UNOFFICIAL ENGLISH TRANSLATION OF
MAIN PROVISIONS OF THE FINANCING AGREEMENT
BETWEEN TELEMATICA AND INTERANET
This Financing Agreement (the "Agreement") is made by and between Telematica
EDC, C.A. ("TELEMATICA") and Interamerican Net de Venezuela, S.A. ("INTERANET").
TELEMATICA and INTERANET are sometimes hereinafter referred to individually as a
"Party" and collectively as "Parties."
CLAUSE ONE
TELEMATICA shall lend to INTERANET a sum not to exceed Twenty Six
Million United States Dollars (US$26,000,000), which, solely for purposes of
complying with the Venezuelan Central Bank Law, is the equivalent of Sixteen
Billion Three Hundred Eighty Six Million Five Hundred Thousand Bolivars (Bs.
16,386,500,000). This sum shall be paid in its equivalent in Bolivars at the
times set forth in this Agreement.
CLAUSE TWO
TELEMATICA shall deliver to INTERANET the sum of Seven Million United
States Dollars (US$7,000,000), which, solely for purposes of complying with the
Venezuelan Central Bank Law, is the equivalent of Four Billion Four Hundred
Eleven Million Seven Hundred Fifty Thousand Bolivars (Bs. 4,411,750,000) to be
used as working capital.
TELEMATICA shall make additional [semiannual payments] until the
completion of the remaining Nineteen Million United States Dollars
(US$19,000,000), which, solely for purposes of complying with the Venezuelan
Central Bank Law, is the equivalent of Eleven Billion Nine Hundred Seventy Four
Million Seven Hundred Fifty Thousand Bolivars (Bs. 11,974,750,000), in order to
perform the following obligations: (A) to make the lease payments under a
leasing of fiber optic agreement entered into by C.A. Electricidad de Caracas
("EDC") and INTERANET (the "Lease Agreement") for the lease of dark fiber
strands; and (B) to make payments due to Administradora Serdeco, C.A.
("SERDECO") under a commercial services agreement entered into by SERDECO and
INTERANET (the "Commercial Services Agreement"). For the above purpose,
INTERANET shall deliver to TELEMATICA duly approved invoices pertaining the
Lease Agreement and the Commercial Services Agreement and TELEMATICA shall make
the payments within three (3) business days after such delivery. The Lease
Agreement and the Commercial Services Agreement shall be negotiated in good
faith in order to satisfy the technical, commercial, and reliability and safety
requirements of the Parties.
The sums loaned by TELEMATICA shall earn an annual interest rate of
three percent (3%), which shall be calculated over the sums actually paid and
delivered to INTERANET by TELEMATICA under this Agreement. Such interests shall
be capitalized semiannually during the first four (4) years from the execution
of this Agreement and shall be paid semiannually to TELEMATICA after the end of
the fourth year. Any amount not paid by INTERANET to TELEMATICA when due shall
bear an annual interest from the date due until paid at a rate equal to five
percent (5%).
CLAUSE THREE
INTERANET shall deliver a promissory note to TELEMATICA for the amount
provided in the first paragraph of Clause Two [e.g., US$7,000,000], which shall
be delivered on the date of such disbursement. INTERANET shall deliver new
promissory notes to TELEMATICA for all subsequent disbursements. Such promissory
notes shall be substituted every six (6) months for a single promissory note
consolidating all the sums delivered to INTERANET under this Agreement as
adjusted pursuant to the inflation adjustment provision established in Clause
Five.
TELEMATICA in lieu of requiring the repayment of the loans, TELEMATICA
shall have the option to convert the credit derived from the loans into shares
of INTERANET, before the maturity thereof pursuant to Clause Four. TELEMATICA
may exercise such right after the expiration of the third year from the
execution of this Agreement. TELEMATICA may also exercise this right before the
expiration of the third year upon the occurrence of any of INTERANET's event of
default under Clause Four.
The right of conversion into shares shall only be exercised for the
total amount of the loans actually disbursed simultaneously with the exercise of
the subscription right to acquire shares pursuant to Clause Seven. The separate
or partial exercise of any of the rights of conversion or susbcription of shares
shall not be accepted.
The rights of credit derived from the loans, the Promissory Note, and
any other rights of TELEMATICA under this Agreement are part of the same
negotiation, and therefore, are transferable only when such transfer is for the
totality of such rights to only one transferee, which shall be an affiliate of
TELEMATICA or Convergence Communications, Inc. ("CCI") or an affiliate of CCI.
For purposes of this Agreement, the term "Affiliate" means an entity that
controls, is controlled or is under common control of TELEMATICA or CCI
respectively.
The amounts due by TELEMATICA, evidenced by the promissory notes, shall
be converted into shares, which value shall be determined in such manner that
the totality of the loans that TELEMATICA has the right to convert into shares
plus the nominal value of the shares that TELEMATICA has the right to subscribe,
shall be equal to a fifty percent (50%) of the capital stock of INTERANET at the
time such shares are subscribed.
In the event EDC defaults under the Lease Agreement and such default
results in its termination, TELEMATICA shall make an election from one of the
following options: (A) allow that loans to be provided under the second
paragraph of Clause Two are applied for paying the rent due to a different
lessor for the leasing of fiber optic, or (B) exercise its rights to convert and
subscribe shares provided in Clauses Three and Seven.
CLAUSE FOUR
The loans under this Agreement shall be paid in Bolivars on October 31
of 2015 with the adjustments provided under this Agreement, unless TELEMATICA
has previously exercised its right of conversion [and subscription], as provided
in the preceding Clause. This term has been agreed upon by the Parties in their
benefit. Consequently, INTERANET shall not prepay the loan until such term has
elapsed.
Once the conversion into shares is exercised, the Parties shall enter
into a shareholder agreement which shall have been negotiated in good faith,
pursuant to which CCI shall be granted sufficient control to allow it to
consolidate for accounting purposes its investment, so long as TELEMATICA's
participating interest is protected.
The interests shall be paid semiannually on April 30 and October 31 of
each year, starting on April 30 of 2004 until October 31 of 2015.
However, the total amount of the loans shall be considered past due and
owned if:
1) INTERANET defaults under the Lease Agreement and the Commercial Services
Agreement resulting in the termination of such Agreements.
2) The concessions granted to INTERANET identified in Annex D are revoked
due to INTERANET's default under such concessions without recourse to any
administrative or judicial procedure.
3) INTERANET pays dividends before the fourth year from the date of the
execution of this Agreement or after the fourth year from the execution
of this Agreement without complying with numeral six of Clause Six.
4) INTERANET increases or decreases its capital stock.
5) INTERANET issues options, debt instruments which may be convertible into
shares, warrants or any other kind of instruments which may require
INTERANET to issue additional shares.
6) INTERANET amends its articles of incorporation, its conditions for
issuing shares, or the nominal values of its shares.
7) INTERANET incurs indebtedness or INTERANET pledges assets for an amount
exceeding an amount over ten percent (10%) of the amounts loaned to
INTERANET under this Agreement.
8) INTERANET conveys or leases all or an important portion of its assets,
the aggregate of which exceeds Two Hundred Fifty Thousand United States
Dollars (US$250,000); or ceases participating in the telecommunications
business in Venezuela; or merges or consolidates with a another company,
or it is restructured or reorganized in any other form.
CLAUSE FIVE
All and every one of the amounts in Bolivars loaned by TELEMATICA to
INTERANET under this Agreement, the amounts to be loaned in the future under
this Agreement, as well as any other amount in Bolivars herein shall be indexed
semiannually in accordance with the CPI of the Metropolitan Area of Caracas
published by the Venezuelan Central Bank. Every six months the promissory notes
delivered by INTERANET shall be substituted by other promissory notes reflecting
such indexed amounts.
CLAUSE SIX: Obligations of INTERANET
1) INTERANET shall pay taxes and submit the corresponding tax returns,
obtain the required licenses, permits and concessions for the performance
of its activities and the expansion of the same; and in general, comply
with its obligations under applicable law.
2) Comply with the concession agreements identified in Annex A.
3) Keep accounting books and records in accordance with Venezuelan Generally
Accepted Accounting Principles, and applicable law.
4) Permit any representative duly designated in writing by TELEMATICA to (i)
visit and inspect any and all of the facilities, (ii) examine the books
and records, and (iii) provide copies of any documents requested in
writing by TELEMATICA in a period no longer than five (5) days after such
request has been delivered. TELEMATICA shall keep such information
provided by INTERANET confidential.
5) Obtain and maintain insurance in accordance with the telecommunications
sector standards.
6) The distributions of dividends shall be restricted during the term of
this Agreement in accordance with the following rules:
A) No dividends shall be paid for the first four (4) years from the
execution of this Agreement.
B) After the fourth year, dividends may be paid annually in accordance
with the following:
a. Dividends shall be paid in cash
b. The most recent payment of interests shall have been paid in
cash and shall not have been capitalized by TELEMATICA.
c. The dividends in cash may not exceed the paid amount in cash
to TELEMATICA in the most recent payment of interests.
7) INTERANET's capital stock may not be increased or decreased.
8) INTERANET may not issue options, debt instruments which may be
convertible into shares, warrants or any other kind of instruments, which
may require INTERANET to issue additional shares.
9) INTERANET shall not amend its articles of incorporation, its conditions
for issuing shares, or the nominal values of its shares.
10) INTERANET may not (i) incur indebtedness, or (ii) encumber assets for an
amount exceeding ten percent (10%) of the amounts loaned to INTERANET
under this Agreement.
11) INTERANET may not merge, consolidate with a another company, restructure
or reorganize in any other form.
12) INTERANET may not convey or lease its assets, the aggregate of which
exceeds Two Hundred Fifty Thousand United States Dollars (US$250,000).
CLAUSE SEVEN: Subscription Rights
Prior to the delivery of the amount established in the first paragraph
of Clause Two, an INTERANET's shareholders meeting shall be held approving and
granting TELEMATICA the subscription right to acquire shares of INTERANET,
through the payment of an amount of Twenty Six Million United States Dollars
(US$26,000,000), which solely for purposes of complying with the Venezuelan
Central Bank Law, is the equivalent of Sixteen Billion Three Hundred Eighty Six
Million Five Hundred Thousand Bolivars (Bs. 16,386,500,0000).
To the extent that INTERANET subscribes capital increases or increases
in any other form the number of shares before TELEMATICA's exercise of its
conversion right, TELEMATICA shall have the right to subscribe additional
shares, through the payment of an amount equal to such amount increased, so that
after exercising its conversion and subscription rights and the subscription of
additional shares pursuant to this paragraph, the result of TELEMATICA's
exercise of all such rights shall be equal to fifty percent (50%) of INTERANET's
capital stock.
The number of shares subject to the subscription right shall decrease
to the extent that amount of the loans evidenced by the promissory notes
referred to in Clause Three of this Agreement increases, so that the shares
resulting from exercising such conversion and subscription rights shall always
be equal to fifty percent (50%) of INTERANET's capital stock, after the
shareholders' meeting approving such increase in the capital stock has occurred.
The Parties shall agree upon (i) the content of the form of Shareholders'
meeting approving the increase of INTERANET's capital stock, and (ii) an
explanatory table in connection with TELEMATICA's exercise of its conversion and
subscription rights. Such form and table shall be annexed to this Agreement.
CLAUSE EIGHT: Rights to Cease Providing Funds
In the event that an administrative authority or a court issues a
decree, law, resolution, decision or any other judicial or administrative act
which adversely affects the conditions of INTERANET or its capacity to comply
with its obligations under this Agreement, TELEMATICA shall have the right to
cease providing funds to INTERANET.
CLAUSE NINE
This Agreement shall be terminated upon TELEMATICA's exercise of its
option to convert its credit derived from the sums loaned to INTERANET into
shares of INTERANET, for the total amount of the loans simultaneously with its
right to acquire shares established in Clause Seven.
CLAUSE TEN: Dispute Resolution
- Good faith negotiations (amicable resolution)
- Conciliation Process:
- bilingual conciliator (Spanish-English)
- application of ICC Rules of Optional Conciliation
- New York
- Arbitration:
- 3 bilingual arbitrators (Spanish-English) experienced in
the telecommunications and business transactions sectors
- International Chamber of Commerce Arbitration Rules
- New York
CLAUSE ELEVEN: Obligations of WCI de Venezuela, C.A.
WCI de Venezuela, C.A. ("WCI") is (i) joined in this Agreement, (ii)
obligated to do everything under its control to comply with the provisions of
this Agreement, and (iii) a joint and several guarantor of INTERANET in order to
ensure INTERANET's compliance with its contractual obligations under this
Agreement.
WCI shall transfer to a bank or an insurance company all shares to
which is titleholder before TELEMATICA's delivery of the amount established in
Clause Two in order to ensure that INTERANET and WCI comply with its contractual
obligations under this Agreement in accordance with a trust agreement which
shall be negotiated in good faith and shall be annexed to this Agreement.
CLAUSE TWELVE: Waiver of Contractual Rights
The waiver may only be obtained with the written consent of the other
Parties.
CLAUSE THIRTEEN: Notice
CLAUSE FOURTEEN: Governing Law
This Agreement shall be governed by the laws of Venezuela.