9 below, LANCE D'AMBROSIO,
TROY D'AMBROSIO and the ESTATE OF GEORGE S. D'AMBROSIO (the latter three
being sometimes referred to collectively herein as the "D'Ambrosios").
Telematica, TCW, IFC, Glacier, FondElec and Internexus are sometimes
referred to collectively as the "Investors" and individually as an
"Investor", and the Company and the Investors are sometimes referred to
collectively as the "Parties" and singularly as a "Party".
A. The Company, directly or through wholly-owned or controlled
subsidiaries, is engaged in the business of providing data
transmission services, domestic and international telephony,
subscriber cable television, value-added telecommunications
services and services for access to and use of the Internet in
Latin America (together, the "Telecommunications Business"), and
proposes to continue to carry out and to further expand and
develop such Telecommunications Business in the manner and to
the extent set out in the business plan and budget attached as
Exhibits A and B (the "Business Plan" and "Budget",
respectively) to the Company's letter addressed to all Investors
and dated October 15, 1999 and previously delivered to them
("Disclosure Letter") and for such purposes requires additional
capital;
B. The Investors individually desire to participate or to
participate further in the Telecommunications Business and
toward that end intend to invest in the Company;
C. FondElec is a shareholder in the Company and is the holder of a
certain Subordinated Exchangeable Promissory Note from the
Company, dated December 23, 1998, in the original principal
amount of Five Million United States Dollars (US$5,000,000) (the
"FondElec December Note"), and FondElec proposes to capitalize
and, therefore, convert and exchange the principal amount of the
FondElec December Note for equity securities of the Company;
D. Internexus is a shareholder in the Company and the holder of (i)
a certain Subordinated Exchangeable Promissory Note from the
Company, dated December 23, 1998, in the original principal
amount of Five Million United States Dollars (US$5,000,000) (the
"Internexus December Note"); (ii) a certain Promissory Note from
the Company, dated June 12, 1999, in the original principal
amount of Two Million Five Hundred and Fifty Thousand United
States Dollars (US$2,550,000) (the "MetroNet Note"), and (iii)
certain Promissory Notes from the Company dated September 3,
1999 and October 2, 1999, in the respective original principal
amounts of One Million United States Dollars (US$1,000,000) and
Five Hundred Thousand United States Dollars (US$500,000) (the
"Bridge Notes"), and proposes to capitalize and, therefore,
convert and exchange the principal amount of, and accrued
interest on, the Internexus December Note, the MetroNet Note and
the Bridge Notes for equity securities of the Company; and
E. The Parties are entering into this Participation Agreement and
the other agreements and instruments entered into or delivered
in connection herewith to memorialize the terms for such
investments and conversions.
NOW, THEREFORE, the Parties agree as follows:
1. Definitions. Capitalized terms used in this Participation Agreement
have the meanings ascribed to them in the Schedule of Definitions
attached to this Participation Agreement as Schedule 1, unless the
context otherwise requires. The definition of terms defined in the
singular shall apply to the plural, and the definition of terms
defined in the plural shall apply to the singular.
2. The Transactions.
(a) The Transactions. The Parties confirm their intention that, on
and subject to the terms and conditions of this Participation
Agreement, they shall carry out the following transactions, and
enter into and deliver the following agreements and instruments
(such agreements and instruments herein referred to
collectively as the "Transaction Documents") at a closing to
occur on October 18, 1999 the ("Closing") and, where
appropriate, at a further closing (the "Subsequent Closing") to
occur within five Business Days following the satisfaction of
the conditions set out in Section 6(c), in each case as
provided for in Section 2(b) below:
(i) the entering into, at the Closing, between each of
Telematica, TCW, IFC and Glacier, and the Company of a
Stock Purchase Agreement in the form of Exhibit A to this
Participation Agreement (each a "CCI Stock Purchase
Agreement" and, collectively, the "CCI Stock Purchase
Agreements"), and the purchase and sale, pursuant to such
CCI Stock Purchase Agreements, of 7,733,332 shares in the
aggregate of Series C Convertible Preferred Stock issued
by the Company and having the rights and preferences set
out in Schedule 2 to this Participation Agreement (the
"Rights and Preferences of Series C Shares") for an
aggregate purchase price, in cash or other immediately
available funds, of Fifty-Eight Million United States
Dollars (US$58,000,000), such purchases and sales of
Series C Shares to occur as follows:
(A) the purchase by and sale to Telematica of an
aggregate of 3,333,333 Series C Shares pursuant to
its CCI Stock Purchase Agreement, 2,000,000 being
purchased and sold at the Closing and 1,333,333
being purchased and sold at the Subsequent Closing,
in each case for a purchase price per share of
Seven and 50/100 United States Dollars (US$7.50),
being an aggregate purchase price of Twenty Five
Million United States Dollars (US$25,000,000),
Fifteen Million United States Dollars
(US$15,000,000) being payable at the Closing and
Ten Million United States Dollars (US$10,000,000)
being payable at the Subsequent Closing,
(B) the purchase by and sale to TCW of an aggregate of
3,333,333 Series C Shares pursuant to its CCI Stock
Purchase Agreement, 2,000,000 being purchased and
sold at the Closing and 1,333,333 being purchased
and sold at the Subsequent Closing, in each case
for a purchase price per share of Seven and 50/100
United States Dollars (US$7.50), being an aggregate
purchase price of Twenty Five Million United States
Dollars (US$25,000,000), Fifteen Million United
States Dollars (US$15,000,000) being payable at the
Closing and Ten Million United States Dollars
(US$10,000,000) being payable at the Subsequent
Closing,
(C) the purchase by and sale to IFC of 666,666 Series C
Shares pursuant to its CCI Stock Purchase
Agreement, at the Subsequent Closing, for a
purchase price per share of Seven and 50/100 United
States Dollars (US$7.50), being an aggregate
purchase price of Five Million United States
Dollars (US$5,000,000) payable at the Closing, and
(D) the purchase by and sale to Glacier of 400,000
Series C Shares, pursuant to its CCI Stock Purchase
Agreement, at the Closing, for a purchase price per
share of Seven and 50/100 United States Dollars
(US$7.50), being an aggregate purchase price of
Three Million United States Dollars (US$3,000,000)
payable at the Closing,
and the commitment by the Company to apply the proceeds
of such sale in the manner set out in Schedule 3 to this
Participation Agreement;
(ii) the conversion by Internexus, at the Closing, of the
principal and interest amounts of the Internexus December
Note, the MetroNet Note and the Bridge Notes into
1,328,911 Series C Shares and the conversion by FondElec,
at the Closing, of the principal amount of the FondElec
December Note into 666,666 Series C Shares;
(iii) the entering into, at the Closing, by the Investors, and
the Company of an Option Agreement in the form of Exhibit
B to this Participation Agreement (the "Option
Agreement"), granting an option to each Investor to
acquire further Series C Shares within nine months
following the Closing Date, on the same terms and
conditions as set out in the CCI Stock Purchase Agreement
attached hereto as Exhibit A, except that the maximum
number of Series C Shares acquired by each Investor shall
be 40% of the number to be acquired by it as contemplated
in subsection 2(a)(i), in the case of Telematica, TCW,
IFC and Glacier, or 40% of the number received upon
conversion as contemplated in subsection 2(a)(ii), in the
case of FondElec and Internexus;
(iv) the granting to each Investor of a Series C Warrant in
the form of Exhibit C to this Participation Agreement
(each a "Series C Warrant" and, collectively, the "Series
C Warrants"), providing for the issuance by the Company
of 2,432,226 shares of Common Stock, such grants to occur
as follows:
(A) the grant to Telematica, as to 500,000 shares, at
the Closing, and as to 333,333, at the Subsequent
Closing,
(B) the grant to TCW, as to 500,000 shares, at the
Closing, and as to 333,333, at the Subsequent
Closing,
(C) the grant to IFC, as to 166,666 shares, at the
Subsequent Closing,
(D) the grant to Glacier, as to 100,000 shares, at the
Closing,
(E) the grant to Internexus, as to 332,228 shares, at
the Closing, and
(F) the grant to FondElec, as to 166,666 shares, at the
Closing;
(v) the granting to each of FondElec and Internexus, at the
Closing, of a FondElec/Internexus Warrant in the form of
Exhibit D to this Participation Agreement (each, a
"FondElec/Internexus Warrant"), providing for the
issuance to each of them, in each case at the same time
and for the same price as the Series C Warrants are
subject to exercise, as to 260,000 shares each of Common
Stock;
(vi) the entering into, at the Closing, among the Company, the
Investors, and the D'Ambrosios of a CCI Shareholders'
Agreement in the form of Exhibit E to this Participation
Agreement (the "CCI Shareholders' Agreement") for the
purpose of setting out how the Investors and the
D'Ambrosios will exercise their rights as shareholders
with respect to, among other matters, corporate
governance, the election of directors and the disposition
of their Company Equity;
(vii) the entering into, at the Closing, among the Investors,
the Company, the D'Ambrosios and certain other parties of
an Amended and Restated Registration Rights Agreement in
the form of Exhibit F to this Participation Agreement
(the "Registration Rights Agreement") for the purpose of
setting out the rights of the Investors, the D'Ambrosios
and such other parties to require or join in the
registration of their shares of common stock of the
Company under U.S. Securities Laws;
(viii)the entering into, at the Closing, among Telematica,
FondElec, WCI de Cayman, Inc., a Cayman Islands limited
liability company and a Subsidiary ("WCI") and Chispa Dos
Inc., a Cayman Islands limited liability company ("CCI
Salvador") of a Subscription and Refinance Agreement in
the form of Exhibit G to this Participation Agreement
(the "Salvador Subscription Agreement"), and the
purchase, at the Subsequent Closing, through the
subscription of unissued shares of CCI Salvador common
stock, by Telematica from CCI Salvador, and the sale by
CCI Salvador to Telematica, of 59.1550 shares of common
stock of CCI Salvador (the "Salvador Shares", as further
described in the Salvador Subscription Agreement) for a
purchase price, in cash or other immediately available
funds of Five Million Five Hundred Twenty-Five Thousand
United States Dollars (US$5,525,000); the contribution,
at the Subsequent Closing, by WCI to CCI Salvador of Nine
Hundred One Thousand Seven Hundred and Sixty United
States Dollars (US$901,760) of its accounts receivable
from CCI Salvador in exchange and in subscription for
9.6549 shares of common stock of CCI Salvador; and the
payment, at the Subsequent Closing, by CCI Salvador,
utilizing a portion of the proceeds of the sale of the
Salvador Shares, of Three Million Eight Hundred
Sixty-Four Thousand Five Hundred Twenty-Nine United
States Dollars (US$3,864,529) to repay Three Million Five
Hundred Thousand United States Dollars (US$3,500,000) of
the principal amount of that certain Promissory Note of
CCI Salvador made to FondElec and dated March 3, 1999
("Salvador Note"), and accrued interest thereon through
October 14, 1999;
(ix) the entering into, at the Closing, among CCI Salvador,
Telematica, WCI, FondElec and the other shareholders of
CCI Salvador of an Amended and Restated Salvador
Shareholders' Agreement in the form of Exhibit H to this
Participation Agreement (the "Salvador Shareholders'
Agreement"), for the purpose of setting out how
Telematica and such other shareholders will manage the
business of CCI Salvador, and provisions regarding the
disposition of their equity interests in CCI Salvador;
and
(x) the entering into, at the Closing, between the Company
and an affiliate of Telematica of a letter of intent in
the form of Exhibit I to this Participation Agreement
("Colombia Letter of Intent").
(b) The Closing and the Subsequent Closing. Subject to the
satisfaction or waiver by the appropriate Party or Parties of
the conditions set out in Section 6, the closing of the
transactions contemplated by this Participation Agreement to
occur at the Closing and the Subsequent Closing shall take
place at the offices of Thelen Reid & Priest LLP in New York
City, New York.
(c) Deliveries at the Closing. At the Closing, the Parties will
deliver the following, subject to the satisfaction or waiver by
the appropriate Party or Parties of the conditions set out in
Sections 6(a) and 6(b):
(i) each of Telematica, TCW, IFC and Glacier will deliver or
cause to be delivered the following:
(A) to the Company, the Investor's CCI Stock Purchase
Agreement, duly executed and delivered by it,
together with
(1) in the case of Telematica, Fifteen Million
United States Dollars (US$15,000,000),
(2) in the case of TCW, Fifteen Million United
States Dollars (US$15,000,000), and
(3) in the case of Glacier, Three Million United
States Dollars (US$3,000,000);
(B) to the Company and each of the other parties
thereto, the CCI Shareholders' Agreement, duly
executed and delivered by it; and
(C) to the Company and each of the other parties
thereto, the Registration Rights Agreement, duly
executed and delivered by it;
(ii) Internexus will deliver or cause to be delivered the
following:
(A) to the Company and each of the other parties
thereto, the CCI Shareholders' Agreement, duly
executed and delivered by it;
(B) to the Company and each of the other parties
thereto, the Registration Rights Agreement, duly
executed and delivered by it; and
(C) to the Company, the Internexus December Note, the
MetroNet Note and the Bridge Notes, in each case
duly marked as cancelled and paid in full;
(iii) FondElec will deliver or cause to be delivered the
following:
(A) to the Company, the FondElec December Note duly
marked as cancelled and paid in full;
(B) to the Company and each of the other parties
thereto, the CCI Shareholder Agreement, duly
executed and delivered by it;
(C) to the Company and each of the other parties
thereto, the Registration Rights Agreement, duly
executed and delivered by it; and
(D) to CCI Salvador and each of the other parties
thereto, the Salvador Subscription Agreement, duly
executed and delivered by FondElec; and
(iv) Telematica will deliver or cause to be delivered the
following:
(A) to CCI Salvador and each of the other parties
thereto, the Salvador Subscription Agreement, duly
executed and delivered by it;
(B) to CCI Salvador and each other party thereto, the
Salvador Shareholders' Agreement, duly executed and
delivered by it;
(C) to the Company, the Colombia Letter of Intent, duly
executed and delivered by it.
(v) the Company will deliver or cause to be delivered the
following:
(A) to each of Telematica, TCW, and Glacier, its
corresponding CCI Stock Purchase Agreement, duly
executed and delivered by the Company, together
with certificates representing Series C Shares as
follows:
(1) to Telematica, 2,000,000 Series C Shares,
(2) to TCW, 2,000,000 Series C Shares, and
(3) to Glacier, 400,000 Series C Shares;
and a certified copy of the resolutions of the
Company's Board of Directors, resolving to apply
the proceeds of the sale of such shares in the
manner described in Schedule 3 to this
Participation Agreement;
(B) To Internexus, certificates representing 1,328,911
Series C Shares;
(C) To FondElec, certificates representing 666,666
Series C Shares;
(D) to the Investors, the Option Agreement, duly
executed and delivered by the Company;
(E) to each of Telematica, TCW, Glacier, Internexus and
FondElec, a Series C Warrant, duly executed and
delivered by the Company with respect to the
following appropriate number of shares of Common
Stock:
(1) as to Telematica, 500,000 shares,
(2) as to TCW, 500,000 shares,
(3) as to Internexus, 332,228 shares,
(4) as to Glacier, 100,000 shares, and
(5) as to FondElec, 166,666 shares;
(F) to each of FondElec and Internexus, its
FondElec/Internexus Warrant, duly executed and
delivered by the Company;
(G) to the Investors and each other party thereto, the
CCI Shareholders' Agreement, duly executed and
delivered by the Company and by each other party
thereto other than the Investors;
(H) to the Investors and each other party thereto, the
Registration Rights Agreement, duly executed and
delivered by the Company;
(I) to Telematica, the Salvador Subscription Agreement,
duly executed and delivered by CCI Salvador and
WCI;
(J) to CCI Salvador, Telematica and FondElec, and the
other parties thereto, the Salvador Shareholders'
Agreement, duly executed and delivered by the
Company and by each party thereto other than
Telematica and FondElec;
(K) to Telematica, the Colombia Letter of Intent, duly
executed and delivered by the Company;
(L) to FondElec, $419,178.08 as repayment of the unpaid
interest portions of the FondElec December Note;
(M) to the Investors, opinions of counsel in the form
of Exhibit J-1, Exhibit J-2 and Exhibit J-3, each
addressed to all Investors and each dated the
Closing Date; and
(N) to IFC, a certificate to the effect that the
proceeds of the sale of the Series C Shares to IFC
shall not, when received, be in reimbursement of,
and shall not be used for, expenditures in the
territories of any country other than
less-developed countries in which IFC is actively
pursuing operations (as described in its 1999
annual report) or for goods produced in or services
supplied from any such country.
(d) Deliveries at the Subsequent Closing. At the Subsequent
Closing, the Parties will deliver the following, subject only
to the satisfaction, as to the appropriate Party, of the
conditions set out in Section 6(c):
(i) Telematica will deliver or cause to be delivered:
(A) to the Company, Ten Million United States Dollars
(US$10,000,000), and
(B) to CCI Salvador, Five Million Five Hundred Twenty
Five Thousand United States Dollars (US$5,525,000);
(ii) TCW will deliver to the Company Ten Million United States
Dollars (US$10,000,000);
(iii) FondElec will deliver or cause to be delivered to CCI
Salvador a partial release of the Salvador Note, in the
form of Exhibit K hereto, acknowledging receipt of Three
Million Eight Hundred Sixty Four Thousand Five Hundred
Twenty Nine United States Dollars (US$3,864,529) in
payment of Three Million Five Hundred Thousand United
States Dollars (US$3,500,000) of the principal amount
thereof, and of interest accrued thereon through October
14, 1999;
(iv) IFC will deliver or cause to be delivered to the Company
Five Million United States Dollars (US$5,000,000);
(v) The Company will deliver or cause to be delivered the
following:
(A) To Telematica:
(1) Certificates representing 1,333,333 Series C
Shares,
(2) A Series C Warrant with respect to 333,333
shares of Common Stock, and
(3) Certificates representing the Salvador
Shares;
(B) To TCW:
(1) Certificates representing 1,333,333 Series C
Shares, and
(2) A Series C Warrant with respect to 333,333
Shares of Common Stock;
(C) To IFC:
(1) Certificates representing 666,666 Series C
Shares, and
(2) A Series C Warrant with respect to 166,666
shares;
(D) To each of Telematica, TCW and IFC, an opinion of
counsel in the form of Exhibit L, addressed to each
of them and dated the Subsequent Closing Date; and
(E) To FondElec, Three Million Eight Hundred Sixty Four
Thousand Five Hundred Twenty-Nine United States
Dollars (US$3,864,529).
(F) to CCI Salvador, an acknowledgment by WCI in the
form of Exhibit M of the contribution to capital of
Nine Hundred One Thousand Seven Hundred and Sixty
United States Dollars (US$901,760) by means of the
capitalization and conversion of inter-company debt
owing by CCI Salvador to WCI;
3. Representations and Warranties of Investors. Each Investor, as to
itself, represents and warrants to the Company and to each other
Investor, with the understanding that the Company and each other
Investor is being induced into entering into this Participation
Agreement and the other Transaction Documents in reliance on such
representations and warranties, that the statements contained in this
Section 3, with respect to such Investor only, are true, correct and
complete in all material respects as of the date of this
Participation Agreement and will be true, correct and complete in all
material respects as of the Closing Date and, if such Investor
participates in the Subsequent Closing, that the statements contained
in Sections 3(e), 3(f) and 3(g) will be true, correct and complete in
all material respects as of the date of the Subsequent Closing. Each
such representation and warranty shall survive the Closing and the
Subsequent Closing, as appropriate, and shall continue in force for a
period of 24 months from the Closing Date.
(a) Organization of the Investors. It is duly organized, validly
existing, and in good standing under the laws of the place of
its organization.
(b) Authorization of Transaction. It has full power and authority
to execute and deliver this Participation Agreement and each
Transaction Document to which it is a party and to perform its
obligations hereunder and thereunder, and as of the Closing
Date, and this Participation Agreement each such Transaction
Document delivered at the Closing and as of the date of the
Subsequent Closing, each such Transaction Document, if any,
delivered at the Subsequent Closing, shall have been duly
authorized and executed by it and constitute its valid and
legally binding obligation, enforceable under Applicable Law in
accordance with its terms, except as may be limited by
bankruptcy, reorganization, moratorium, fraudulent conveyance
and insolvency laws and by other laws affecting the rights of
creditors generally and except as may be limited by the
availability of equitable remedies. There is no requirement of
Applicable Law that any notice be given, nor any filing,
authorization, consent, or approval of any governmental
authority be obtained in order that it may execute, deliver and
consummate the transactions contemplated by this Participation
Agreement and each other Transaction Document to which it is a
party, except that if the representing and warranting Investor
is Telematica or TCW, it excepts from the foregoing
representation and warranty the filing and waiting period
requirements applicable pursuant to the HSR Act for the
transactions contemplated to be performed or caused to be
performed by it at the Subsequent Closing.
(c) Noncontravention. Neither the execution nor the delivery by it
of this Participation Agreement or of any other Transaction
Document to which it is or becomes a party, nor the performance
of its obligations hereunder or thereunder will (i) violate any
Applicable Law to which it is subject or any provision of its
charter or other organization documents or bylaws or (ii)
conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require
any notice under any material contract to which it is a party
or by which it or any of its property may be bound.
(d) Brokers' Fees. It has not incurred any liability or obligation
to pay any fees or commissions to any broker, finder, or agent
with respect to the transactions contemplated hereunder or
under any other Transaction Document to which it is or becomes
a party for which any other Party could become liable.
(e) Investment Intent. It understands that the Series C Shares, the
Series C Warrants and the Option, and in case of the
representations being made by Telematica, the Salvador Shares,
and, in the case of the representations being made by FondElec
or Internexus, the FondElec/Internexus Warrants (collectively
sometimes referred to as the "Securities") have not been
registered under the United States Securities Act of 1933, as
amended (the "Securities Act"). It is acquiring the Securities
without a view to or for sale in connection with any
distribution thereof inside the United States within the
meaning of Regulation S under the Securities Act or other
exemptions from the registration requirements of the Securities
Act. It understands that the Securities will constitute
"restricted securities" under the Securities Act, and may not
be resold without registration under, or the availability of an
exemption from, the registration requirements of the Securities
Act and similar state laws. It is familiar with Securities and
Exchange Commission Regulation S and Rule 144, as presently in
effect, and understands the resale limitations imposed thereby
and by the Securities Act.
(f) Restrictive Legend. It understands that the certificate or
certificates evidencing the Series C Shares may bear legends in
substantially the following form:
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF
STOCK. THE CORPORATION WILL FURNISH WITHOUT CHARGE TO THE
HOLDER OF THIS CERTIFICATE UPON REQUEST THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
OR OTHER SPECIAL RIGHTS OF EACH CLASS OF THE CORPORATION'S
STOCK OR SERIES THEREOF AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE IN THE
UNITED STATES IN VIOLATION OF THE SECURITIES ACT AND MAY NOT BE
SOLD, MORTGAGED, PLEDGED OR HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES ACT
OR THE DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL
THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT.
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF A SHAREHOLDERS' AGREEMENT DATED OCTOBER 15, 1999
BY AND BETWEEN THE SHAREHOLDER, THE CORPORATION AND CERTAIN
OTHER HOLDERS OF COMMON AND PREFERRED STOCK OF THE CORPORATION
WHICH PROVIDES RESTRICTIONS ON THE TRANSFERABILITY OF THE
SHARES REPRESENTED BY THIS CERTIFICATE. BY ACCEPTING ANY
INTEREST IN THE SECURITIES REPRESENTED BY THIS CERTIFICATE, THE
PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND
SHALL BE BOUND BY ALL THE PROVISIONS OF SAID SHAREHOLDERS'
AGREEMENT. COPIES OF SUCH AGREEMENT MAY BE OBTAINED UPON
WRITTEN REQUEST TO THE SECRETARY OF THE CORPORATION.
It understands the certificates or agreements representing the Securities
other than the Series C Shares may bear legends in substantially the form
of the second and third paragraphs set forth above.
(g) Accredited Investor. It is an "accredited investor," as that
term is defined in Regulation D promulgated under the
Securities Act, can bear the risk of its investment in the
Securities that it proposes to acquire, and has such knowledge
and experience in financial and/or business matters that it is
capable of evaluating the merits and risks of an investment in
such Securities.
(h) HSR Warranty. The premerger notification and report form, and
any and all appendices and attachments thereto, filed or to be
filed by it, if any under the HSR Act ("HSR Form") with the
Federal Trade Commission ("FTC") and the Antitrust Division of
the Department of Justice, was prepared and assembled in
accordance with the instructions issued by the FTC. To the best
of its knowledge, the information contained in the HSR Form is
true, correct and complete in accordance with the HSR Act and
its regulations. Each Investor, other than Telematica and TCW,
represents that the HSR Act does not require it to file an HSR
Form.
4. Representations and Warranties of the Company Concerning the Company
and its Subsidiaries. The Company represents and warrants to each
Investor, with the understanding that each of them is being induced
to enter into this Participation Agreement and the other Transaction
Documents to which such Investor is a party in reliance on such
representations and warranties, that the statements contained in this
Section 4 are true, correct and complete in all material respects as
of the date of this Participation Agreement and will be true, correct
and complete in all material respects as of the Closing Date and that
the statements contained in Sections 4(a), 4(b), 4(c), 4(d), 4(f)
(except as approved by budget or action taken by the Board of
Directors), 4(j), 4(k), 4(t) and 4(z) will be true, correct and
complete in all material respects as of the Subsequent Closing
except, in each case, as otherwise set out in the Disclosure Letter.
Each such representation and warranty shall survive the Closing (and
as to those made as of the Subsequent Closing, the Subsequent
Closing), and shall continue in force and effect for a period of 24
months from the Closing Date (and as to those made as of the
Subsequent Closing), except that (i) the representations and
warranties set out in clause (j) below with respect to claims or
lawsuits shall not expire, (ii) the representations and warranties
set out in clause (i) below with respect to environmental claims
shall continue in force and effect for a period of 60 months from the
Closing Date, and (iii) the representations and warranties set out in
clauses (c), (g), (h) and (o) below shall continue in force and
effect through the expiration of the statute(s) of limitation for
claims related thereto.
(a) Organization, Qualification and Corporate Power. Each of the
Company and its Subsidiaries is a corporation duly organized,
validly existing, and in good standing under the laws of the
place of its organization, and each of the Company and the
Subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such
qualification is required, and has all requisite corporate
power and authority to own and operate its properties and to
carry on its business as now conducted and as contemplated to
be conducted in the Business Plan. The articles of
incorporation, bylaws and any other organizational documents of
the Company and its Subsidiaries that the Company previously
delivered to each Investor were true, correct and complete as
of the date of delivery, and are true, correct and complete as
of the date hereof, and will be true, correct and complete as
of the Closing Date and as of the Subsequent Closing Date.
(b) Authorization of Transaction. Each of the Company, CCI Salvador
and CCI Venezuela (together sometimes referred to herein as the
"CCI Companies", and individually as a "CCI Company") has full
power and authority to execute and deliver the Participation
Agreement and each Transaction Document to which it is a party
and to perform its obligations hereunder and thereunder, and as
of the Closing Date and as of the Subsequent Closing Date this
Participation Agreement and each such Transaction Document
shall have been duly authorized and executed by the appropriate
CCI Company and constitute its valid and legally binding
obligation, enforceable in accordance with its terms, except as
may be limited by bankruptcy, reorganization, moratorium,
fraudulent conveyance and insolvency law and by other laws
affecting the rights of creditors generally and except as may
be limited by the availability of equitable remedies. Other
than with respect to the Company's filing under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), there is no requirement of Applicable
Law that any notice be given, nor any filing, authorization,
consent, or approval of any governmental authority be obtained
by the Company or its Subsidiaries in order that each CCI
Company may execute, deliver and consummate the transactions
contemplated by this Participation Agreement and each other
Transaction Document to which it is a party.
(c) Capitalization. All of the authorized and outstanding shares of
the capital stock of the Company and each Subsidiary and the
ownership thereof (including, without limitation, the ownership
interests of FondElec and Internexus in the Company) are
described in the Disclosure Letter. All of the issued and
outstanding shares of stock of the Company and of each of the
Subsidiaries have been duly authorized, are validly issued,
fully paid, and are non-assessable, are owned by the Company
(with respect to the stock of the Subsidiaries), and the
holders thereof (with respect to the stock of the Company),
free of claims, charges or encumbrances, and were not issued in
violation of any preemptive rights. Other than the Series C
Warrants, the FondElec/Internexus Warrants and the options
provided for in the Option Agreement, there are no outstanding
or authorized options, warrants, purchase rights, preemptive
rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require
any CCI Company or any of their respective subsidiaries to
issue, sell, or otherwise cause to become outstanding any
additional or other capital stock. Neither the Company nor any
Subsidiary is under any obligation (contingent or otherwise) to
repurchase or otherwise acquire, redeem or retire any of its
equity interests or any warrants, options or other rights to
acquire its equity interests. Neither the Company nor any of
its Subsidiaries is a party or subject to any agreement or
understanding, and, to the best of their Knowledge, there is no
agreement or understanding between any Persons that affects or
relates to the voting or giving of written consents with
respect to any security or the voting by a director of the
Company or any of its Subsidiaries. The Series C Shares, the
Series C Warrants, the FondElec/Internexus Warrants, the
Options and the Common Stock and Series C Shares to be issued
upon the exercise of those Securities, when issued, sold and
delivered by the Company in accordance with the terms of the
CCI Stock Purchase Agreements, the Series C Warrant, the
FondElec/Internexus Warrant or the Option Agreement, as
appropriate, will be duly authorized and validly issued, fully
paid and non-assessable shares of the capital stock of the
Company with the rights, preferences and privileges described
in Schedule 1 of the CCI Shareholders' Agreement. Upon
issuance, sale or delivery, each Investor will receive good and
marketable title to the Securities, free and clear of all
claims and Liens, other than those arising under the
Transactions Documents. The Salvador Shares, when issued, sold
and delivered by CCI Salvador in accordance with the terms of
the Salvador Subscription Agreement, will be duly authorized
and validly issued, fully paid and non-assessable shares of
capital stock of CCI Salvador with the rights, preferences and
privileges described in Schedule 1 thereto, and will be free
and clear of all adverse claims other than those arising under
the Transaction Documents.
(d) Noncontravention. Neither the execution and delivery of this
Participation Agreement or any Transaction Document to which
any CCI Company is a party, nor the performance of its
obligations hereunder or thereunder, will (i) violate any
Applicable Law to which the Company or any of its Subsidiaries
is subject or any provision of the charter or organizational
document of the Company or any of its Subsidiaries or (ii)
conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require
any notice under any Material Contract to which it is a party
or by which it or any of its property may be bound, or (iii)
will with respect to the approval by the directors of such
company of the transactions contemplated by the Transaction
Documents to which it is a party constitute a violation by any
such director of any fiduciary duty that it owes to such
company or to a third party, as a consequence of which the
Company or any of its Subsidiaries is obligated to indemnify
such director, (iv) give rise to any claims against the Company
or the Subsidiaries, or (v) result in the creation of any Lien
on the Securities (other than as created by the Transaction
Documents) or any assets of the Company or its Subsidiaries.
(e) Intellectual Property; Permits and Licenses.
(i) Intellectual Property.
(A) The Disclosure Letter sets forth for all
Intellectual Property, as defined hereinafter,
owned by the Company or any of its Subsidiaries: a
complete and accurate list of all U.S. and foreign
(i) patents and patent applications; (ii) trademark
and servicemark registrations (including internet
domain registrations), trademark and servicemark
applications, and material unregistered
servicemarks and trademarks; and (iii) copyright
registrations, copyright applications, and material
unregistered copyrights. As used herein, the term
"Intellectual Property" means all trademarks,
service marks, trade names, internet domain names,
designs, logos, slogans and general intangibles of
like nature, together with goodwill, registrations
and affiliations relating to the foregoing,
registered and unregistered patents; copyrights
(including registrations and applications of any of
the foregoing); Software (as defined below);
confidential information, technology, know-how,
inventions, processes, formulae, algorithms, models
and methodologies (collectively "Trade Secrets")
in each case used in the Telecommunication Business
as conducted or contemplated to be conducted, and
any licenses to use any of the foregoing;
"Software" means any and all (i) computer programs,
including any and all software implementation of
algorithms, models and methodologies, whether in
source code or object code, (ii) databases and
computations, including any and all data and
collections of data, (iii) all documentation,
including user manuals and training materials,
relating to any of the foregoing, and (iv) the
content and information contained in any web site.
(B) The Disclosure Letter lists all material Software,
other than off-the-shelf or commercially available
software purchased for less than Twenty-Five
Thousand United States Dollars (US$25,000), which
is owned, licensed, leased, or otherwise used by
the Company or any of its Subsidiaries, and
identifies which Software is owned, licensed,
leased, or otherwise used, as the case may be.
(C) The Disclosure Letter sets forth a complete and
accurate list of all agreements granting or
obtaining any right to use or practice any rights
under any Intellectual Property other than
off-the-shelf or commercially available software
set forth in paragraph (B) above, to which the
Company or any of its Subsidiaries is a party or
otherwise bound, as licensee or licensor
thereunder, including license agreements,
settlement agreements, and covenants not to sue
(collectively, the "IP License Agreements").
(D) The Company or its Subsidiaries own or have the
right to use all Intellectual Property, free and
clear of all liens, claims, charges, encumbrances
or security interests, except that the acquisition
of the assets of Metrotelecom, S.A., a Guatemalan
corporation ("Metrotelecom") or of its subsidiaries
has not been consummated by the Company or any
Subsidiary, the rights of the Company or its
Subsidiaries in connection with Metrotelecom being
as set out in the Disclosure Letter.
(E) Any Intellectual Property owned or, to the
Knowledge of the Company or any Subsidiary, used,
by the Company or its Subsidiaries is valid and
subsisting in full force and effect and has not
been cancelled, expired or abandoned.
(F) To the Knowledge of the Company or any Subsidiary,
the Telecommunications Business as currently and as
contemplated to be conducted does not infringe on
any Intellectual Property of any third party.
(G) The consummation of the transactions contemplated
hereby by the Company and its Subsidiaries will not
result in the loss or impairment of the Company or
any of its Subsidiaries' rights to own or use any
of the Intellectual Property, nor will it require
the consent of any third party, including for the
avoidance of doubt any Governmental Authority, in
respect of any Intellectual Property.
(H) The IP License Agreements are valid and binding
obligations of all parties thereto, enforceable in
accordance with their terms, and there exists no
event or condition which will result in a violation
or breach of, or constitute a default by any party
under any such IP License Agreement.
(I) The Company and each of its Subsidiaries takes
measures consistent with commercial practices to
protect the confidentiality of Trade Secrets,
including requiring its key employees and other key
parties having access thereto to execute written
non-disclosure agreements. To the Knowledge of the
Company, no Trade Secret has been disclosed and the
Company has not authorized the disclosure to any
third party other than pursuant to a non-
disclosure agreement in favor of the Company and
the applicable Subsidiary with respect to such
Trade Secrets.
(J) To the Knowledge of the Company or any Subsidiary,
no third party is misappropriating, infringing,
diluting or violating any Intellectual Property
owned by the Company or any of its Subsidiaries,
the misappropriation, infringement, dilution or
violation of which would have a material adverse
effect on the Company's operation or its
Subsidiaries, either individually or in the
aggregate.
(K) Year 2000. (a) As of the date of this Agreement;
all Date Data and Date-Sensitive Systems owned by
the Company and its Subsidiaries is Year 2000
Compliant (as defined below). As used herein, "Date
Data" means any data of any type that includes date
information or which is otherwise derived from,
dependent on or related to date information.
"Date-Sensitive System" means any Software,
microcode or hardware system or component,
including any electronic or electronically
controlled system or component, that uses or
processes any Date Data and that is installed, in
development or on order by the Company or any of
its Subsidiaries for their internal use or for the
use of third parties, or which the Company or any
of its Subsidiaries sell, lease, license, assign or
otherwise provide to any third party. "Year 2000
Compliant" means (i) with respect to Date Data,
that such data is in proper format and accurate for
all dates, including for those before, on and after
December 31, 1999 and (ii) with respect to
Date-Sensitive Systems, that each such system
accurately processes all Date Data, including for
dates before, on and after December 31, 1999,
without loss of any functionality or performance,
including but not limited to calculating,
comparing, sequencing, storing and displaying such
Date Data (including all leap year considerations),
when used as a standalone system or in combination
with other Software or hardware.
(ii) Permits and Licenses. The Company or its Subsidiaries own
and possess all licenses, permits, concessions and other
authorizations required by law in connection with
carrying out the Telecommunications Business as conducted
as of the Closing Date and all of such licenses, permits,
concessions and other authorizations are in full force
and effect, and no violations are or have been recorded
in respect thereof, nor is any proceeding pending which
threatens to suspend, revoke or limit any such license,
permit, concession or other authorizations, and no such
licenses, permits, concessions or authorizations will be
adversely affected by this Participation Agreement or by
the Transaction Documents. No CCI Company has the
Knowledge of any circumstance, event or set of facts that
constitute (or, with the passage of time or the giving of
notice, or both, would constitute) a violation of or a
breach or default under any such license, permit,
concession or authorization. The Disclosure Letter sets
forth a list, arranged by country, of all such licenses,
permits, concessions and other authorizations.
(f) Financial Statements; Financial Condition. Attached hereto as
Exhibit N are the Company's audited consolidated and
consolidating financial statements (including related
statements of income, changes in shareholders' equity and cash
flow) for the year ended December 31, 1998 and its unaudited
consolidated and consolidating financial statements for the six
months ended June 30, 1999 (together, the "Financial
Statements"). The Financial Statements have been prepared in
accordance with United States GAAP (except in certain instances
for the absence of footnotes, and with respect to the unaudited
portions of the Financial Statements, except for normal year
end audit adjustments consistent with prior Company practice),
present fairly the financial condition of the Company as of the
dates set forth therein and the results of operations for such
periods, and are correct and complete in all material respects.
Since June 30, 1999, neither the Company nor any of its
Subsidiaries has done any of the following or permitted any of
the following to occur: (i) suffered any material adverse
change in its assets or liabilities, business, financial
condition, results of operations or prospects; (ii) incurred
any material liabilities (other than liabilities disclosed in
the Financial Statements and Disclosure Letter, adequately
provided for in the Financial Statements or disclosed in any
related notes thereto, incurred in connection with this
Participation Agreement or the other documents described
herein, or incurred in the ordinary course of business
consistent with past practices without the occurrence of a
material adverse consequence) or (iii) altered its assumptions
underlying or methods of calculating, any bad debt, contingency
or other reserves; (iv) entered into any settlement to avoid or
terminate a judicial dispute; (v) written down the value of any
material inventory, notes or accounts receivable; (vi) canceled
any material debts or waived any material rights; (vii) sold,
transferred, or otherwise disposed of any of its material
properties or rights, or breached or permitted the breach (or
suffered to occur any event which with the passage of time or
the giving of notice would constitute a breach) of any contract
material to its business as presently being conducted; (viii)
granted any material increase in the compensation or benefits
of officers or employees; (ix) made any material capital
expenditure or commitment for additions to property, plant,
equipment or intangible capital assets; (x) declared any
dividend in respect of shares of the Company or any of its
Subsidiaries; (xi) made any change in any method of accounting
or accounting practice; or (xii) entered into any agreement
with any shareholder of the Company or of any Subsidiary or any
affiliate of such shareholder or agreed to take any action
described in this paragraph. Since December 31, 1998, the
Company has not, directly or indirectly, declared, paid or set
aside for payment any dividend or any other transactions
similar to a dividend involving a distribution on any of its
securities of any class, or, directly or indirectly, redeemed,
purchased or otherwise acquired any of its shares or securities
or agreed to do any of the foregoing.
(g) Taxes. The Company and each Subsidiary have (i) duly filed all
tax reports and returns required to be filed by any of them in
accordance with Applicable Law and all such reports and returns
are true, complete and accurate in all material respects and
(ii) has duly paid all taxes and other charges due by it to
federal, state, local or foreign taxing authorities, including,
without limitation, those due in respect of the properties,
income, licenses, sales or payrolls of any of them; the
reserves for taxes reflected in the Financial Statements are
adequate in conformity with United States GAAP; there are no
tax liens upon any property or rights of the Company or any of
its Subsidiaries; and there are no material liabilities (other
than as is set forth in the Financial Statements) for taxes and
there are no extensions or claims or to the Knowledge of the
Company, audits or investigations pending with regard to the
Company's or its Subsidiaries' tax liabilities. The acquisition
by the Company or a Subsidiary of the assets of Metrotelecom or
its subsidiaries will not cause the Company or any Subsidiary
to become liable for any tax or other liabilities of
Metrotelecom or its subsidiaries for, or arising with respect
to, any period prior to such acquisition. Neither the Company
nor any Subsidiary has been subject to any tax audit or has
been notified by any Governmental Authority that it will be
subject to any tax audit.
(h) Employees and Labor Contracts. There are no labor or employment
proceedings against the Company or any of its Subsidiaries
pending in any labor court or other body or authority and no
unsatisfied labor judgments against any of them, and each is in
compliance with all material applicable laws regarding hiring,
employment and employment termination practices, including,
without limitation, laws, regulations, and judicial and
administrative decisions relating to wages, hours, conditions
of work, conditions of employment (including applicable
discrimination statutes, laws and regulations) collective
bargaining, health and safety, payment of social security,
payroll, withholding and other taxes, workers' compensation,
and insurance requirements. Neither the Company nor any
Subsidiary is a party to or bound by any employment contract,
deferred compensation agreement, bonus plan, consulting
agreement, incentive plan, profit sharing plan, retirement
agreement or other employee compensation agreement, except as
set forth on the Disclosure Letter. The Company has entered
into written employment contracts with the persons set forth in
the Disclosure Letter and has previously provided the Investor
copies of those employment agreements, all of which are valid
and binding and are in full force and effect. The transactions
contemplated by this Participation Agreement shall not entitle
any employee of the Company or any of its Subsidiaries to any
severance, termination, indemnity, payments in lieu of notice
or similar related payments.
(i) Environmental Laws and Regulations. The business of the Company
and each of the Subsidiaries is and has been conducted in
compliance with all Environmental Laws. The operations of, and
the buildings and property owned, leased or used by the Company
and each of the Subsidiaries comply with all such Environmental
Laws. There is no existing practice, action or activity of the
Company or any Subsidiary and no existing condition relating to
any of the properties or assets owned or used by the Company or
any Subsidiary which might require clean up or remediation or
give rise to any civil or criminal liability under, or violate
or prevent compliance with, any such Environmental Laws or any
health or occupational safety or other applicable statute,
regulation, ordinance or decree. Neither the Company nor any
Subsidiary has received any notice from any governmental
authority revoking, canceling, materially modifying or refusing
to renew any permit, license or authorization or providing
written notice of violations under any such Environmental Laws.
(j) Litigation. There is no suit, claim, action, proceeding or
investigation pending or, to the Knowledge of the Company,
threatened (or any basis therefor known to the Company) which,
either in any case or in the aggregate, might result in a
material adverse change or in any impairment of the right or
ability of the Company or any Subsidiary to carry on their
respective businesses as now conducted or as proposed to be
conducted or in any liability on the part of the Company or any
Subsidiary, either individually or taken as a whole and none
which questions the validity of this Participation Agreement or
any Transaction Document or any action taken or to be taken in
connection herewith. Neither the Company nor any of the
Subsidiaries is a party or subject to the provisions of any
order, injunction, judgement or decree of any court or
government agency or instrumentality (other than government
decrees of general applicability) which might adversely affect
their respective businesses; and there is no action suit,
proceeding or investigation by the Company or any Subsidiary
currently pending or which the Company or any Subsidiary
intends to initiate which may reasonably be expected to
materially adversely affect their respective businesses.
(k) Bankruptcy. Neither the Company nor any Subsidiary has filed
any voluntary petitions admitting its bankruptcy or requesting
a reorganization, nor have any petitions alleging insolvency
been filed against the Company or any Subsidiary, nor have any
of them been judicially declared to be bankrupt or insolvent,
nor is any of them insolvent or in the state of being
liquidated or dissolved.
(l) Ordinary Course. Since the date of the Offering Memorandum, as
defined below, the Company and each Subsidiary has carried on
its business in the ordinary course in substantially the same
manner as reflected in the Reports, following operations and
investment policies consistent with past practices, and will
continue to do so until the Closing.
(m) Brokers. Neither the Company nor any of its Subsidiaries will
be liable directly or indirectly to pay any brokerage fee,
commission, finder's fee or financial advisory or similar fee
by reason of the transactions contemplated by any Transaction
Document to any person claiming such compensation by reason of
any agreement or relationship with the Company or any of its
shareholders or any affiliate thereof or with any Subsidiary or
any of its shareholders or any affiliate thereof.
(n) Contracts. Except for those agreements listed in the Disclosure
Letter, true, correct and complete copies of which have been
delivered to each Investor (and made available to FondElec and
Internexus), none of the Company or any Subsidiary is a party
to (i) any agreement, arrangement, understanding or contract,
whether formal or informal, written or oral, requiring payment
of an amount in excess of Twenty-Five Thousand United States
Dollars (US$25,000) per annum (or its equivalent in other
currencies), (ii) any license, distribution, confidentiality or
similar agreements, (iii) any employment or consulting
agreements requiring a payment of an amount in excess of Fifty
Thousand United States Dollars (US$50,000) per annum (or its
equivalent in other currencies), (iv) any collective
bargaining, severance or similar agreements or other agreements
with labor unions, (v) any agreements with suppliers or
customers not in the ordinary course of business, or (vi) any
agreement not in the ordinary course of business or not made at
arm's length or which would otherwise be material in any
respect to any aspect of the Company's or any Subsidiary's
business or operations. All agreements, arrangements,
understanding and contracts listed in the Disclosure Letter are
valid and binding obligations, in full force and effect in all
respects and are being performed by the Company or its
Subsidiary, as appropriate, and, to the Knowledge of the
Company by all other parties thereto, in accordance with their
terms in all material respects.
(o) Compliance with Laws. The Company and the Subsidiaries have
operated and are operating their business in compliance in all
material respects with all Applicable Laws, and neither the
Company nor any Subsidiary is in violation of, or in default
under, any term of its organizational documents or of any
judgment, decree, writ, statute, governmental rule or
regulation applicable to the Company or any of its Subsidiaries
or to which they or any of them is bound, except to the extent
that such violations or defaults would not (i) affect the
validity or enforceability of any Transaction Document, or (ii)
impair the ability of the Company to perform any material
obligation which the Company has under any Transaction
Document, or (iii) have any material adverse effect in its
assets, liabilities, business, financial condition, result of
operations or prospects.
(p) Business Plan and Use of Proceeds. The Business Plan was
prepared by the Company in good faith, and is based on
assumptions, projections, expressions of opinion and estimates
for which the Company believes there was a reasonable basis in
light of existing market conditions, political and economic
conditions, technology, demographics, competition and
regulatory environment. The purchase price received by the
Company for the Series C Shares sold to Investors will be used
by the Company only for the purposes set forth in the Use of
Proceeds Summary attached in Schedule 3 to this Participation
Agreement.
(q) Complete Statements. No representation or warranty of the
Company in this Participation Agreement contains any untrue
statement of a material fact, and the representations and
warranties of the Company (together with the Disclosure Letter
and the Reports), taken as a whole, do not omit any statement
necessary in order to make any material statements or
descriptions contained herein or therein in light of the
circumstances in which they were made, not misleading or
incomplete.
(r) Reports. The Company has made all filings required of it under
the Securities Act of 1933, as amended, and the Securities
Exchange Act of 1934, as amended. The Company has made
available to each Investor each such report prepared by it
since December 31, 1998, including its Annual Report on Form
10-KSB for the year ended December 31, 1998 in the form
(including exhibits, annexes and any amendments thereto) filed
with the Securities and Exchange Commission (the "SEC"), as
well as its private offering memorandum (the "Offering
Memorandum") dated April, 1999 (collectively, but not including
any such reports filed subsequent to the date hereof, its
"Reports"). As of their respective dates, the Reports did not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading and no
statement of material fact that was true and not misleading as
of the date of the Report in which it was made is untrue or
misleading as of the date hereof in light of events or changes
in circumstances occurring since the date of the Report which
are not otherwise disclosed in the Reports or the Disclosure
Letter. Each of the consolidated balance sheets included in or
incorporated by reference into the Reports (including the
related notes and schedules) fairly presents the consolidated
financial position of the Company and its Subsidiaries as of
its date and each of the consolidated statements of income and
of cash flows included in or incorporated by reference into its
Reports (including any related notes and schedules) fairly
presents the consolidated results of operations, retained
earnings and cash flows, as the case may be, of it and its
Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to notes and normal year-end
audit adjustments that will not be material in amount or
effect), in each case in accordance with United States GAAP
consistently applied during the periods involved, except as may
be noted therein.
(s) Related Party Transactions. No officer, director, or
stockholder of the Company and its Subsidiaries or any
affiliate thereof, or any member of their immediate families is
directly or indirectly interested in any contract, agreement,
arrangement or transaction with the Company or any Subsidiary.
(t) Foreign Corrupt Practices Act. None of the Company nor any of
the Subsidiaries or any of their respective officers,
employees, directors, representatives or agents acting at the
direction of the Company or any of the Subsidiaries, acting in
such a capacity, has taken any action in violation of any
anti-bribery, anti- corruption or criminal laws of the United
States, Guatemala, El Salvador, Venezuela, Costa Rica, Panama,
Mexico, Argentina or New Zealand, including the Foreign Corrupt
Practices Act of 1977 of the United States, as amended, and
including, but not limited to, the making of improper payments,
directly or indirectly, in the form of cash or otherwise, to
officials of any governmental authority.
(u) No Bank Regulation. Neither of the Company nor any Subsidiary
is a bank subject to regulation as a bank or entered into
agreements with any governmental authority charged with the
supervision or regulation of banks or bank holding companies or
engaged in the insurance of bank deposits.
(v) Property; Assets.
(i) The Disclosure Letter sets forth a complete and accurate
list of (i) all of the real property owned by the Company
or a Subsidiary (the "Owned Real Property") and (ii) all
of the real property leased or subleased by the Company
or a Subsidiary from a third party requiring a payment in
excess of Fifty Thousand United States Dollars
(US$50,000) per year (the "Leased Real Property" and,
together with the Owned Real Property, the "Real
Property"). The Company or its Subsidiaries have (i) (A)
good and marketable title to its interest in the
applicable Owned Real Property and (B) a valid leasehold
interest in the Leased Real Property as provided in the
applicable lease agreements (the "Real Property Leases")
and (ii) with respect to any other material property and
assets, good and marketable title to its interest in such
property and assets, in each case, free and clear of all
Liens, except for (A) Liens, encumbrances, defects,
exceptions, easements, rights of way, restrictions,
covenants, claims or other similar charges listed or
identified in the Disclosure Letter with respect to the
applicable Real Property and (B) Liens, encumbrances,
defects, easements, rights of way, restrictions,
covenants, claims or other similar charges, whether or
not of record, which do not, individually or in the
aggregate, materially impact the use or operation of the
Real Property in connection with the Telecommunications
Business consistent with the current use thereof.
(ii) All of the Real Property, machinery, fixtures, vehicles,
equipment and other personal property owned or leased by
the Company or any Subsidiary is in satisfactory repair
and operating condition, ordinary wear and tear excepted.
(iii) With respect to the Leased Real Property, neither the
Company nor any of its Subsidiaries has received a
written notice of (i) any monetary default or other
material default thereunder or (ii) non-compliance with
any Applicable Laws.
(iv) Neither the Company nor any Subsidiary has received
any written notice from any Governmental Authority with
respect to the Real Property of any violations of any
Applicable Laws, which violation is not in the process of
being cured or contested in good faith
(w) Employee Benefits. Except as set forth in the Disclosure
Letter, neither the Company nor any Subsidiary has any
employees in the United States. With respect to all of the
employee benefit plans of the Company and its Subsidiaries (a)
such plans are in material compliance with any Applicable Laws,
including relevant tax laws, and the requirements of any trust
deed under which they are established, (b) all employer and
employee contributions to each such plan required by law or by
the terms of such plan have been made, or, if applicable,
accrued, in accordance with normal accounting practices; and
(c) the fair market value of the assets of each funded plan,
the liability of each insurer for any plan funded through
insurance or the book reserve established for any plan,
together with any accrued contributions, is sufficient to
procure or provide for the accrued benefit obligations with
respect to all current and former participants in such plan.
(x) U.S. Employee Plans. No employee benefit plan, policy,
arrangement or agreement is maintained for the benefit of any
US employee of the Company (each, a "Plan"), no Plan is
intended to be "qualified" within the meaning of Section 401(a)
of the Internal Revenue Code, no Plan is subject to Title IV of
Employee Retirement Income Security Act ("ERISA") and no
liability under Title IV of ERISA has been incurred by the
Company that has not been satisfied in full, and no condition
exists that presents a material risk to the Company of
incurring a material liability thereunder.
(y) Insurance. The Company and each of the Subsidiaries is insured
with respect to the matters set forth in the Disclosure Letter.
All such insurance is in full force and effect, and neither the
Company nor any of the Subsidiaries is in default thereunder
and all claims thereunder have been correctly filed in a due
and timely manner. A list of all insurance policies held by the
Company and each of the Subsidiaries with coverages in excess
of One Million United States Dollars (US$1,000,000) is set
forth in the Disclosure Letter.
(z) IFC Policies. To the best of its Knowledge, neither the Company
nor any Subsidiary is in violation of any of the policies set
forth in Exhibit O (the "IFC Policies") and neither the Company
nor any Subsidiary has received or is aware of any complaint,
order, directive, claim, citation or notice from any
Governmental Authority with respect to any matter of the
Company's or such Subsidiary's compliance with the relevant
environmental, health and safety laws and regulations in effect
in any Country such as, without limitation, air emissions,
discharges to surface water or ground water, noise emissions,
solid or liquid waste disposal, or the use, generation,
storage, transportation or disposal of toxic or hazardous
substances or wastes.
(aa) HSR Warranty. The HSR Form filed or to be filed by the Company
under the HSR Act with the FTC and the Antitrust Division of
the Department of Justice, was prepared and assembled in
accordance with instructions issued by the FTC. To the best of
its Knowledge, the information contained in the HSR Form is
true, correct and complete in accordance with the HSR Act and
its regulations, subject to the recognition that reasonable
estimates have been made because books and records do not
provide the required data.
5. Pre-Closing Covenants. The Parties agree as follows with respect to
the period, if any, between the execution of this Participation
Agreement and the Closing Date and, if appropriate, the Subsequent
Closing Date:
(a) General. Each of the Parties will use its reasonable best
efforts to take all actions and to do all things necessary in
order to consummate the transactions contemplated by this
Participation Agreement (including the satisfaction, but not
the waiver, of the closing conditions set forth in section 6
below) and the other Transaction Documents.
(b) Notices and ConsentsEach of the Parties will give any notices,
make any filings and use its reasonable best efforts to obtain
any authorizations, consents, and approvals necessary to
consummate the transactions described herein. Each of TCW,
Telematica, and the Company shall use its best efforts to make
a proper filing, and to cause the waiting period to expire or
terminate under the HSR Act, and to take all other actions
necessary to permit the consummation of the transactions
contemplated by the Participation Agreement and the other
Transaction Documents under the HSR Act.
(c) Operation of Business. The Company will not, and will not cause
or permit any Subsidiary to, prior to the Closing, engage in
any practice, take any action, or enter into any transaction
outside the ordinary course of business. Without limiting the
generality of the foregoing, the Company will not, and will not
cause or permit any Subsidiary, to take any action described in
clauses (ii) through (xii), or the last sentence of the second
paragraph, of Section 4(f).
(d) Preservation and Conduct of Business. The Company will keep its
business and properties substantially intact, including each
Subsidiary's present operations, physical facilities, working
conditions, and relationships with lessors, licensors,
suppliers, customers, subscribers and employees and operate and
carry on the Telecommunications Business in the ordinary course
of business.
(e) Full Access. The Company will permit, and the Company will
cause each of the Subsidiaries to permit, representatives of
the Investors to have full and complete access at all
reasonable times, and in a manner so as not to interfere with
the normal business operations of such entities, to all
premises, properties, personnel, books, records (including tax
records), contracts, and documents of or pertaining to each of
such entities for the purpose of enabling the Investors or
their representations to verify the accuracy of the
representations and warranties contained herein, to verify that
the covenants of this Participation Agreement have been
complied with and to determine whether the conditions to
Investors' performance set forth herein have been satisfied.
(f) Notice of Developments. The Company will give prompt written
notice to the Investors of any of the following that occur
prior to the Subsequent Closing or the termination of this
Agreement under the provisions of Section 8:
(i) any material adverse development causing or potentially
causing a breach of any of the representations and
warranties set forth in Section 4 above,
(ii) any event which constitutes a material default in any of
the terms, conditions or provisions of any Material
Contract, or
(iii) any other event or condition which could reasonably be
expected to have a material adverse effect on the assets,
operations, operating results, customer or employee
relations, business or financial condition or prospects
of the Company or of any Subsidiary.
Each Investor will give prompt written notice to the other
Parties of any material adverse development that occurs prior
to the Closing and causes a breach of any of its own
representations and warranties in Section 3 above. No
disclosure by any Party pursuant to this Section 5(f), however,
shall be deemed to amend or supplement the Disclosure Letter or
prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
6. Conditions to Obligations.
(a) Conditions to Obligations of Each Investor at the Closing. The
obligation of each Investor to consummate or cause to be
consummated the transactions to be performed at the Closing as
described in the appropriate clauses of Section 2(c) is subject
to the satisfaction or waiver by it of the following
conditions:
(i) Each other Party shall consummate or cause to be
consummated the transactions contemplated in the
appropriate clauses of Section 2(c) to be performed at
the Closing;
(ii) the representations and warranties of the Company set
forth in Section 4, and the representations and
warranties of each other Investor set forth in Section 3,
shall have been true and correct at the execution hereof
and shall be true and correct in all respects at and as
of the Closing Date as if made on the Closing Date;
(iii) the Company and each other Investor shall have performed
and complied with all of its covenants hereunder in all
material respects through the Closing Date;
(iv) there have been received by the Investor opinions of
counsel to the Company, in substantially the form(s) set
forth in Exhibit J, addressed to all Investors and dated
as of the Closing Date; and
(v) no court or Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any law,
statute, ordinance, rule, regulation, judgement, decree,
injunction or other order (whether temporary, preliminary
or permanent) that continues in effect and restrains,
enjoins or otherwise prohibits consummation of the
transactions to be performed at the Closing.
(b) Conditions to Obligations of the Company at the Closing. The
obligation of the Company to consummate or cause to be
consummated the transactions to be performed at the Closing as
described in Section 2(c)(v) is subject to the satisfaction or
waiver of the following conditions:
(i) each Investor shall consummate or cause to be consummated
the transactions contemplated in the appropriate clauses
of Section 2(c) to be performed by it at the Closing;
(ii) the representations and warranties set forth in Section 3
above shall be true and correct in all material respects
as to each Investor at and as of the Closing Date;
(iii) no court or Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any law,
statute, ordinance, rule, regulation, judgement, decree,
injunction or other order (whether temporary, preliminary
or permanent) that continues in effect and restrains,
enjoins or otherwise prohibits consummation of the
transactions to be performed at the Closing; and
(iv) each Investor shall have performed and complied with all
of its respective covenants hereunder in all material
respects through the Closing Date as if made on that
Closing Date.
(c) Conditions to Obligations at the Subsequent Closing. The
obligation of any Party (the "Performing Party") to consummate
or cause to be consummated the transaction to be performed at
the Subsequent Closing as described in Section 2(d) is subject
to the satisfaction or waiver by such Party of the following
conditions:
(i) each other Party shall consummate or cause to be
consummated the transactions contemplated in the
appropriate clauses of Section 2(d) to be performed by it
at the Subsequent Closing;
(ii) no court or Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any law,
statute, ordinance, rule, regulation, judgement, decree,
injunction or other order (whether temporary, preliminary
or permanent) that continues in effect and restrains,
enjoins or otherwise prohibits consummation of the
transactions to be performed at the Subsequent Closing;
(iii) any filing and waiting period requirements applicable
pursuant to the HSR Act to the transactions contemplated
to be performed or caused to be performed by the
Performing Party shall have expired or been terminated;
and
(iv) the representations and warranties of each other Party
made as of the Subsequent Closing Date, (i) with respect
to the Investors, in connection with Sections 3(e), 3(f),
and 3(g), and (ii) with respect to the Company in
connection with Sections 4(a), 4(b), 4(c), 4(d), 4(f)
(except as approved by budget or action taken by the
Board of Directors), 4(j), 4(k), 4(t) and, to the extent
the condition relates to the IFC's obligations at the
Subsequent Closing, 4(z), shall be true, correct and
complete at and as of the Subsequent Closing Date as if
made on the Subsequent Closing Date.
7. Indemnity. If any of the representations and warranties of the
Company in this Participation Agreement or any Transaction Document
is untrue or inaccurate as of the Closing Date or as of the date of
the Subsequent Closing, or if any claim or lawsuit described in the
Disclosure Letter is not settled as described therein, or if the
Company or any of its Subsidiaries becomes a party to litigation
arising out of events occurring before the Closing Date (any of the
foregoing here referred to as an "Indemnity Event"), the provisions
of Section 7(a) and, if appropriate, Section 7(b) shall apply:
(a) If, as a result of the Indemnity Event, the Company or any
Subsidiary incurs a liability or otherwise suffers a loss in
value, and such liability or loss in value is not fully offset
by the value of any asset or benefit received by the Company or
a Subsidiary in connection with the Indemnity Event (the extent
to which not so offset being referred to herein as the
"Negative Delta") then, subject to the limitations set out in
Sections 7(d) and 7(e), the Company shall issue to each
Investor, as an indemnity, an additional number of shares of
the Company's stock having the same rights and preferences as
the Series C Shares or, if any of the Series C Shares acquired
pursuant to this Participation Agreement have been converted by
such Investor, an additional number of shares of Common Stock,
("Indemnity Shares") calculated as follows:
(i) first, each Investor shall receive by way of indemnity a
number of Indemnity Shares determined by multiplying the
Negative Delta by the Investor's percentage of the equity
of the Company acquired in the transactions contemplated
by this Agreement (being the Series C Shares acquired at
the Closing or the Subsequent Closing, those acquired or
subject to acquisition in the exercise of the rights
granted under the Option Agreement, and those issued or
issuable to it pursuant to the Series C Warrants or the
FondElec/Internexus Warrants), and dividing the sum by
the Fair Value (taking into account the issuance of the
Indemnity Shares) of a share of Common Stock;
(ii) second, each of FondElec and Internexus shall receive by
way of indemnity a number of additional Indemnity Shares
determined by multiplying the Negative Delta by its
percentage of the equity of the Company obtained by it
prior to the Closing or in the exercise of rights
obtained by it prior to the Closing as reflected in
Schedule 1 to the CCI Shareholders' Agreement, and
dividing that product by the Fair Value (taking into
account the issuance of the Indemnity Shares) of a share
of Common Stock;
(iii) third, each Investor shall receive by way of indemnity
such a number of additional Indemnity Shares as shall be
required to restore the Investor to the percentage
ownership of the Company that it would have had if no
shares had been issued pursuant to clause (ii) above; and
(iv) fourth, each of FondElec and Internexus shall receive by
way of indemnity such a number of additional Indemnity
Shares as shall be required to restore it to the
percentage ownership of the Company that it would have
had if no shares had been issued pursuant to clause (i)
above.
An example of the foregoing indemnity calculations is set out in
Exhibit P, and the Parties acknowledge that the method implicit in
that example is to be used in making the calculations called for
above. It is the Parties' intention and agreement that the indemnity
to FondElec and Internexus be in lieu of the indemnities extended to
them in connection with their various transactions with the Company
prior to the Closing, and each of FondElec and Internexus (on behalf
of itself and all parties which could claim by or through it) hereby
waives all rights to make, and releases the Company from, indemnity
obligations under all prior indemnity agreements or provisions.
(b) To the extent the Indemnity Event is not manifested in the
Company, or any of its Subsidiaries, incurring a liability or
suffering a loss in value not fully offset by the value of
assets or benefits received in connection with the Indemnity
Event, but nonetheless an Investor or any of its directors,
officers, employees, agents or representatives (each, an
"Indemnitee") suffers a loss or incurs liability as a result of
the Indemnity Event, then the Company shall, subject to the
limitations set out in Sections 7(d) and 7(e), indemnify such
Indemnitee for the loss by making a payment to it in cash equal
to the amount of the loss.
(c) If there occurs a disagreement between any Indemnitee and the
Company as to the application of this Section 7, the matter
shall be the subject of dispute resolution in the manner set
out in Section 11(n).
(d) Claims under this Section 7 that are based on a breach of the
Company's representations and warranties may be made only if
notice of such breach is given by any Investor to the Company
during the period of validity of such representations and
warranties as set out in Section 4. No claim may be made
pursuant to Section 7(a) with respect to a given Indemnity
Event, unless either (i) the Negative Delta resulting from such
event exceeds One Hundred Thousand Dollars (US$100,000), or
(ii) such Negative Delta, when added to the Negative Delta
resulting from earlier events as to which an indemnity pursuant
to Section 7(a) has not been satisfied, exceeds Two Hundred
Fifty Thousand Dollars (US$250,000). No claim may be made
pursuant to Section 7(b) with respect to a given Indemnity
Event unless either (i) the loss suffered by all Indemnitees by
reason of such Indemnity Event for which a claim may be made
under Section 7(b) exceeds One Hundred Thousand Dollars
(US$100,000), or (ii) if such loss, when added to the losses
suffered by all Indemnitees by reason of Indemnity Events as to
which an indemnity pursuant to Section 7(b) has not been
satisfied, exceeds Two Hundred and Fifty Thousand Dollars
(US$250,000).
(e) The Company shall not have any obligation to indemnify an
Indemnitee, whether under Section 7(a) or Section 7(b), to the
extent that the loss suffered by the Indemnitee results from
the breach of the relevant Investors' representations,
warranties or agreements in the Participation Agreement or any
other Transaction Document, or the Indemnitees' gross
negligence or willful misconduct. The Company's obligations to
issue stock by way of indemnity as set out in Section 7(a)
shall constitute the sole remedy for breach of contract
available to the Indemnitees by reason of the happening of any
Indemnity Event, except to the extent Section 7(b) is
applicable.
(f) At such time as the Company is obligated to indemnify any
Indemnitee under Section 7(a) or Section 7(b), the Company
shall also reimburse such Indemnitee for its reasonable
attorney's fees and other out-of-pocket expenses of the
Indemnitee, if any, incurred in enforcing its rights under
Section 7.
8. Termination.
(a) Termination of Agreement. The Parties may terminate this
Participation Agreement as provided below:
(i) The Parties may terminate this Participation Agreement as
to all Parties by mutual written consent;
(ii) Any Investor may terminate this Participation Agreement
as to itself if,
(A) prior to the Closing,
(1) the Company or any other Investor has
breached any of its representations,
warranties, or covenants contained in this
Participation Agreement in any material
respect,
(2) such Investor has notified the Company and
each other Investor of the breach prior to
the Closing, and
(3) the breach has continued without cure for a
period of two business days after the notice
of breach, or
(B) if the Closing shall not have occurred on or before
October 28, 1999, or, with respect to the
Subsequent Closing only, if the Subsequent Closing
shall have not occurred on or before January 18,
2000; (unless the failure results primarily from
such Investor breaching any representation,
warranty, or covenant contained in this
Participation Agreement); or
(C) this Participation Agreement has been terminated as
to any other Investor.
(iii) The Company may terminate this Participation Agreement as
to a given Investor if
(A) (1) such Investor has breached any of its
representations, warranties, or covenants contained
in this Participation Agreement in any material
respect,
(2) the Company has notified the Investor of the
breach, and
(3) the breach has continued without cure for a
period of two business days after the notice
of breach, or
(B) if the Closing shall not have occurred on or before
October 28, 1999, or, with respect to the
Subsequent Closing only, if the Subsequent Closing
shall have not occurred on or before January 18,
2000 (unless the failure results primarily from the
Company itself breaching any representation,
warranty, or covenant contained in this
Participation Agreement).
(b) Effect of Termination. If any Party terminates this
Participation Agreement pursuant to Section 8(a) above, all
rights and obligations of the Party hereunder shall terminate
without any liability of any Party to any other Party, except
for any liability of the terminating Party resulting from a
breach that occurs prior to the termination. A termination as
to a given Investor as contemplated in clause (ii) or clause
(iii) of Section 8(a) shall not have the effect of removing
such Investor's performance from among the conditions precedent
to any other Party's obligation hereunder as set out in Section
6, and each other Parties shall be obligated to proceed with
its respective transactions contemplated hereunder only if and
when all of the conditions to their obligations set out in
Section 6 are either fully performed, or expressly waived by
the Party.
(c) Specific Performance. Nothing in this Participation Agreement
shall be interpreted to preclude any Party's right to seek and
obtain specific performance of the terms of this Participation
Agreement or any equitable remedy.
9. D'Ambrosio ParticipationRemoval of Legend;Use of Proceeds.
11. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to
the subject matter of this Participation Agreement without the
prior written approval of each other Party; provided, however,
that any Party may make any public disclosure it believes in
good faith that it is required by applicable law or any listing
or trading agreement concerning its publicly-traded securities
(in which case the disclosing Party will advise the other
Parties and afford such Parties a reasonable opportunity under
the circumstances to comment prior to making the disclosure).
(b) No Third Party Beneficiaries. This Participation Agreement
shall not confer any rights or remedies upon any person or
entity other than the Parties, their related Indemnitees and
their respective successors and permitted assigns.
(c) Entire Agreement. The English language version of this
Participation Agreement and other Transaction Documents
(including the documents referred to herein) constitutes the
entire agreement among the Parties and supersedes any prior
understandings, agreements, or representations by or among the
Parties, written or oral (including, specifically, any letter
of intent or letter or understanding between the Parties), to
the extent they relate in any way to the subject matter hereof.
(d) Succession and Assignment. This Participation Agreement shall
be binding upon and inure to the benefit of the D'Ambrosios and
the Parties and their respective successors and permitted
assigns. Neither any D'Ambrosio nor any Party may assign either
this Participation Agreement or any of its rights, interests,
or obligations hereunder without the prior written approval of
the other Parties, except to a Person to whom a Transfer of
Company Equity is made free of the restrictions of Sections 2
and 3 of the CCI Shareholders' Agreement.
(e) Counterparts. This Participation Agreement may be executed in
one or more counterparts, each of which shall be deemed an
original but all of which together will constitute one and the
same instrument. For purposes of this Participation Agreement,
the delivery of a counterpart signature by telephonic facsimile
transmission shall be deemed the equivalent of the delivery of
an original counterpart signature.
(f) Headings. The section headings contained in this Participation
Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this
Participation Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice,
request, demand, claim, or other communication hereunder shall
be deemed duly given when actually received, whether personally
delivered, transmitted by fax or sent by reputable air courier
(such as Federal Express or DHL) and addressed to the intended
recipient as set forth below:
If to the Company:
Convergence Communications, Inc.
c/o Lance D'Ambrosio
102 West 500 South, Suite 320
Salt Lake City, Utah 84101
Fax: (801) 532-6060
Copy to:
Parsons Behle & Latimer
201 South Main Street, Suite 1800
Salt Lake City, Utah 84111
Attention: Scott R. Carpenter, Esq.
Fax: (801) 536-6111
If to Telematica:
Telematica EDC, C.A.
Avenida Vollmer, San Bernardino - Apartado 2299
Caracas 1010-A-Venuezala
Attention: Norberto Corredor
Fax: 011-582-502-3477
Copy to:
Angel Gabriel Viso
Viso Rodriguez Cottin Medina Garrido & Associados
Torre Banvenez
Av. Francisco Solano, Sabana Grande
Caracas 1050, Venezuela
Fax: 011-582-762-4562
Arnold & Porter
555 Twelfth Street, N.W.
Washington, D.C. 20004-1206
Attention: Bruce A. Adams
Fax: (202) 942-5999
If to TCW:
TCW/CCI Holding LLC
200 Park Avenue, Suite 2100
New York, New York 10166
Attention: Mr. Mario Baeza
Telephone: (212) 771-4147
Fax: (212) 771-4155
Copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Mr. Paul Schnell
Telephone: (212) 735-2322
Fax: (212) 735-7485
If to IFC:
International Finance Corporation
2121 Pennsylvania Avenue, NW
Washington, D.C. 20433 USA
Attention: Umberto Pisoni
Telephone: (202) 473-9143
Fax: (202) 974-4403
If to Glacier:
Glacier Latin-America Ltd.
2999 NE 191 Street, #404
Aventura, FL 33180
Attention: Mr. Gregorio Berliavsky
Telephone: (305) 935-6511
Fax: (305) 935-6512
If to FondElec:
FondElec Essential Services Growth Fund, L.P.
333 Ludlow Street
Stamford, CT 06902
Attention: George Sorenson
Gaston Acosta Rua
Fax: (203) 326-4578
If to Internexus:
Jorge Fucaraccio and/or
Pedro Schiller
Internexus S.A.
Peron 925, Piso 1
C1038AAS Buenos Aires
Argentina
Fax: 5411-4320-7560
Copy to:
Bazan-Cambre &Orts
Florida 234-Piso 4
C1005AAF-Buenos Aires
Argentina
Fax: 5411-4325-3564
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the
address set forth above using any other means (including
personal delivery, messenger service, telecopy, telex, ordinary
mail, or electronic mail), but no such notice, request, demand,
claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder
are to be delivered by giving the other Parties notice in the
manner herein set forth.
(h) Governing Law. This Participation Agreement shall be governed
by and construed in accordance with the domestic laws of the
state of New York, United States of America, without giving
effect to any choice or conflict of law provision or rule
(whether of the state of Utah or any other jurisdiction) that
would cause the application of the laws of any jurisdiction
other than the state of New York.
(i) Amendments and Waivers. This Participation Agreement may be
amended, extended or modified by a writing signed by the
Investors, the D'Ambrosios and the Company. No waiver shall be
deemed to have been made unless in writing, nor shall any
waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional
or not, be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder
or affect in any way any rights arising by virtue of any prior
or subsequent such occurrence.
(j) Severability. Any term or provision of this Participation
Agreement that is invalid or unenforceable in any situation in
any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in
connection with this Participation Agreement and the
transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Participation Agreement. In
the event an ambiguity or question of intent or interpretation
arises, this Participation Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of
proof shall arise favoring or disfavoring any Party by virtue
of the authorship of any of the provisions of this
Participation Agreement. The Parties intend that each
representation, warranty, and covenant contained herein shall
have independent significance. If any Party has breached any
representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter
(regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the
fact that the Party is in breach of the first representation,
warranty, or covenant.
(m) Incorporation of Attachments and Exhibits. The Schedules and
Exhibits identified in this Participation Agreement are
incorporated herein by reference and made a part hereof.
(n) Disputes.
(i) The provisions of this Section 11(n) shall be the sole
and exclusive method for resolving disputes between the
Parties or their successors or assigns arising under or
relating to the transactions contemplated by this
Participation Agreement or any other Transaction
Documents. In the event there is a dispute under this
Participation Agreement or any Transaction Documents, the
Parties shall meet with one another and diligently
attempt to resolve their disagreements. If they are
unable to do so, then upon request of any Party to the
dispute, they will conciliate the dispute, utilizing a
single conciliator pursuant to the ICC Rules of Optional
Conciliation in a proceeding to take place in New York,
New York, and carried out in the English language. If,
after 60 calendar days, the mediation is not successful,
then any Party to the dispute may bring arbitration to
resolve the dispute as contemplated in this Section
11(n).
(ii) Assuming negotiations and mediation are unsuccessful, any
Party to the dispute may submit the disagreement to
binding arbitration by making a written demand for
arbitration. The arbitration shall occur before a panel
of three arbitrators in New York, New York, and shall be
governed by the Rules of Arbitration of the International
Chamber of Commerce including, in the event of more than
two Parties to the dispute, Article 10 of such rules. To
assure predictability, the arbitrators shall be persons
selected by the Parties with experience in
telecommunication issues and commercial transactions. The
arbitrators shall base their decision on the terms and
conditions of this Participation Agreement, and shall not
vary the same, New York statutory law, and judicial
precedent, and will include in the award findings of fact
and conclusions of law upon which the award is based.
Subject to the limitation set out in the Indemnity clause
above, the arbitrators may grant such legal or equitable
relief as they deem to be appropriate, including money
damages, specific performance and injunctive relief.
(iii) Questions of whether the dispute is subject to
arbitration shall also be decided by the panel of
arbitrators.
(iv) Any Party may request and obtain from a court of
competent jurisdiction provisional or ancillary remedies
for relief such as an injunction or the appointment of a
receiver, but the institution of a judicial proceeding
will not constitute a waiver of the right of such Party
to submit a dispute to arbitration. Judgment upon an
arbitration award may be entered in any court having
jurisdiction. Subject to the award of the arbitrators,
each Party shall pay an equal share of the arbitrators'
fees, except the arbitrators shall have the power to
award all expenses (including attorney's fees, costs and
expert witness fees) to the prevailing Party, as
determined by the arbitrators. All matters relative to
the arbitration, including the result thereof, shall be
maintained as confidential by all Parties to this
Participation Agreement, except as required to obtain
judgment upon an arbitration award or otherwise as
required by law.
(o) Special IFC Covenants.
(i) The Company and its Subsidiaries shall design, construct,
operate, maintain and monitor all of their sites, plant,
equipment and facilities:
(A) in accordance with the IFC Policies; provided,
however, that such obligation shall not be deemed
to require the Company or any Subsidiary to perform
an environmental assessment of projects proposed
nor shall the IFC have the right to approve or
disapprove any proposed operation of the Company or
any Subsidiary;
(B) in compliance with the environmental mitigation and
management measures, as well as applicable
environmental, indigenous peoples, involuntary
resettlement, cultural property protection,
occupational health and safety requirements, and
any child labor and forced labor laws, rules and
regulations (including any international treaty
obligations; if any) of the Governmental Authority
of any Country;
(ii) Neither the Company nor its Subsidiaries shall use the
proceeds of the sale of the Series C Shares to IFC in the
territories of any country other than less-developed
countries in which IFC is actively pursuing operations
(as described in its 1999 annual report) or for
reimbursements of expenditures in those territories or
for goods produced in or services supplied from any such
country.
(p) Reporting to IFC.
(i) Within ninety (90) days after the end of each fiscal
year, deliver to IFC an annual monitoring report,
confirming compliance with the applicable national or
local requirements, the IFC Policies, the environmental
mitigation and management measures and Section (o)(i) or,
as the case may be, detailing any non-compliance together
with the action being taken to ensure compliance.
(ii) As soon as possible but no later than five (5) days after
its occurrence, notify IFC of any incident or accident
involving the Company or any of its Subsidiaries which
has or may reasonably be expected to have an adverse
effect on the environment, health or safety, including,
without limitation, explosions, spills or workplace
accidents which result in death, serious or multiple
injury or major pollution, specifying, in each case, the
nature of the incident or accident, the on-site and
off-site impacts arising or likely to arise therefrom and
the measures the Company or such Subsidiary is taking or
plans to take to address those impacts; and keep IFC
informed of the on-going implementation of those
measures.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
CONVERGENCE
COMMUNICATIONS, INC.
By: /s/ Lance D'Ambrosio
Name: Lance D' Ambrosio
Title: Chairman and CEO
TELEMATICA EDC, C.A.
By: /s/ Norberto Corredor
Name: Norberto Corredor
Title: Duly Authorized
TCW/CCI HOLDING LLC
By: /s/ Mario L. Baeza
Name: Mario L. Baeza
Title: Chairman and CEO
INTERNATIONAL FINANCE
CORPORATION
By: /s/
Name:
Title:
GLACIER LATIN-AMERICA LTD.
By: /s/ David Leivman
Name: David Leivman
Title: Assistant Treasurer
FONDELEC ESSENTIAL SERVICES
GROWTH FUND, L.P.
By: FondElec E.S.G.P. Corp.
Its: General Partner
By: /s/ Gaston Acosta Rua
Name: Gaston Acosta Rua
Title: Director
INTERNEXUS S.A.
By: /s/ Peter Schiller
Name: Peter Schiller
Title: Duly Authorized
JOINDER FOR PURPOSES OF SECTION 9:
Lance D'Ambrosio
By: /s/ Lance D'Ambrosio
Name: Lance D'Ambrosio
Title: Personal Capacity
Troy D'Ambrosio
By: /s/ Troy D'Ambrosio
Name: Troy D'Ambrosio
Title: Personal Capacity
ESTATE OF GEORGE S. D'AMBROSIO
By: /s/ Lance D'Ambrosio
Name: Lance D'Ambrosio
Title: Representative of
Estate of George S.
D'Ambrosio
SCHEDULE 1.
INDEX OF DEFINITIONS.
For purposes of the Participation Agreement and the other
Transaction Documents, the following words and phrases shall have the
meanings identified as follows (where a reference is to a Recital, Section
or clause, the same shall be taken to be to the corresponding provision of
the Participation Agreement unless otherwise noted):
"Applicable Law" means all published constitutions, statutes,
rules, regulations, orders, decrees, codes, rulings, charges,
injunctions, or judgments applicable to the entity or person in
question with respect to a relevant matter.
"Budget" shall have the meaning set forth in the first recital of
the Participation Agreement.
"Business Day" means a day on which banks are open both in the
State of New York and in Caracas, Venezuela.
"Business Plan" shall have the meaning set forth in the first
recital.
"CCI Companies" shall have the meaning set forth in Section 4(b) of
the CCI Shareholders' Agreement.
"CCI Salvador" shall mean Chispa Dos Inc., a Cayman Islands limited
liability company.
"CCI Shareholders' Agreement" shall have the meaning set forth in
Section 2(a)(vi).
"CCI Stock Purchase Agreements" shall have the meaning set forth in
Section 2(a)(i).
"Closing" shall have the meaning set forth in Section 2(a).
"Closing Date" shall be the date on which the Closing occurs.
"Colombia Letter of Intent" shall have the meaning set forth in
Section 2(x).
"Common Stock" means the shares of common stock of Convergence
Communication, Inc. with a par value of $0.001 each.
"Company" shall have the meaning set forth in the preamble.
"Company Equity" shall have the meaning given in the second recital
of the CCI Shareholders' Agreement.
"Company Shares" shall have the meaning given in the second recital
of the CCI Shareholders' Agreement.
"Control" (and, with correlative meaning, "Controlled by" and
"under Common Control with") means the possession, directly or
indirectly, of the power to direct the management of a Person
through ownership of voting securities, exercise of contract
rights, or otherwise.
"Control Affiliate" of a Shareholder Party means a Person that
Controls, is Controlled by or under Common Control with the
Shareholder Party, or succeeds to all or substantially all of the
business and assets of the Shareholder Party.
"Country" shall mean Costa Rica, El Salvador, Guatemala, Panama,
Mexico and Venezuela.
"Disclosure Letter" shall have the meaning set forth in recital A.
"Environmental Law" shall mean all the United States, Guatemala, El
Salvador, Venezuela, Costa Rica, Panama, Mexico, Argentina and New
Zealand, and other countries, federal, provincial, state and local
laws, regulations rules and ordinances, relating to pollution or
protection of the environment, and to human health and safety
including, without limitation, laws relating to release,
discharges, leaching, migration or disposal of hazardous, toxic, or
radioactive substances, oils, pollutants or contaminants into the
indoor or outdoor environment (including, without limitation,
ambient air, surface water, groundwater, land, surface and
subsurface strata) or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, transport or
handling of such substances, oils, pollutants or contaminants.
"Fair Value" shall mean, with respect to a share of Common Stock,
(a) if the shares are listed or admitted for trading on any
Recognized Exchange, the last reported sales price as reported on
such exchange or market, if available; (b) if the shares are not
listed or admitted for trading on any Recognized Exchange or no
such last sale information is available, the average of the last
reported closing bid and asked quotation for the shares as reported
on NASDAQ or a similar service if NASDAQ is not reporting such
information; (c) if the shares are not listed or admitted for
trading on any Recognized Exchange or included in The Nasdaq
National Market or Nasdaq or Nasdaq SmallCap Market or quoted by a
similar service, the average of the last reported bid and asked
quotation for the shares as quoted by a market maker in the shares
(or if there is more than one market maker, the bid and asked
quotation shall be obtained from two market makers and the average
of the lowest bid and highest asked quotation). In the absence of
any available public quotations for the Common Stock, "Fair Value"
shall be as is determined by an investment advisor of international
standing reasonably acceptable to the Company and three out of TCW,
Telematica, Internexus and FondElec, based upon conventional
valuation methodologies that the advisor believes are appropriate
in the circumstances.
"Financial Statements" shall have the meaning set forth in Section
4(f).
"FondElec" shall have the meaning set forth in the preamble.
"Fond Elec December Note" shall have the meaning set forth in
recital C.
"FondElec/Internexus Warrant" shall have the meaning set forth in
Section 2(a)(v).
"FTC" means the Federal Trade Commission of the United States of
America.
"GAAP" means generally accepted accounting principles and
practices, as set forth in the opinions and pronouncements adopted
by a significant segment of the accounting profession (including
any generally recognized applicable principles or standards boards,
committees or professional organizations) of the country in
question (as such principles are applied in such country as of the
date of the financial statement or other documents with respect to
which the term is used) and, with respect to the United States, the
accounting principles and practices set forth in the opinions and
pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board.
"Going-In Value" shall mean seven and 50/100 United States Dollars
(US$7.50), except that if, as of the date the Going-In Value is
used in any calculation, there has occurred any subdivision or
combination of outstanding shares of common stock, that amount
shall be proportionately reduced or increased, as appropriate, or
if, as of that date, shares of Common Stock have been issued as a
dividend or other distribution on Common Stock, that amount shall
be multiplied by a fraction (i) the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to
the declaration or payment of such dividend or other distribution,
and (ii) the denominator of which shall be the total number of
shares of Common Stock outstanding immediately after the
declaration or payment of such dividend or other distribution.
"Glacier" shall have the meaning set forth in the preamble.
"Governmental Authority" shall mean any national or local
government, governmental, regulatory or administrative authority,
agency or commission or any court, tribunal or judicial body of
United States, Guatemala, El Salvador, Venezuela, Costa Rica,
Panama, Mexico, Argentina or New Zealand.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"HSR Form" shall have the meaning set forth in Section 3(h).
"IFC" shall have the meaning set forth in the preamble.
"IFC Policies" shall have the meaning set forth in Section 4(z).
"Indemnitee" shall have the meaning set forth in Section 7.
"Indemnity Event" shall have the meaning set forth in Section 7.
"Indemnity Shares" shall have the meaning set forth in Section 7.
"Internexus" shall have the meaning set forth in the preamble.
"Internexus December Note" shall have the meaning set forth in
recital D.
"Investors" shall have the meaning set forth in the preamble.
"Knowledge" means the knowledge of the Company or any of the
Subsidiaries and of each Person who is serving or who has at any
time served as a director or officer of the Company or any of the
Subsidiaries and all knowledge that any such Person could be
expected to discover or otherwise become aware of had he or she
fulfilled his or her responsibilities as a director or officer of
the Company or any of the Subsidiaries, as the case may be.
"Lien" as to any Person, shall mean any mortgage, lien, pledge,
charge, preferential payment arrangement, security interest, other
encumbrance, or preferential agreement having the effect of
constituting a security interest, including without limitation, any
equivalent interest or right created or arising under the laws of
any country where the person owns property.
"Material Contracts" means all contracts, agreements, instruments
and documents to which the entity in question (or any one or more
of its subsidiaries) is a party, (i) the breach, violation or
default of which by that entity (or its subsidiaries) would have a
material adverse affect on the business, properties, assets,
conditions (financial or otherwise), or results of operations of
the entity and its subsidiaries, taken as a whole, (ii) which
provides for aggregate payments during the term thereof to be made
or received by the Company in excess of Two Hundred and Fifty
Thousand United States Dollars (U.S. $250,000) or (iii) provides
any Person any preemptive or other preferential rights with respect
to the issuance by such entity or subsidiaries.
"Metrotelecom" shall have the meaning set forth in Section 4(e).
"Negative Delta" shall have the meaning set forth in Section 7.
"Offering Memorandum" means the private placement memorandum of the
Company dated April 1999, previously delivered to the Investor,
relating to the offer and sale of the Company's to-be-designated
Series C Preferred Stock.
"Option Agreement" shall have the meaning set forth in Section
2(a)(iii).
"Participation Agreement" shall have the meaning set forth in the
preamble.
"Person" means a natural person, corporation, society, partnership,
joint venture, unincorporated association or other entity,
including any governmental, multilateral or quasi-public entity.
"Prior Agreement" shall have the meaning set forth in the third
recital of the CCI Shareholders' Agreement.
"Publicly Traded Securities" shall have the meaning given in
Section 2(a) of the CCI Shareholders' Agreement.
"Qualified Disposition" shall have the meaning given in Section
2(a) of the CCI Shareholders' Agreement
"Qualified Public Offering" shall have the meaning given in Section
2(b) of the CCI Shareholders' Agreement.
"Realized Valuation Event" shall have the meaning set forth in
Section 2 of the Shareholders Agreement.
"Recognized Exchange" means the New York Stock Exchange, the
American Stock Exchange or the National Market System for the
National Association of Securities Dealers Automated Quotation
System, or any successor entities thereto.
"Registration Rights Agreement" shall have the meaning set forth in
Section 2(a)(vii).
"Remedy Parties" shall have the meaning set forth in Section 8(d).
"Reports" shall have the meaning set forth in Section 4(r).
"Salvador Notes" shall have the meaning set forth in Section
2(a)(viii).
"Salvador Shareholders' Agreement" shall have the meaning set forth
in Section 2(a)(ix).
"Salvador Shares" shall have the meaning set forth in Section
2(a)(viii).
"Salvador Subscription Agreement" shall have the meaning set forth
in Section 2(a)(viii).
"SEC" shall have the meaning set forth in Section 4(r).
"Securities" shall have the meaning set forth in Section 3(e).
"Securities Act" shall have the meaning set forth in Section 3(e).
"Series C Shares" shall have the meaning set forth in Section
2(a)(i).
"Series C Warrant" shall have the meaning set forth in Section
2(a)(iv).
"Shareholders' Parties" shall have the meaning set forth in the
first recital of the CCI Shareholder's Agreement.
"Subsequent Closing" shall have the meaning set forth in Section
2(a).
"Subsequent Closing Date" shall mean the date on which the
Subsequent Closing occurs.
"Subsidiary" shall mean any Person that is Controlled by the
Company. The Persons listed in clause 1(d) of Section 4(c) of the
Disclosure Letter (except Comunicaciones Centurion S.A.) shall be
included within the meaning of the term "Subsidiary".
"Target Value" means an amount determined as of a given time that
is equal to the greater of (a) twice the Going-In Value or (b) an
amount that, when discounted to the Going-In Value from the date of
calculation to the Closing Date yields a return equal to the daily
equivalent of 40% per annum or greater, calculated on the basis of
a 365 day year for the number of days elapsed.
"TCW" shall have the meaning set forth in the preamble.
"Telecommunications Business" shall have the meaning set forth in
the recital.
"Telematica" shall have the meaning set forth in the preamble
"Transaction Documents" shall have the meaning set forth in Section
2(a).
"Transaction Resulting in a Change of Interest" is a transaction
engaged in by the Company or any Subsidiary as a result of which
the rights or preferences of the Shareholder Parties derived from
their holding of Company Equity are reduced, the ownership
interests of the Shareholder Parties in the Company (or,
indirectly, in any Subsidiary) relative to each other are changed,
representation provided in Section 5 of the CCI Shareholders'
Agreement are adversely affected, or their right of Shareholder
Parties to participate in corporate governance as provided in
Section 6 of the CCI Shareholders' Agreement are limited.
"U.S. Securities Law" means the Securities Act and all other
federal securities laws of the United States and the securities
laws of its separate states, together with the regulations issued
pursuant thereto.
"WCI" shall mean WCI de Cayman, Inc., a Cayman Islands limited
liability company.
