10.4 Shareholders Agreement between the state of Parana and Domino Holdings
S.A. dated September 4, 1998 .............................................
[cover page handwritten entirely in English]
EXHIBIT 10.4
SHAREHOLDERS' AGREEMENT
COMPANHIA DE SANEAMENTO DO PARANA - SANEPAR
The STATE OF PARANA, a legal entity under Brazilian public law, herein
represented by its State Secretary of Finance, Dr. Giovanni Gionedis,
hereinafter the STATE, and DOMINO HOLDINGS S/A, a company domiciled at Av.
Candido de Abreu, no. 651, 4 andar, Curitiba, Parana, recorded in the Taxpayer
Registry under No. 02.358.947/0001-02, [herein represented] by its undersigned
legal representatives, hereinafter the COMPANY, each individually designated in
this document as PARTY or jointly, as PARTIES;
Whereas, the STATE is the controlling shareholder of COMPANHIA DE SANEAMENTO DO
PARANA - SANEPAR (hereinafter SANEPAR);
Whereas, the STATE was authorized by State Law No. 11.963 of December 19, 1997
to sell shares it owns in the capital stock of SANEPAR, although it must retain
a minimum ownership of 60% (sixty percent) of all common shares;
Whereas, based on the aforementioned legislative authorization, the STATE
decided to sell a block of 39.71% (thirty-nine and seventy-one hundredths
percent) of the common shares it owns in the capital stock of SANEPAR to a
shareholder who can contribute managerial experience to the modernization and
optimization of the performance of SANEPAR, [these shares] to be held by it, the
shareholder, or by its subsidiaries, parent companies, or companies under common
control;
Whereas, the STATE understands that it is necessary, in order to achieve its
objectives, to set rules for working with the new shareholder and establish the
general principles for conducting the business of SANEPAR, and the conditions
governing the exercise of the right to vote at SANEPAR'S administrative bodies
and shareholder meetings by means of a Shareholders' agreement;
They resolve to enter into this SHAREHOLDERS' AGREEMENT, pursuant to and for the
purposes of Art. 118 of Law No. 6.404 of December 15, 1976, which will be
governed by the following clauses and conditions:
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ONE - OBJECTIVE OF THE SHAREHOLDERS' AGREEMENT
1.1 The objective of this Shareholders' agreement is to govern the
relationship between the PARTIES in their capacity as holders of shares
having the right to vote at SANEPAR'S general shareholders' meetings
(hereinafter the SHARES), as well as the rules of conduct of the PARTIES
and their representatives on the administrative bodies of SANEPAR.
1.2 In order to achieve the aforementioned objective, the PARTIES will
exercise the right to vote at the general shareholders' meetings of
SANEPAR, and will ensure that their representatives on the administrative
bodies act in accordance with the provisions of this Agreement, always
subject to the interests of SANEPAR, approving and ensuring that
resolutions and decisions are approved in the manner and time provided
herein.
TWO - THE PARTIES' STAKE IN THE VOTING CAPITAL OF SANEPAR
2.1 The PARTIES' stake in the voting capital of SANEPAR as of the date of this
Agreement is as follows:
STATE: 60% (sixty percent), represented by 173,902,122 (one hundred
seventy-three million nine hundred two thousand one hundred twenty-two)
SHARES;
COMPANY: 39.71% (thirty-nine and seventy-one one-hundredths percent),
represented by 115,106,273 (one hundred fifteen million one hundred six
thousand two hundred seventy-three) SHARES.
2.2 Any and all shares issued by SANEPAR that are subscribed or purchased by
the PARTIES during the life of this Agreement will be deemed subject to it
as of the time they are issued, subscribed or purchased, and all rights
regarding them will be exercised only in accordance with the rules and
conditions stipulated in this Agreement.
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2.3 The terms and conditions of this Agreement also apply to exercise of the
right to vote that may be attributed to preferred shares owned by either
of the PARTIES according to the terms of the Law of Stock Corporations.
THREE - EXERCISE OF THE RIGHT TO VOTE AT GENERAL SHAREHOLDERS' MEETINGS
3.1 The PARTIES hereby agree to appear and to vote at the general
shareholders' meetings of SANEPAR in accordance with the provisions of
this Shareholders' agreement, availing themselves of all the SHARES that
they hold, and voting in a block when the deliberation has to do with:
(a) any amendment to the bylaws of SANEPAR (hereinafter the BYLAWS) having to
do with its corporate purpose; the issuance of new shares with voting
rights, the creation of new types or classes of shares or a modification
of the rights that already exist, the authority, composition and operation
of its bodies (General Shareholder Meeting, Board of Directors, and
Management Board) and the determination of income (including the formation
of reserves, the setting and distribution of dividends and of interest
rates on own capital);
(b) issuance of bonds that are convertible into shares with voting rights, and
of subscription certificates of shares with voting rights, creation of
beneficiaries, redemption and retirement of shares of SANEPAR.
(c) merger, split-up, takeover, dissolution or liquidation of SANEPAR
(including the selection of the liquidator and approval of its accounts);
(d) distribution of a dividend in a percent other than the obligatory percent
established in the BYLAWS and in this AGREEMENT; and
(e) compensation of the members of the Board of Directors and the Management
Board of SANEPAR.
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3.2 The PARTIES will meet, in order to seek a consensus with regard to matters
set forth in agendas for shareholders' meetings of SANEPAR whose purpose
is to deliberate on any of the matters referred to in item 3.1 above,
represented by duly authorized individuals, 2 (two) days prior to the date
designated for the respective meeting in the first call.
3.2.1 The advance meetings will be called by either of the PARTIES, and will
take place in the city of Curitiba. The decisions made at these meetings
will be recorded in minutes. The meeting call will be delivered by means
of an official notice, and may be delivered personally, by registered
letter, or by means of a fax.
3.2.2 If there is consensus between the PARTIES with regard to the subject
matter to be deliberated upon at the respective general shareholders'
meeting, the PARTIES will vote in a block, in strict conformity with the
decision made by them at the advance meeting.
3.2.3 If consensus is not reached at the advance meeting with regard to the
content of the mailer to be deliberated upon, the PARTIES will vote nay on
the proposal at the general shareholders' meeting.
3.2.4 The provisions of this item will not apply to the selection of the regular
and alternate members of the Board of Directors of SANEPAR, who will be
appointed individually by each of the PARTIES in the manner established in
Clause Four below.
3.3 Any exercise by either of the PARTIES of the right to vote at the general
shareholders' meetings of SANEPAR that is not in accordance with the
provisions herein established, will result in the nullity of the decision
so made, without prejudice to the right of the interested PARTY to enforce
the specific performance of the obligation not satisfied.
FOUR - COMPOSITION AND FUNCTIONING OF THE ADMINISTRATIVE BODIES
4.1 SANEPAR will be managed by a Board of Directors and by a Management Board,
which will be composed and will function in accordance with the BYLAWS and
the provisions of this Agreement.
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4.2 The Board of Directors of SANEPAR will be made up of 9 (nine) regular
members and an equal number of alternates. One member will be the chairman
and another will be the vice chairman. They will be elected for a term of
3 (three) years, and may be re-elected.
4.2.1 The STATE will have the right to appoint 5 (five) of the regular members
of the Board of Directors and their respective alternates, and the COMPANY
will have the right to appoint 3 (three) regular members and their
respective alternates, subject to legal requirements. The remaining member
and his respective alternate will be appointed by the employees of
SANEPAR.
4.2.2 Each PARTY will indicate to the other, 48 (forty-eight) hours prior to the
occurrence of the shareholders' meeting, the persons chosen by them to
fill the positions on the Board of Directors. Both PARTIES agree to vote
in a block on the persons so indicated, whose names may not be rejected
unless legal requirements are not satisfied.
4.2.3 The chairman and the vice chairman of the Board of Directors will be
selected by all the Board members at the first meeting to take place after
the start of their term, from among the regular members appointed by the
STATE and by the COMPANY.
4.2.4 If a decision is made to vote using the multiple vote process, the PARTIES
will be required to distribute their votes so as to reflect the
composition of the Board of Directors established in this Agreement.
4.2.5 If any regular board member's seat becomes vacant, that board member will
be replaced his alternate. At the first general shareholders' meeting
thereafter, the PARTIES will vote to elect a replacement appointed by the
same PARTY that appointed the member to be replaced.
4.2.6 Neither of the PARTIES may dismiss a board member, whether a regular or
alternate, elected to the Board of Directors by appointment of the other
PARTY. However, if either of the PARTIES wishes to dismiss a board member,
whether a regular or alternate, that was appointed by it, the other PARTY
will vote in favor of the dismissal and will elect, in his stead, another
board member appointed by the same PARTY that appointed the member who was
dismissed.
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4.2.7 If any board member fails to vote in accordance with the wishes of the
PARTY that appointed him, then, subject to the provisions of Art. 154, and
its paragraphs, of Law No. 6.404 of December 15, 1976, his deliberation
will be deemed invalid, and the PARTIES will take the necessary steps to
replace that member, if this is requested by either of the PARTIES.
4.3 At general shareholders' meetings involving deliberations on the BYLAWS of
SANEPAR, the PARTIES agree to vote to establish the authority of the Board
of Directors to make decisions, among other items, on the following
matters:
(a) setting the general direction of SANEPAR'S business;
(b) electing and dismissing, in the manner set forth in this Agreement,
members of the Management Board;
(c) deliberating, prior to their execution, on contracts between SANEPAR and
any of its shareholders or companies that are its parent companies, its
subsidiaries, or are under common control;
(d) deliberating, pursuant to a proposal by the Management Board, with regard
to the sale of or establishment of mortgages on the fixed assets of
SANEPAR, and about SANEPAR'S provision of guarantees to third parties, for
individual amounts greater than 0.5% (one half of one percent) of the net
assets of SANEPAR;
(e) deliberating, pursuant to a proposal by the Management Board, with regard
to loans and financing to be entered into by SANEPAR that are greater than
2.0% (two percent) of the net assets of SANEPAR;
(f) calling general shareholders' meetings;
(g) overseeing the activity of the Management Board, with the authority to
examine, at any time, the books and papers of SANEPAR and to request
information regarding contracts entered into or in the process of being
entered into, as well as regarding any other administrative matters or
acts that it deems of interest;
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(h) expressing an opinion in advance on management's report and on the
accounts of the Management Board;
(i) selecting, and, if applicable, dismissing SANEPAR'S independent auditors,
from among internationally known companies authorized by the Securities
Commission to audit public companies;
(j) deciding on proposals for allocation of profits for the fiscal year,
subject to the provisions of item 7.3 below;
(k) approving the expense and salary plan, as well as the salary policy of
SANEPAR; and
(l) deliberating, pursuant to a proposal by the Management Board, on the
exercise of the vote at general shareholders' meetings of affiliates and
subsidiaries of SANEPAR, when having to do with matters covered in
SANEPAR'S BUSINESS PLAN (as defined below);
4.4 The meetings of the Board of Directors will be called by means of a
written notice sent at least 7 (seven) days in advance and containing the
list of the matters to be discussed. These meetings may be deemed validly
convened when at least 3 (three) board members are present. Decisions will
be made by a majority of the votes of the board members present. If there
is a tie, the chairman will cast the deciding vote.
4.4.1 A qualified quorum will be required for decisions of the Board of
Directors regarding the matters set forth in letters "c", "d", "e", "h",
"i", "j", "k" and "l" of item 4.3 above, which will require a favorable
vote of 7 (seven) board members.
4.5 At general shareholders' meetings where deliberation takes place regarding
the BYLAWS of SANEPAR, the PARTIES agree to vote in favor of having the
current management of SANEPAR be carried out by a Management Board made up
of 7 (seven) Directors, who may or may not be shareholders, appointed as
President, New Business Director, Supervising Director, Financial
Director, Director of Market Relations, Director of Operations and
Administrative Director. The Directors will be elected by the Board of
Directors for a 3 (three) year term, in the manner established below.
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4.5.1 The President, Director of New Business, Director of Market Relations,
Director of Operations and Administrative Director will be elected by the
Board of Directors from among names presented by the STATE, based on
criteria of technical and professional ability; the Supervising Director,
Director of Operations and Financial Director will also be elected by the
Board of Directors from among names presented by the COMPANY, and also on
the basis of criteria of technical and professional ability.
4.5.2 For the purposes of the preceding sub item, each of the PARTIES will
present the names of the candidates they are entitled to select for the
positions on the Management Board to the chairman of the Board of
Directors 48 (forty-eight) hours prior to the meeting. From these names
the members of the Board of Directors will elect the respective position
holders.
4.5.3 In view of the limitation established in Art. 143, ss.1 of Law No.
6.404/76, each of the PARTIES will reserve the right to appoint 1 (one)
Managing Director who is, at the same time, a member of the Board of
Directors of SANEPAR. A third member of the Management Board may also be a
member of the Board of Directors, and appointed for each term by each of
the PARTIES on an alternating basis.
4.5.4 If there is a vacancy in any of the positions of the Management Board, the
respective replacement will be elected from among names indicated by the
same PARTY that appointed the person replaced.
4.5.5 The PARTIES recognize that the election of the Management Board of SANEPAR
in the manner described in the preceding sub items is an essential
condition to ensuring the contribution of each PARTY to the management of
SANEPAR. Therefore, any resolution regarding the election of the members
of the Management Board referenced in the preceding item that does not
comply with the provisions herein established will be invalid with regard
to SANEPAR, and a new election must take place immediately that strictly
observes the preceding sub items.
4.6 The Management Board will be responsible for the daily management of
company business, subject to the provisions of the BYLAWS, the resolutions
of the General Shareholders' Meeting, the resolutions of the Board of
Directors and the terms of this Agreement.
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4.7 Without prejudice to their other powers, the Director of Operations, the
Financial Director and the Administrative Director will share the power to
prepare and approve:
(a) the organization plan of SANEPAR and the issuance of the respective
regulations, as well as their respective modifications;
(b) the BUSINESS PLAN (as defined below), as well as its updates and
revisions, including schedules, amount and allocation of investments
provided for therein;
(c) the ANNUAL BUDGET (as defined below), which will reflect the BUSINESS PLAN
then in effect, as well as any investment or expenditure not provided for
in the approved ANNUAL BUDGET that, individually or together, exceeds 0.5%
(one half of one percent) of SANEPAR'S ANNUAL BUDGET.
4.7.1 If no consensus is reached among the Directors specified in this item 4.7
regarding the matters set forth herein, the decision will be made by the
majority, and the mailer must necessarily be submitted for approval by the
Management Board, meeting as a group. The Management Board may only
approve or reject it, without making any modifications.
4.7.2 If a matter submitted to the Management Board in accordance with the terms
of the preceding sub item is not approved by it, it will justify its
decision and notify the directors responsible for the proposal of that
decision. The directors will review the decision and decide, by majority,
whether to make any change in its content and resend it to the Management
Board for deliberation. If approval is still not obtained, and the impasse
remains between the directors responsible for preparing the documents and
the Management Board, each Director will decide, within his area of
authority, whether to implement temporarily the plans referred to in
letters "a" and "b" of item 4.7 above, using the same amount of resources
set forth in the ANNUAL BUDGET for the prior fiscal year, adjusted for the
change in the IGP-M (General Price Index - Market) published by the
Fundacao Getulio Vargas.
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4.8 Any decision made by any of the members of the administrative bodies of
SANEPAR that does not comply with the provisions herein established or
with the voting wishes given by either of the PARTIES to their respective
representatives as set forth in this Agreement, subject to the provisions
of Art. 154, and its paragraphs, of Law No. 6.404 of December 15, 1976,
will result in the invalidity of the decision so made, and a new meeting
will take place to review the matter, in accordance with the provisions of
this Agreement.
FIVE - REGULATIONS REGARDING CONDUCT OF BUSINESS
5.1 SANEPAR will have the following items as principal elements of its
management, which its administrative bodies are to observe strictly:
(a) a business plan (hereinafter the BUSINESS PLAN), that will contain the
plans and projections for the period of 2 (two) fiscal years of SANEPAR,
revisable semi-annually, subject to the procedures set forth in item 4.7
above. The BUSINESS PLAN will cover in detail activities and strategies
(including any expansion plans), new investments and business
opportunities (including at subsidiaries and affiliates), the amounts to
be invested or in some other way contributed through SANEPAR's own capital
or by third parties, as well as the expected return,
(b) an annual budget (hereinafter the ANNUAL BUDGET), that reflects and
details revenues and operating expenses, costs and investments, cash flow,
investments made with its own capital or third party funds, and other
information that the management of SANEPAR deems necessary.
5.2 The PARTIES agree to direct their representatives on the administrative
bodies of SANEPAR according to the following principles and objectives:
(a) SANEPAR will maintain a service quality standard compatible with that
required by the competent authorities, and will gradually seek to achieve
higher standards compatible with those practiced by companies of the same
economic segment that are recognized to be efficient;
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(b) the PARTIES, in their capacity as shareholders of SANEPAR, and also
SANEPAR, will always perform their respective activities in a manner that
is compatible with the highest ethical standards;
(c) the PARTIES will act with loyalty towards SANEPAR, and will refrain from
practicing, for themselves, their parent companies, subsidiaries or any
company that is under common control with them, acts that could constitute
conflicts of interest with SANEPAR, and each undertakes to notify the
other of the existence of any circumstance that could lead to such
conflict. Conflict of interest is understood to mean, for the purposes of
this Agreement, any situation that results in one PARTY gaining an
advantage to the detriment of SANEPAR, the other PARTY or the other
shareholders of SANEPAR.
(d) To the extent that its economic and financial situation allows, SANEPAR
will consider the possibility of making a distribution of its excess
funds.
5.3 If either of the PARTIES presents SANEPAR with opportunities to
participate in new undertakings in the basic sanitation sector, such PARTY
will reserve the right, for itself, its parent companies, subsidiaries or
any company that is under common control with it, to become a partner of
SANEPAR in order to participate in such undertakings, if SANEPAR decides
to participate in them.
SIX - OPERATING ACTIVITIES OF SANEPAR
6.1 In view of the fact that to achieve the objectives set forth in this
Agreement, the STATE established that SANEPAR will seek new technologies
for its operating activities, and that the sale of the SHARES by the STATE
and their purchase by the COMPANY presumed the execution of this strategy
in the provision of the public service, the PARTIES recognize that it is
essential to this Agreement that SANEPAR contract with a company that will
be responsible for transferring the necessary operating technology to
achieve the following goals and objectives:
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(a) achieving qualitative improvement of the services currently provided by
SANEPAR, according to quality, accessibility and universalization
standards compatible with those existing in developed markets;
(b) application and development of new technologies in sanitation services to
be provided in the state of Parana, modernization of operations and
introduction of telecomputing;
(c) reduction of the mismatch that currently exists between demand and supply
of the sanitation service, with the consequent expansion of waste service
and treatment in SANEPAR'S concession areas;
(d) implementation of the Quality and Productivity Program;
(e) establishment of means for efficient communication between end users and
SANEPAR that are of a quantity and quality capable of providing rapid
attention to service requests.
6.2 Subject to the principles established herein, as well as the criteria set
forth in the preceding item, the PARTIES will ensure that their
representatives on the administrative bodies of SANEPAR proceed, within 90
(ninety) days of the execution of this Agreement, to carry out the acts
necessary to initiate the implementation of the above provisions, by means
of a standard bidding procedure, for the purpose of contracting a basic
sanitation services operator with recognized experience and ability, which
will be responsible for transferring the operating technology needed to
achieve the aforementioned goals.
SEVEN - DISTRIBUTION OF SANEPAR'S INCOME
7.1 SANEPAR'S funds will be managed so as to ensure the highest possible
return for its shareholders, subject to the safety and investment
standards set forth in the BUSINESS PLAN and the ANNUAL BUDGET of SANEPAR.
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7.2 The PARTIES agree to vote, at the general shareholders' meetings of
SANEPAR that address the distribution of income, to approve the
distribution of the obligatory annual dividend and/or interest on own
capital, according to the terms of the BYLAWS and the Law of Stock
Corporations.
7.3 Aside from the aforementioned obligatory annual dividend, the PARTIES
agree to approve the distribution, as an additional dividend and/or as
interest on SANEPAR's own capital, of at least an additional 25%
(twenty-five percent) of net income. If SANEPAR decides that the
investments and obligations set forth in its BUSINESS PLAN and ANNUAL
BUDGET will be financed by means of issuance of securities or obtainment
of loans, the PARTIES may, by mutual agreement, approve the distribution
of other additional portions of net income, in the form of dividends or
interest on SANEPAR's capital.
EIGHT - ASSIGNMENT AND PLEDGE OF SANEPAR SHARES
8.1 Subject to the conditions established in this Shareholders' Agreement, in
Brazilian law and in the Constitution of the State of Parana, the PARTIES
may assign their SHARES, regardless of consent or preferential right of
the other PARTY.
8.2 In view of the fact that the STATE is continuing in the capacity of
controlling shareholder of SANEPAR, any assignment of SHARES by the STATE
may only occur in accordance with applicable legal and regulatory
provisions and must be for blocks of its SHARES so as to preserve the
inherent value of same.
8.2.1 In the event of any assignment by the STATE of SHARES or of subscription
rights that it holds, it will first be ensured that the purchaser will
abide by the terms of this Agreement and will sign it upon the transfer of
the SHARES to its name, so as to ensure performance of the rights and
obligations herein established.
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8.2.2 If the STATE decides to sell its stake in SANEPAR, the COMPANY may, if it
wishes, participate in the process on the same conditions as third
parties.
8.3 If the COMPANY reduces its stake, at any time, to less than 20% (twenty
percent) of the common shares of SANEPAR, this Agreement will be
terminated in full.
8.4 Either of the PARTIES may pledge the SHARES it owns. However, the
provisions above are applicable if, while the pledge is in effect, the
SHARES are transferred to third parties.
8.5 The COMPANY may only assign the SHARES it owns to a legal entity that is
its parent company, its subsidiary, or is under common control with it,
provided that (a) the assignee expressly states in writing that it
unconditionally accepts the terms of this Agreement, and (b) the assignee
continues to be a parent company, subsidiary or under common control with
the COMPANY. In this case, the COMPANY and its assignee will jointly
exercise the rights attributed by this Agreement to the COMPANY, and will
be jointly and severally liable for their respective obligations.
8.6 Any assignment or pledge of the SHARES that does not comply with the
provisions of this Clause will be null, and the respective transfer or
notation in the books of SANEPAR is prohibited.
NINE - BREACH OF CONTRACT AND SPECIFIC PERFORMANCE
9.1 In view of the nature of this Shareholders' Agreement, the PARTIES
recognize that if there is a breach of the obligations assumed hereunder,
any indemnification of losses and damages does not constitute sufficient
reparation. Therefore, without prejudice to the losses and damages that
may occur, any obligation to which reference is made herein that is not
performed by either of the PARTIES may be the object of specific
performance by means of a judicial order for supply or replacement of the
act, vote or measure performed, rejected, or omitted contrary to the
provisions of this Agreement, in accordance with the applicable
provisions.
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9.2 The PARTIES will be liable, respectively, for the direct and indirect
losses that each causes the other, as well as those caused to SANEPAR, due
to failure to perform in a timely manner the obligations attributed by
this Agreement, except, however, for lost profits.
TEN - MISCELLANEOUS PROVISIONS
10.1 The PARTIES agree, for themselves and for their successors of any kind, to
perform this Agreement according to the conditions set forth herein.
10.2 Failure to exercise, in whole or in part, the rights attributed by this
Agreement to either of the PARTIES does not imply waiver, renunciation or
novation; rather, it constitutes an act of mere tolerance.
10.3 Any amendment to this Agreement will be valid only if it is in the form of
a written document signed by the legal representatives of both PARTIES.
10.4 If any provision of this Agreement is deemed unenforceable by virtue of a
government or judicial decision, the PARTIES agree to replace that
provision by another that produces an equivalent result so as to preserve,
to the maximum extent possible, the integrity of the commitments mutually
assumed hereunder.
10.5 Aside from the other obligations and commitments assumed by the STATE in
this AGREEMENT, the STATE further agrees to:
(a) implement proposals to develop alternative forms of capitalization, in
order to provide flexibility to the capital structure of SANEPAR;
(b) make its best efforts to eliminate factors that restrict the flexibility
of administrative and management actions of SANEPAR, in order to provide
it with conditions under which it may achieve its objectives, and ensure
it the necessary administrative autonomy;
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(c) exempt performance of the following operating activities of SANEPAR from
prior authorization by the State Executive Branch, except for those cases
established by law:
(c.1) selection, hiring, compensation, promotion, training and development
of personnel, as well as the practice of any other operating
activities related to human resources;
(c.2) negotiation and execution of collective labor agreements of an
economic or legal nature, subject to the parameters and goals agreed
upon herein;
(c.3) taking of trips by managers and employees;
(c.4) arrangement and renewal of credit transactions of any kind with
financial institutions and with suppliers of goods and/or services,
whether domestic or international, including commercial leases, and
also the issuance of bonds and any other securities in the domestic
and international markets, subject to the limits established by the
BYLAWS;
(c.5) arrangement and renewal of loan transactions and financing,
discounted paper, and commercial leases of any kind, performed by
financial institutions and commercial leasing companies; and
(c.6) drafting, execution and revision of the plan, budget, and expansion
plan of SANEPAR.
10.6 Aside from the other obligations and commitments assumed by the COMPANY in
this AGREEMENT, the COMPANY further agrees to make its knowledge available
to SANEPAR in order to support the technical, operating, commercial,
financial and management areas with the objective of developing and
improving the services and improving the profitability and productivity of
SANEPAR, as follows:
(a) human resources, including fully qualified professionals;
(b) methods and programs designed to reduce system losses;
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(c) methods for analyzing the technical and economic/financial feasibility of
projects;
(d) methods for evaluating the business data of SANEPAR in order to provide it
with management, operating and marketing tools compatible with the new
needs of the business environment;
(e) technical studies designed for the development, implementation and
operation of the services; and
(f) studies of alternative sources of obtaining financial resources from the
domestic and international capital markets.
10.6.1 The commitments assumed in this Agreement will not include services
involving licenses or intellectual property rights owned by the COMPANY,
which will be dependent upon specific contracting in accordance with
applicable law.
ELEVEN - TEMPORARY PROVISIONS
11.1 In order to carry out the terms of this Agreement with regard to the
composition of the [administrative] bodies of SANEPAR, the PARTIES will
hold, within 30 (thirty) days of the execution of this Agreement, a
General Shareholders' Meeting or General Shareholders' Meetings whose
purpose will be to:
(a) amend the BYLAWS so as to accurately reflect the form attached hereto,
which forms an integral part of this Agreement, and
(b) elect the members of the Board of Directors, subject to the provisions of
the relevant clauses of this Agreement with regard to the filling of the
respective positions.
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11.1.1 The PARTIES agree to vote in a block at the General Shareholders' Meeting
to approve the resolutions passed with regard to performance of this
Agreement. In addition, the PARTIES agree to ensure that within 30
(thirty) days of the aforementioned General Shareholders' Meeting, the
Board of Directors will elect the Management Board of SANEPAR in
accordance with the provisions set forth in this Shareholders' Agreement
11.2 In order to provide liquidity for a portion of the shareholdings of the
PARTIES without compromising the power of control, the PARTIES agree to
initiate, within 6 (six) months of the date of this Agreement, the process
of making SANEPAR'S capital public by making it a public company, pursuant
to the Law of Stock Corporations and the regulations of the Securities
Commission, and to pass all shareholder resolutions and make all
administrative decisions necessary to this end.
11.3 The PARTIES will exert their best effort to seek alternatives that make it
possible, at a reasonable cost, to convert part of their common shares to
preferred shares, so that the capital structure of SANEPAR approaches or
reaches the limit of 2/3 preferred shares.
TWELVE - NOTICES
12.1 Any notices that must be exchanged between the PARTIES by reason of this
Agreement will be given in writing, through a letter or fax confirmed by a
letter, with proof of receipt, to the following addresses:
STATE: Secretaria de Estado da Fazenda [State Secretary of Finance] Rua
Vicente Machado, no. 445 - Curitiba - PR - CEP 80420-010
COMPANY:
Av. Candido de Abreu, no. 651, 4(0) andar - Curitiba - PR - CEP 80530-907
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[initials]
THIRTEEN - FILING
13.1 This Agreement will be filed by SANEPAR in accordance with the law.
SANEPAR agrees to ensure that this is properly done and to notify the
PARTIES promptly of any act or omission that is in violation of the
conditions herein established.
FOURTEEN - LIFE
14.1 This Agreement will have a life of 15 (fifteen) years, as of the date on
which it is signed.
FIFTEEN - APPLICABLE LAW AND DISPUTES
15.1 This Agreement will be governed solely by Brazilian laws.
15.2 The parties will attempt to resolve amicably their differences regarding
this Agreement, in the spirit of good faith that inspires them. However,
if it is not possible to reach an amicable solution to the disputes that
may arise with regard to the interpretation or application of this
instrument, they will be definitively resolved by means of arbitration,
carried out in accordance with the Rules of Arbitration of the
International Chamber of Commerce of Paris, by three arbitrators appointed
pursuant to the aforementioned rules. The arbitration will take place in
the city of Curitiba and will be conducted in the Portuguese language.
15.3 For enforcement of the arbitration decision and disputes requiring
resolution that cannot be submitted to arbitration, the applicable
jurisdiction will be Curitiba, State of Parana, to the exclusion of any
other, regardless of category.
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[initials]
It having been so agreed, the parties hereby sign 3 (three) identical copies of
this document, having a single tenor and purpose, together with the witnesses
appearing below.
Curitiba, September 4, 1998
[signature]
Giovani Gionedis
SECRETARY OF STATE OF THE STATE OF PARANA
[signature] [signature]
Jose Renato de Camargos - Christophe Malik Akli
DOMINO HOLDINGS S/A
Accepted and agreed:
[signature]
SANEPAR - SANEAMENTO DO PARANA S.A.
Witnesses:
(a) [signature] (b) [signature]
Name: Josh Luiz C. Taborda Rauen Name: Ninon Cristiane Sovierzoski
Taxpayer ID: 254.801.119-49 Taxpayer ID: 355.556.029-87
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