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.......................6
(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...............................11
(b) Authorization of Transaction................................11
(c) Noncontravention............................................11
(d) Brokers' Fees...............................................12
(e) Investment Intent...........................................12
(f) Restrictive Legend..........................................12
(g) Accredited Investor.........................................13
(h) HSR Warranty............................................... 14
4. Representations and Warranties of the Company Concerning
the Company and its Subsidiaries.....................................14
(a) Organization, Qualification and Corporate Power.............14
(b) Authorization of Transaction................................15
(c) Capitalization..............................................15
(d) Noncontravention............................................16
(e) Intellectual Property; Permits and Licenses.................17
(f) Financial Statements; Financial Condition...................20
(g) Taxes.......................................................21
(h) Employees and Labor Contracts...............................21
(i) Environmental Laws and Regulations..........................22
(j) Litigation..................................................22
(k) Bankruptcy..................................................22
(l) Ordinary Course.............................................23
(m) Brokers.....................................................23
(n) Contracts...................................................23
(o) Compliance with Laws........................................23
(p) Business Plan and Use of Proceeds...........................24
(q) Complete Statements.........................................24
(r) Reports.....................................................24
(s) Related Party Transactions..................................25
(t) Foreign Corrupt Practices Act...............................25
(u) No Bank Regulation..........................................25
(v) Property; Assets............................................25
(w) Employee Benefits...........................................26
(x) U.S. Employee Plans.........................................26
(y) Insurance...................................................27
(z) IFC Policies................................................27
(aa) HSR Warranty................................................27
5. Pre-Closing Covenants................................................27
(a) General.....................................................28
(b) Notices and Consents........................................28
(c) Operation of Business.......................................28
(d) Preservation and Conduct of Business........................28
(e) Full Access.................................................28
(f) Notice of Developments......................................29
6. Conditions to Obligations............................................29
(a) Conditions to Obligations of Each Investor at the Closing...29
(b) Conditions to Obligations of the Company at the Closing.....30
(c) Conditions to Obligations at the Subsequent Closing.........30
7. Indemnity............................................................31
8. Termination..........................................................34
(a) Termination of Agreement....................................34
(b) Effect of Termination.......................................35
(c) Specific Performance........................................35
9. D'Ambrosio Participation.............................................35
10. Removal of Legend;Use of Proceeds....................................36
11. Miscellaneous........................................................36
(a) Press Releases and Public Announcements.....................36
(b) No Third Party Beneficiaries................................36
(c) Entire Agreement............................................36
(d) Succession and Assignment...................................36
(e) Counterparts................................................37
(f) Headings....................................................37
(g) Notices.....................................................37
(h) Governing Law...............................................39
(i) Amendments and Waivers......................................40
(j) Severability................................................40
(k) Expenses....................................................40
(l) Construction................................................40
(m) Incorporation of Attachments and Exhibits...................41
(n) Disputes....................................................41
(o) Special IFC Covenants.......................................42
(p) Reporting to IFC............................................42
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 Consents
. Each 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 Participation
. Subject to the satisfaction or waiver of the conditions to the
Company's obligation to consummate the transactions contemplated hereby
as set forth in Section 6(b), each of the D'Ambrosios agrees to execute
and deliver the CCI Shareholder's Agreement at the Closing. Each
D'Ambrosio hereby represents and warrants to the Company and each
Investor that (i) he or it has full power and authority to execute and
deliver the CCI Shareholders' Agreement and to perform his or its or
obligations thereunder, (ii) the CCI Shareholders' Agreement, when
executed and delivered by him or it, will constitute his or its legally
binding obligation, enforceable 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, (iii) there is no requirement of
Applicable Law that any notice be given, nor any filing, authorization,
consent or approval or any governmental agency be obtained in order
that he or it may execute and deliver the CCI Shareholders' Agreement,
and (iv) neither the execution nor the delivery by him or it of the CCI
Shareholders' Agreement will violate any Applicable Laws to which he or
to which it is subject or conflict with, result in the breach of,
constitute a default under, result in the acceleration of or create in
any party the right to accelerate, terminate, modify or cancel, any
agreement to which he or to which it is subject.
10. Removal of Legend;Use of Proceeds.
. The Company agrees to remove, at the request of an Investor, any
legend placed on the Investor's certificate covering any securities
issued pursuant to this Participation Agreement or any of the
Transaction Documents in order to comply with the requirements of U.S.
Securities Laws at such time as no longer required thereby. The Company
agrees that 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 the Participation Agreement.
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
-----------------------------------
Its:
-----------------------------------
TELEMATICA EDC, C.A.
By: /s/ Noberto Corredor
-----------------------------------
Its: Duly Authorized
-----------------------------------
TCW/CCI HOLDING LLC
By: /s/ Mario L. Baeza
-----------------------------------
Its: Chairman and CEO
-----------------------------------
INTERNATIONAL FINANCE CORPORATION
By:
-----------------------------------
Its:
-----------------------------------
GLACIER LATIN-AMERICA LTD.
By: /s/ David Liebman
-----------------------------------
Its: Assistant Treasurer
-----------------------------------
FONDELEC ESSENTIAL SERVICES
GROWTH FUND, L.P.
By: FondElec E.S.G.P. Corp.
Its: General Partner
By: /s/ Gaston Acosta-Rua
-----------------------------------
Its: Director
-----------------------------------
INTERNEXUS S.A.
By: /s/ Peter Schiller
-----------------------------------
Its: Duly Authorized
-----------------------------------
JOINDER FOR PURPOSES OF SECTION 9:
/s/ Lance D'Ambrosio
---------------------------------------
Lance D'Ambrosio
/s/ Troy D'Ambrosio
---------------------------------------
Troy D'Ambrosio
ESTATE OF GEORGE S. D'AMBROSIO
By: /s/ Lance D'Ambrosio
-----------------------------------
Its:
-----------------------------------
EXHIBITS SCHEDULES
-------- ---------
1. Exhibit A CCI Stock Purchase Agreement 1. Schedule 1 Definitions
2. Exhibit B Option Agreement 2. Schedule 2 Rights and Preferences
of Series C Shares
3. Exhibit C Series C Warrant 3. Schedule 3 Use of Proceeds
Summary
4. Exhibit D FondElec/Internexus Warrant
5. Exhibit E CCI Shareholders' Agreement
6. Exhibit F Registration Rights Agreement
7. Exhibit G Salvador Subscription Agreement
8. Exhibit H Salvador Shareholders' Agreement
9. Exhibit I Colombia Letter of Intent
10.Exhibit J Closing Opinions
Exhibit J-1 Thelen Reid & Priest LLP Enforceability Opinion
Exhibit J-2 Parsons Behle & Latimer Estate Opinion
Exhibit J-3 Parsons Behle & Latimer Corporate Opinion
11.Exhibit K Partial Release of the Salvador Note
12.Exhibit L Subsequent Closing Opinion
13.Exhibit M CCI Salvador's Acknowledgment of Capitalization of
Inter-company Receivable
14.Exhibit N Financial Statements
15.Exhibit O IFC Policies
16.Exhibit P Example of Indemnity Calculations
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.