CAPITAL COMMUNICATIONS CDPQ INC. ("CDPQ") AND
VPC CORPORATION ("VPC")
(CDPQ AND VPC COLLECTIVELY REFERRED TO AS THE "SHAREHOLDERS")
IN RELATION TO THEIR SHARE OWNERSHIP IN
OPTEL, INC. ("OPTEL")
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TERM SHEET
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A. Articles
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1. VPC and Le Groupe Videotron Ltee (*Le Groupe Videotron*) shall use their
reasonable best efforts to cause OpTel to modify its charter prior to CDPQ
acquiring any shares of OpTel from Vanguard and VPC undertakes to vote in
favor of such modifications:
(a) so as to provide holders of Class B Common Stock with pre-emptive
rights. Any shares to be issued by OpTel (except if made under a stock
option plan for directors, officers and employees of OpTel or under VPC
convertible notes) shall be first offered by OpTel to VPC and CDPQ in
proportion to the number of shares held by them, on a fully diluted
basis; and
(b) so that any restrictions relating to the voting rights attached to the
Class B Common Stock in the event of the acquisition and resale of such
shares be removed from the Charter;
2. In the event that in the course of a public offering of equity securities
of OpTel, strategic investment in OpTel, amalgamation or merger VPC
determines that it would be preferable that the shares held by it in OpTel
cease to carry multiple voting rights, CDPQ shall collaborate and
participate in any modification requested by VPC as long as CDPQ and VPC
are treated in the same manner.
3. In the event that in the course of a public offering of equity securities
of OpTel, strategic investment in OpTel, amalgamation or merger VPC
determines that it would be preferable that OpTel modify its charter in
order to cease providing the holders of Class B Common Stock with
pre-emptive rights, CDPQ shall collaborate and participate in any
modification requested by VPC as long as CDPQ and VPC are treated in the
same manner.
4. CDPQ acknowledges that OpTel has given a mandate to a broker in order to
provide OpTel with a stategic investor, which shall not be an affiliate of
VPC, which may subscribe for OpTel's stock and, subject to (i) Section
B(10) hereof; (ii) the fact that the subscription price payable by such
strategic investor shall not be less then the price per share (US$82.18)
paid by CDPQ for the acquisition of OpTel's shares from Vanguard (the "CDPQ
Price"); and (iii) VPC's election not to exercise its pre-emptive rights
available by reason of such shares issuance by OpTel, CDPQ agrees that it
will not exercise its pre-emptive rights available by reason of such shares
issuance by OpTel.
5. CDPQ agrees that VPC may, at any time on or after September 1, 1997 but
before September 30, 1997, convert such portion of its convertible notes
including interest theron in OpTel necessary to provide VPC with 80% of the
voting rights in OpTel, at a price per share equal to the CDPQ Price in
order to provide VPC the option to consider OpTel on a tax consolidated
basis with its own operation. In the event VPC makes use of OpTel's tax
losses and credits and carry-overs and carry-backs of tax losses and
credits (collectively "tax Items") for any fiscal year subsequent to
August 31, 1997, VPC hereby undertakes to fully compensate OpTel, at the
end of each fiscal year (commencing August 31, 1998) at the net present
value (as provided in the example in Schedule C hereto) of the Tax Items
for any Tax Items OpTel would have benefited from had the conversion not
taken place, less interest amounts on the portion of the convertible notes
converted and which would have accrued on such notes until, the earlier of,
their maturity had the conversion not taken place or the conversion date of
all other outstanding convertible notes.
B. Shareholders' Agreement
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The Shareholders' Agreement among VPC and CDPQ relating to OpTel shall be
designed primarily to protect the rights of the Shareholders and to provide
liquidity. To this effect, the Shareholders' Agreement will include provisions
relating to:
1. Reciprocal rights of first offer to be exercised within a period of 30
days; if such right of first offer is not exercised during said period of
thirty days the vendor shall have a period of 120 days to seek and accept
another offer and shall have the right to sell its shares to a third party
at the same price as offered to the other Shareholder (less 10% or at a
higher price) but subject to the same terms and conditions; failing such
disposition within the period for 120 days allotted the vendor shall not so
dispose of his shares without re-offering them to the other Shareholder; in
the event OpTel becomes public, and its shares are listed on a recognized
Stock Exchange (which shall include NASDAQ) (a "Stock Exchange") each of
VPC and CDPQ shall lose the benefit of this provision;
2. As long as CDPQ is a holder of at least 5% of the voting rights in OpTel,
CDPQ shall have the right to designate a number of directors on the Board
of Directors of OpTel or any subsidiary and any committee thereof which
shall be proportional to its voting interest in OpTel, calculated on a
fully diluted basis, with a minimum of one representative as long as it is
a holder of at least such above percentage. Each Shareholder of OpTel shall
agree to vote its shares in order to elect on the Board of Directors of
OpTel and any committee
thereof the members designated by CDPQ and VPC as mentioned herein above
and cause OpTel to elect on the Board of Directors of any subsidiary and
any committee thereof the members designated by CDPQ and VPC. Such right to
nominate a Board representative under paragraph 2 shall not be in addition
to the right provided for in the Consolidated Agreement among Caisse de
depot et placement du Quebec, Andre Chagnon and Sojecci dated as of May 10,
1995 (the "Consolidated Agreement").
3. Acts and decisions concerning the conduct of the business and internal
affairs of OpTel relating to the matters mentioned in Schedule A hereto
shall not be undertaken or decided, as the case may be, unless the subject
to be dealt with was specifically mentioned and described in a notice
previously sent to CDPQ, and only to the extent that such matter is
approved by CDPQ in writing. To the exception of the US $10,000,000 and US
$40,000,000 limitations in Schedule A (subject to paragraph (c) thereof) no
provision of Shedule A shall be construed to impose a limitation upon OpTel
which is not already covered by the Indenture (to the exception of
paragraphs (a) and (b) in Schedule A). In the event OpTel becomes public,
and its shares are listed on a Stock Exchange, CDPQ shall lose the benefit
of said provision. The right contained in this paragraph, insofar and
solely as OpTel and its subsidiaries are concerned, amends and supersedes
Section 3 contained in the Consolidated Agreement.
4. (a) Prior to an Initial Public Offering of voting and equity shares of
OpTel whereby such shares would be listed upon a Stock Exchange (an
"IPO"), if VPC elects to sell all of its shares and its Covertible
Notes, which taken together or seperately represent a controlling
interest in OpTel, for cash or readily marketable securities (on the
condition that such securities are listed on a recognized Stock
Exchange and issued by a corporation with a market capitalization of at
least U.S. $1 billion and that such securities which would be issued to
CDPQ were it to join in the sale represent 5% or less of the float of
such cororation), VPC may require CDPQ to join in such sale in the same
proportion that the number of shares held by CDPQ bears to the total
number of OpTel shares then owned by VPC and CDPQ, calculated on a
fully-diluted basis, and otherwise at the same price per share and on
the same terms and conditions, provided that in order for this
provision to apply, CDPQ must receive an amount at least equal to the
aggregate price it paid to Vanguard for the OpTel shares it acquired
from Vanguard.
(b) If VPC elects to sell 10% or more of the OpTel shares owned by it
and/or its Convertible Notes (representing in the aggregate at least
10% of OpTel's shares), otherwise than in a public offering, CDPQ shall
have the right to join in such sale in the same proportion that the
number of shares held by CDPQ bears to the total number of shares then
owned by VPC and CDPQ, calculated on a fully-diluted basis, and
otherwise at the same price per share and on the same terms and
conditions.
(c) Without limiting the rights of CDPQ under Sections 4(a) and 4(b) above,
if VPC elects to sell 50% or more of the OpTel shares owned by it
and/or its Convertible Notes (representing in the aggregate at least
10% of OpTel's shares) otherwise than
in a public offering, CDPQ shall have the right to join in such sale to
the extent of all of the shares then owned by it, calculated on a
fully-diluted basis, at the same price per share and on the same terms
and conditions.
(d) If prior to the IPO VPC shall cease to be an affiliate of Le Groupe
Videotron, then CDPQ shall have the option for a period of 15 days
after such change in control to sell all or any part of its OpTel
shares to the person then controlling VPC, at a price and on terms no
less favourable to CDPQ than those enjoyed by VPC in the transaction
that resulted in the change of control, adjusted as if the transaction
would have been made at the level of OpTel, (for greater certainty
including any control premiums) said adjustment to be determined
independently by two investment banks chosen by each of Le Groupe
Videotron and CDPQ respectively in a manner similar to the method
provided in Section 5 hereinafter.
5. VPC shall enter into an agreement (the "Agreement") (the obligations to be
set out therein to be guaranteed solidarily by Le Groupe Videotron) (which
may form part of the Shareholders' Agreement) which shall provide that if
upon the fifth anniversary of the transaction among Vanguard and CDPQ the
shares of OpTel are not registered under the Securities Act of 1933, as
amended, and that if no reputable underwriter has undertaken to underwrite
a registered offering of the shares of OpTel, CDPQ shall have the right to
sell all of its shares in OpTel to VPC at fair market value as determined
independently by two investment banks chosen by each of VPC and CDPQ,
respectively. Said Agreement will provide for an evaluation method whereby
should there be a discrepancy between the reports of the two investment
banks of 20% or less, the fair market value will be the average of the two
and should the discrepancy be more than 20%, the two investment banks shall
appoint a third, who shall be instructed to select within 30 days of its
engagement, one of the two fair market values previously determined by the
two originally seleced investment banks (without modification). The fair
market value selected by such third reputable investment bank shall be
final. The expenses of all reputable investments banks performing duties
hereunder shall be borne equally by VPC and CDPQ. VPC shall have the option
to pay for the transaction with cash or with Le Groupe Videotron freely
tradeable shares duly listed on the Toronto Stock Exchange and/or Montreal
Exchange (or any other Exchange acceptable to CDPQ) at a price per share
equal to the weighted average closing market price on such Exchange for the
last twenty (20) days in respect of which trading was done for a total
amount equal to the purchase price. CDPQ will receive the demand and
piggy-back registration rights more fully described in Schedule B hereto.
In the event OpTel becomes a public company, CDPQ may participate in such
public offering to the extent VPC is offered the opportunity to participate
in such public offering; in the event that VPC wishes to participate, both
of them shall participate on the same basis (share for share).
6. Arbitration of disputes which may arise in connection with the
Shareholders' Agreement, upon terms and conditions to be agreed upon among
the Shareholders.
7. VPC and Le Groupe Videotron shall use their reasonable best efforts to
cause OpTel to meet the following ongoing reporting requirements up and
until OpTel proceeds with an IPO:
(a) OpTel will submit its audited consolidated financial statements, and/or
the individual audited, financial statements of each of its
subsidiaries (to the extent subsidiary financials are prepared and/or
audited in the normal course) within one hundred and twenty (120) days
following the end of each fiscal year.
(b) OpTel will submit its consolidated quarterly financial statements,
including a balance sheet and statement of changes in financial
position, and (to the extent they are regularly prepared) the
individual quarterly financial statement of each of its subsidiaries,
within forty-five (45) days following the end of each quarter.
(c) The Board of Directors of OpTel shall meet at least quarterly.
(d) VPC and Le Groupe Videotron shall use their reasonable best efforts to
cause OpTel to provide CDPQ with a copy of any document sent (i) to any
member of the Board of Directors, in their capacity as director, and
(ii) to any member of a Committee of the Board of Directors, in their
capacity as member of a committee.
8. VPC and Le Groupe Videotron covenant that they will use their reasonable
best efforts to cause OpTel not to enter into any transactions with
Affiliates that are "Affiliate Transactions" (as defined in the Indenture
dated as of February 14, 1997 between OpTel and U.S. Trust Company of
Texas, N.A., as Trustee and as Escrow Agent ("Indenture")) except in
accordance with and as permitted by the Indenture.
9. VPC covenants that it will confer any rights or privileges upon CDPQ as are
confirmed upon any new shareholder of OpTel if such rights or privileges
(strictly in relation to the rights prescribed in sections B(1), B(4)(b) to
B(4)(d) are more advantageous, (as determined by CDPQ at its sole
discretion, acting reasonably), than those granted to CDPQ under such
sections.
10. VPC shall represent and warrant that OpTel has no contractual restrictions
to carry on its affairs and business other than what would be considered
customary and in the ordinary course of business and under the Indenture
and that it may freely engage in the business of acquiring, developing and
operating cable television systems and telecommunications services in the
United States. CDPQ acknowledges that an affiliate of VPC holds an interest
in Wireless Holdings, Inc. and Videotron (Bay Area) Inc. and VPC holds an
interest in County Cable Corp.
11. Prior to CDPQ acquiring any shares of OpTel Vanguard will renounce to its
right to receive a management fee of US$ 350,000 annually; in relation to
the management fee of US$ 350,000 paid to Le Groupe Videotron and/or VPC,
the latters agree, effective upon the purchase by CDPQ of the Vanguard
shares, that their right to receive the management fee
from OpTel shall terminate, Le Groupe Videotron and VPC shall provide a
list of the services rendered by each of them to OpTel and its subsidiaries
and the cost associated therewith which cost shall be fair and reasonable.
12. The Shareholders' Agreement will remain in full force until such time as
CDPQ is no longer a Shareholder of OpTel.
13. This Term Sheet is an agreement in principle. It is executed in couterparts
and such couterparts shall together constitute a single instrument. It is
the intention of the parties that the terms hereof will be incorporated in
formal documentation, with appropriate modification and detail, as promptly
and as practicable after the date hereof. This Term Sheet will lapse if not
replaced by a definite agreement within 60 days from the date hereof.
Signed as of this 13th day of May 1997.
CAPITAL COMMUNICATIONS CDPQ VPC CORPORATION
INC.
Per: _________________________ Per: _________________________
Per: _________________________
LE GROUPE VIDEOTRON LTEE
Per: _________________________
Per: _________________________
OPTEL INC. CAISSE DE DEPOT ET PLACEMENT
DU QUEBEC
Per: _________________________
Per: _________________________
Per: _________________________
OpTel has signed this Term Sheet only to affirm its concurrence with the
provisions of Section A(1) and Schedule B and Caisse de Depot et Placement du
Quebec only to affirm its concurrence with the provisions of Sections B(2) and
B(3).
SCHEDULE A
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(a) Any modification, amendment or deletion to the articles (charter) or by-laws
of OpTel or any direct or indirect subsidiary.
(b) Any subdivision, consolidation, conversion, reclassification or modification
of any kind to the authorized or outstanding share capital of OpTel or any
direct or indirect subsidiary thereof.
(c) Except for the contemplated acquisition of Phonoscope and other acquisitions
which in the aggregate do not exceed US $25,000,000, the acquisition by
OpTel or any subsidiary thereof of shares, partnership interests, titles or
indebtedness or other securities of any partnership, company, corporation or
all or substantially all of the assets thereof or of any business for a
consideration in excess of U.S.$ 10,000,000 per transaction or in excess of
U.S.$ 40,000,000 in the aggregate per fiscal year.
(d) Merge or amalgamate OpTel or any subsidiary thereof with any other person,
company, corporation or partnership or otherwise associate itself or any
subsidiary (if said association results in an acquisition or transfer or
assets of causes important changes in the affaires of OpTel) with any other
person, partnership, company or corporation if the result of such
transaction is in excess of U.S.$ 10,000,000 or in excess of
U.S.$ 40,000,000 in the aggregate in the same fiscal fiscal year.
(e) Dispose of or transfer any shares it may hold in the share capital of any
other company or all or substantially all of the assets of OpTel or of any
subsidiary thereof or of a business thereof if for a consideration in excess
of U.S.$ 10,000,000 per transaction or in excess of U.S.$ 40,000,000 in the
aggregate per fiscal year.
(f) Subject to the Indenture not being reimbursed, the concurrence by OpTel or a
Restricted Subsidiary (as defined in the Indenture) of any indebtedness
which is not permitted to be incurred under the Indenture as in effect on
the date hereof.
(g) As soon as the Indenture is reimbursed, the grant by OpTel or any subsidiary
thereof of loans (excluding loans made to their employees as authorized
under the Indenture summarized in OpTel's Offering Memorandum dated February
7, 1997), guarantees, the guarantees, the guaranteeing of any debt or
obligation of a third party, or any borrowing except for Permitted
Indebtedness (as defined in the Indenture) if, in either case, after giving
pro forma effect to such occurrence (including the application of the net
proceeds therefrom), the ratio of (x) Total Consolidated Indebtedness (as of
the date of occurrence) to (y) Annualized Pro Forma Consolidated Operating
Cash Flow (based upon the two most recent fiscal quarters for which
consolidated financial statements of OpTel are available preceding the date
of such occurrence) would be more than (i) 8.0 to 1.0 if such occurrence is
prior to August 31, 2000 or (ii) 7.0 to 1.0 if such occurrence is on or
after August 31, 2000 and prior to August 31, 2002 or (iii) 6.0 to 1.0 if
such occurrence is on or after August 31, 2002.
SCHEDULE B
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REGISTRATION RIGHTS AGREEMENT
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1. Demand Rights
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1.1 effective 9 months after the IPO Date
1.2 applies to all Registrable Securities then owned by CDPQ
1.3 a first demand right at the expense of OpTel and one subsequent demand
right at the expense of CDPQ
1.4 OpTel will pay all Registration Expenses, subject to 1.3
1.5 selection of underwriters shall be by OpTel
1.6 if a demand registration is made, VPC has option within ten (10) days of
receipt of the said demand to buy shares from CDPQ at the average trading
price within the five (5) trading days following the receipt of the said
demand
2. Piggy-back Rights - have 3 times to exercise these rights provided
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registration becomes effective
2.1 Post-IPO Offerings
(a) OpTel must give CDPQ prompt written notice of OpTel's intention to
register securities
(b) exercise of right must be for at least 20% of Registrable Securities
then owed by CDPQ
(c) OpTel will pay all Registration Expenses
2.2 IPO
(a) if OpTel proposes an IPO, will give prompt written notice to CDPQ
("IPO Notice")
(b) CDPQ shall be entitled to include Registrable Securities, to the
extent, if any, that the investment banker for OpTel shall advise
OpTel in writing that, in its opinion, the offering contemplated by
OpTel would not be adversely affected
(as to price and quantity) by the inclusion of Registrable Securities
(the quantity, if any, of Registrable Securities that may be included
per underwriter, the "IPO Permitted Registrable Securities"). IPO
Notice shall specify the quantity of IPO Permitted Registrable
Securities, if then known.
(c) exercise of right must be for at least 20% of Registrable Securities
then owned by CDPQ (or # of IPO Permitted Registrable Securities, if
less)
(d) OpTel will pay all Registration Expenses
2.3 Appointment in Incidental Registrations (piggy-back)
(a) if a reduction in amount to be sold; OpTel includes all of its
securities, and reduces Registrable Securities PRO RATA with ALL
other holders who were going to sell (other than VPC) based on total
amount of securities held by such persons.
(b) Notwithstanding the foregoing, CDPQ shall have priority over OpTel
with respect to the inclusion of Registrable Securities in the
registration for purposes of the exercise of any "greenshoe" or over
allotment option w/respect to the offering, but only to the extent,
that Registrable Securities were excluded from the firm portion of
the offering and, in the case of an IPO, such excluded Registrable
Securities were IPO Permitted Registrable Securities.
Definition of "Registrable Securities" means the shares of Class A Stock issued
or issuable upon conversion of the shares of Class B Stock delivered to CDPQ
pursuant to the Purchase Agreement and any securities later acquired from OpTel
by CDPQ
REGISTRATION EXPENSES - includes reasonable expenses of counsel selected by CDPQ
to represent CDPQ's interest, but excludes underwriting discounts.
SCHEDULE C
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