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Exhibit 10.5
EXECUTION COPY
SHAREHOLDERS AGREEMENT
Dated as of March 2, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES......4
1.1 Existence and Power; Due Authorization, Etc.; Governmental
Authorization; Non-Contravention....................................4
1.2 Intentionally omitted...............................................5
1.3 Legal Compliance....................................................5
1.4 Covenants...........................................................6
1.5 Bylaws..............................................................6
1.6 Purchaser...........................................................6
1.7 Confidentiality.....................................................6
ARTICLE II CORPORATE GOVERNANCE..........................................7
2.1 Election of Directors...............................................7
2.2 Supermajority Requirements for Certain Actions by the Corporation..10
2.3 Supermajority Requirements for Certain Actions by Shareholders.....11
2.4 Resolution of Deadlock.............................................12
ARTICLE III DECLARATION OF DIVIDENDS.....................................12
ARTICLE IV RESTRICTION ON DISPOSITION OF SHARES AND PURCHASER INTERESTS.13
4.1 General Restriction................................................13
4.2 Permitted Transfers by Purchaser...................................14
4.3 Permitted Transfers by Purchaser Group.............................15
4.4 Tag-Along Rights...................................................15
4.5 Purchaser Group's Right of First Refusal...........................19
ARTICLE V OPTION.......................................................21
5.1 Option to Acquire Shares...........................................21
ARTICLE VI REGISTRATION RIGHTS..........................................21
6.1 Definitions........................................................21
6.2 Required Registration..............................................22
6.3 Corporation Registration...........................................25
6.4 Registration Procedures............................................25
ARTICLE VII MISCELLANEOUS................................................34
7.1 Financial Statements...............................................34
7.2 Books, Records and Inspections.....................................34
7.3 Endorsement of Stock Certificates..................................34
7.4 Products and Services..............................................35
(ii)
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ARTICLE VIII TERMINATION..................................................35
8.1 Termination........................................................35
8.2 Survival...........................................................36
ARTICLE IX INTENTIONALLY OMITTED........................................36
ARTICLE X GENERAL PROVISIONS...........................................36
10.1 Notices............................................................36
10.2 No Waiver..........................................................38
10.3 Agreement to Perform Necessary Acts................................38
10.4 Modification.......................................................38
10.5 Counterparts.......................................................39
10.6 Severability.......................................................39
10.7 Entire Agreement...................................................39
10.8 Governing Law......................................................39
10.9 Headings...........................................................39
10.10 Construction.......................................................39
10.11 Binding Effect; Assignment.........................................39
10.12 Equitable Relief...................................................40
10.13 Fees; Expenses.....................................................40
10.14 Submission to Jurisdiction; Venue..................................41
10.15 Subsequent Parties.................................................42
10.16 Initial Public Offering............................................42
10.17 FCC Compliance.....................................................43
(iii)
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DEFINED TERMS
Defined Term Section Where Defined
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Acceptance .......................................... 4.5(b)
Act.................................................. 6.1(a)
1934 Act............................................. 6.4(f)(i)
Act No. 54........................................... Recitals
Additional Purchase Election......................... 4.4(b)
Affiliate............................................ 2.2(d)
Authorizing Legislation.............................. Recitals
Board................................................ 2.1(a)
comfort.............................................. 6.4(a)(vii)
control.............................................. 2.2(d)
Preamble and Corporation............................. Section 2.1(a)
Directors............................................ 2.1(a)
Dividend Policy...................................... Article III
GDB.................................................. 10.11
Government Directors................................. 2.1(b)
Government Nominee................................... 2.1(c)
GTE Permitted Transferees............................ 2.1(b)
Holder............................................... 6.1(c)
Indemnitee........................................... 6.4(f)(i)
Initial Ownership Interests.......................... Recitals
Market Stand-Off Agreement........................... 6.4(g)
Minimum Number....................................... 6.2(c)
NASDAQ............................................... 6.4(h)
Offer................................................ 4.5(a)
Offered Shares....................................... 4.4(a)
Offer Notice......................................... 4.5(a)
Option............................................... 5.1
Permitted Transferees................................ 4.3(a)
Person............................................... 2.2(d)
Piggy Back Registration.............................. 6.3
Pre-Acquisition Exercise............................. 4.2(e)
Proposed Transferee.................................. 4.5(a)
pro rata portion..................................... 4.4(b)
PRTA................................................. Preamble
PRTC................................................. Recitals
Puerto Rico.......................................... Preamble
Puerto Rico Entities................................. 2.1(b)
Purchaser............................................ Preamble
Purchaser Directors.................................. 2.1(b)
(iv)
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DEFINED TERMS
Defined Term Section Where Defined
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Purchaser Group...................................... Preamble
Purchaser Interests.................................. Recitals
register............................................. 6.1(a)
Registered Securities................................ 6.1(b)
Returns.............................................. 1.3(a)
SEC.................................................. 6.1(d)
Seller............................................... 4.4(a)
Selling Holder....................................... 6.4(b)
Shareholder.......................................... Recitals
Shares............................................... Recitals
Stock Purchase Agreement............................. Recitals
Strategic Purchaser.................................. Preamble
Tag-Along Notice..................................... 4.4(a)
Tag-Along Transaction................................ 4.4(b)
Total PR Shares...................................... 4.4(b)
Transfer............................................. 4.1
Violation............................................ 6.4(f)(i)
(v)
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SHAREHOLDERS AGREEMENT
AGREEMENT dated as of March 2, 1999 among Telecomunicaciones de Puerto
Rico, Inc. (the "Corporation"), a Puerto Rico corporation, GTE Holdings (Puerto
Rico) LLC, a Delaware limited liability company ("Purchaser"), GTE International
Telecommunications Incorporated, a Delaware corporation and the sole holder of
equity interests of Purchaser ("Strategic Purchaser"), Popular, Inc., a Puerto
Rico corporation (together with Purchaser and Strategic Purchaser, the
"Purchaser Group"), and Puerto Rico Telephone Authority ("PRTA"), a public
corporation and government instrumentality of the Commonwealth of Puerto Rico
("Puerto Rico"), and the shareholders of the Corporation who or which shall from
time to time be parties hereto as provided herein.
WITNESSETH
WHEREAS, pursuant to Act No. 54 of August 4, 1997 ("Act No. 54") and Joint
Resolution No. 209 of June 24, 1998 (collectively, the "Authorizing
Legislation"), PRTA organized the Corporation for the purpose of transferring to
the Corporation all of the issued and outstanding shares of the common stock of
Puerto Rico Telephone Company, Inc. ("PRTC") and Celulares Telefonica, Inc.
("CTI"), each a Puerto Rico corporation, in exchange for shares of common stock
of the Corporation and a cash payment of $100,000;
WHEREAS, on Xxxxx 0, 0000 XXXX became the owner of all the capital stock
of the Corporation, which in turn became the owner of all the capital stock of
PRTC and CTI;
WHEREAS, PRTA was, prior to the date hereof, the owner of all the issued
and outstanding shares, par value $0.01 per share, of the Corporation (the
"Shares");
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WHEREAS, Purchaser was formed by Strategic Purchaser, which owns 100% of
the issued and outstanding equity interests of Purchaser (the "Purchaser
Interests"), for the specific purpose of purchasing Shares;
WHEREAS, Purchaser, Strategic Purchaser, PRTA and the Puerto Rico
Telephone Company, a Delaware corporation ("PRTC"), entered into an Amended and
Restated Stock Purchase Agreement dated as of July 21, 1998, (as amended, the
"Stock Purchase Agreement"), whereby Purchaser, subject to Section 6.05 thereof,
agreed to purchase from PRTA Shares representing 51% plus one (1) share of the
total issued and outstanding Shares, pursuant to the terms and subject to the
conditions set forth therein;
WHEREAS, at the closing under the Stock Purchase Agreement the Authority
sold 10,000 Shares, constituting 1.0% of the outstanding Shares, to Purchaser
and Popular, Inc. jointly, and Purchaser and Popular, Inc. jointly contributed
such Shares to the employee stock ownership plan and trust referred to in
Section 8.02(l)(i) of the Stock Purchase Agreement;
WHEREAS, at the closing under the Stock Purchase Agreement the Authority
contributed 30,000 Shares, constituting 3.0% of the outstanding Shares, to the
employee stock ownership plan and trust referred to in Section 8.02(l)(i) of the
Stock Purchase Agreement;
WHEREAS, at the closing under the Stock Purchase Agreement the Authority
sold 30,000 Shares, constituting 3.0% of the outstanding Shares, to the employee
stock ownership plan and trust referred to in Section 8.02(l)(ii) of the Stock
Purchase Agreement;
WHEREAS, at the closing under the Stock Purchase Agreement the Authority
sold 99,900 Shares, constituting 9.99% of the outstanding Shares, to Popular,
Inc.;
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WHEREAS, PRTA, Purchaser and Popular, Inc. (hereinafter, each referred to
individually as a "Shareholder" and collectively as the "Shareholders") are the
registered and beneficial owners of 43% less 1 share, 40.01% plus one share, and
9.99%, respectively, of the total issued and outstanding Shares (such respective
initial ownership interests being referred to as the "Initial Ownership
Interests");
WHEREAS, each Shareholder desires to enter into this Agreement and legally
bind itself, its successors, and assigns, to provide for the stability of the
Corporation and to promote the continuity of its management and policies;
WHEREAS, the Shareholders desire to restrict the sale, assignment,
transfer, encumbrance and other disposition of the Shares and provide for
certain rights and obligations in respect thereto as hereinafter provided; and
WHEREAS, as one of the conditions imposed by PRTA in the Stock Purchase
Agreement and in consideration for PRTA's willingness to sell Shares pursuant to
the Stock Purchase Agreement, the members of the Purchaser Group are willing to
restrict the sale, assignment, transfer, encumbrance and other disposition of
their Shares and Purchaser Interests.
NOW, THEREFORE, it is agreed by and among the parties hereto as follows:
ARTICLE I
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PARTIES
1.1 Existence and Power; Due Authorization, Etc.; Governmental
Authorization; Non-Contravention.
(a) Existence and Power.
(i) PRTA represents and warrants to the other parties that PRTA is
validly existing as a public corporation under the laws of Puerto Rico and has
all requisite power, authority and legal right to conduct its affairs as
currently conducted.
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(ii) Each member, if an entity, of the Purchaser Group represents
and warrants to the other parties hereto that it is a Person duly incorporated
or formed, validly existing and in good standing under the laws of its
jurisdiction of incorporation or formation.
(b) Due Authorization, Etc. Each of the parties hereto represents and
warrants to each other that: (i) it has full right, power and authority to
execute, deliver and perform this Agreement; (ii) all actions necessary or
required to be taken by or on its part to execute, deliver and perform this
Agreement have been duly authorized and approved by all necessary or required
corporate or company action and have been validly taken; and (iii) this
Agreement has been duly executed and delivered by it and is a valid and binding
agreement enforceable in accordance with its terms, except to the extent that
its enforceability may be subject to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity.
(c) Governmental Authorization. Each of the parties hereto represents and
warrants to each other that the execution, delivery and performance by it of
this Agreement requires no action by or in respect of, or filing with, any
Puerto Rico or United States Governmental Authority other than: (i) those which
have been obtained as of the date hereof; (ii) compliance with any applicable
requirements of the Communications Act of 1934, as amended, and any rules,
regulations, practices and policies promulgated by the United States Federal
Communications Commission; (iii) compliance with any applicable requirements of
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"); (iv) compliance with any applicable requirements of the
Telecommunications Regulatory Board of
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Puerto Rico; and (v) the approval, if required, of the Board of Governors of the
Federal Reserve System with respect to Popular, Inc.
(d) Non-Contravention. Each of the parties hereto represents and warrants
to the other parties hereto that the execution, delivery and performance by it
of this Agreement do not and will not (i) contravene or conflict with (x) Act
No. 54, or (y) its governance documents, or (ii) assuming compliance with the
requirements referred to in Section 1.01(c)(i) - (v), contravene or conflict
with or constitute a violation of any provision of any Puerto Rico or United
States law, regulation, judgment, injunction, order or decree binding upon or
applicable to it.
1.2 Intentionally omitted.
1.3 Legal Compliance. Each member of the Purchaser Group represents that
it has complied with the requirements of Article 8(e) of Act No. 54 and each
certifies that:
(a) Except as described in writing to the Authority (i) any tax returns,
statements, reports and forms which were required to be filed by it and its
affiliates within the past five years with respect to its activities in Puerto
Rico (collectively, the "Returns") have been filed in accordance with any
applicable laws; (ii) it and its affiliates have timely paid taxes payable to
any Puerto Rico taxing authority (including payments in respect of unemployment
benefits, workmen's compensation, social security for chauffeurs and withholding
taxes), if any, shown as due and payable on the Returns that have been filed;
and (iii) there is no action, suit, proceeding, audit or claim pending or, to
the knowledge of such party, proposed against or with respect to it or its
affiliates in respect of any tax payable to any Puerto Rico taxing authority.
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(b) It has not paid and it will not pay any commission or bonus, and it
has not granted any direct or indirect financial benefit, to any public official
or employee, nor to any former public official or employee, participating in the
privatization process of the Corporation while discharging his/her public
service duties.
1.4 Covenants. Each party agrees to comply with the provisions of this
Agreement and agrees, to the extent within its power, to cause the Corporation
to comply with its obligations hereunder.
1.5 Bylaws. On the date hereof, the Bylaws of the Corporation and its
subsidiaries shall be amended to reflect the covenants, agreements and rights of
the parties contained in this Agreement.
1.6 Purchaser. Any representation, warranty, covenant or agreement
contained in this Agreement made by Purchaser is also made by Strategic
Purchaser on behalf of Purchaser.
1.7 Confidentiality. The parties hereto agree to maintain the
confidentiality of all non-public information concerning the Corporation and its
subsidiaries acquired by the parties hereto in the course of their exercising
their respective rights and performing their obligations under this Agreement;
provided, that, such information may be disclosed (i) to the employees,
directors, agents, attorneys, accountants and other professional advisors of the
parties who shall also be bound by the provision of this Section 1.7, (ii) upon
the request or demand of a Governmental Authority (as defined in the Stock
Purchase Agreement) having jurisdiction over such party, (iii) in respect to any
court order, (iv) which has been publicly disclosed other than in breach of this
Agreement, or (v) in connection with the exercise of any remedy hereunder.
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ARTICLE II
CORPORATE GOVERNANCE
2.1 Election of Directors.
(a) Election. The Shareholders shall elect members ("Directors") of the
Board of Directors of the Corporation (the "Board") in accordance with the
Bylaws of the Corporation and this Agreement. As used in this Article, the term
"Corporation" shall include all subsidiaries of the Corporation.
(b) Nominees. So long as PRTA and other entities of the Government of
Puerto Rico (excluding trusts that hold or own Shares for the benefit of the
employees of the Corporation or its subsidiaries) (collectively, the "Puerto
Rico Entities") collectively own (excluding Shares acquired after the date
hereof other than directly from the Corporation, its successors or any other
Puerto Rico Entity) at least 4% of the issued and outstanding Shares: (i) the
Board will have nine (9) Directors; (ii) the Puerto Rico Entities will
collectively be entitled to nominate, or take such action as shall be necessary
to cause the nomination of, three (3) Directors, so long as the Puerto Rico
Entities collectively own (excluding Shares acquired after the date hereof other
than directly from the Corporation, its successors or any other Puerto Rico
Entity) at least 25% of the issued and outstanding Shares, two (2) Directors so
long as the Puerto Rico Entities collectively own (excluding Shares acquired
after the date hereof other than directly from the Corporation, its successors
or any other Puerto Rico Entity) at least 15% of the issued and outstanding
Shares and one (1) Director so long as the Puerto Rico Entities collectively own
at least 4% (excluding Shares acquired after the date hereof other than directly
from the Corporation, its successors or any other Puerto Rico Entity) of the
issued and outstanding Shares (the "Government Directors"); and (iii) Purchaser
will be entitled to
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nominate, or take such action as shall be necessary to cause the nomination of,
five (5) Directors (the "Purchaser Directors") so long as Strategic Purchaser
and any wholly owned subsidiaries of GTE Corporation ("GTE Permitted
Transferees") own directly or indirectly collectively more than 20% of the
outstanding Shares.
(c) Ex Officio. For so long as the Puerto Rico Entities are entitled to
nominate at least (i) two (2) Directors, the Government Directors will include
or be, ex-officio, the President of the Government Development Bank for Puerto
Rico and a member of the Board of Directors of the Government Development Bank
for Puerto Rico (each a "Government Nominee") and (ii) one (1) Director, the
Government Director shall be a Government Nominee.
(d) Committees. For so long as the Puerto Rico Entities are entitled to
nominate at least one (1) Director, at least one of the Government Directors
will also be a member of the Audit and Finance Committees of the Board of the
Corporation to the extent such committees exist and except as otherwise required
by law or rules or listing requirements of stock exchanges or national market
systems on which Shares are listed or traded.
(e) Shareholder Action. Promptly upon the execution and delivery of this
Agreement, if requested by Strategic Purchaser, the Shareholders shall each
execute a written shareholders consent for purposes of electing the Directors at
a special shareholders' meeting called for such purpose. The Shareholders will
vote all Shares held by them in favor of, and the Corporation will take all
actions necessary (including calling special meetings of the Shareholders) to
cause the election of, the Government Directors and the Purchaser Directors
pursuant to the provisions of this Section 2.1 at such shareholders' meeting and
all subsequent shareholder and director meetings during the term of this
Agreement. The remaining Directors will be elected
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by majority vote of the Shares voted at any shareholder meetings at which
Directors are elected, or the Board to the extent then permitted by law.
(f) Vacancies. In the event of any vacancy on the Board, whether caused by
a Director's resignation, removal, death or otherwise, the successor to the
Director whose absence from the Board caused such vacancy shall be a person
nominated by the Shareholder who originally nominated such Director, if
applicable, unless a different allocation of Directors is required by Section
2.1(b), and the parties hereto agree to vote in favor of such successor.
(g) Removals. Any Government Director or Purchaser Director may be removed
only for cause, or with the consent of the Shareholder then entitled to such
Director.
(h) Negative Controls. Each of the Strategic Purchaser, Purchaser and the
Corporation agrees that it shall not grant, directly or indirectly, to any
Person (including but not limited to the members of the Purchaser Group), other
than Purchaser or Strategic Purchaser, any supermajority Director or shareholder
voting rights (or other governance rights disproportionate, compared to Shares
owned by Puerto Rico Entities, to the amount of Shares such other Person owns,
directly or indirectly) with respect to the Corporation other than those
disclosed in writing to the PRTA prior to the date hereof.
2.2 Supermajority Requirements for Certain Actions by the Corporation. The
Corporation may not take any of the following actions without approval by the
Board and without unanimous approval by the Government Directors for so long as
the Puerto Rico Entities collectively continue to own at least 10% of the
outstanding Shares:
(a) Any acquisition, strategic alliance or joint venture involving a
dollar amount equal to, or in excess of, 15% of the
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total assets of the Corporation or enter into any agreement with respect
thereto;
(b) The issuance of equity securities or securities exercisable or
exchangeable for or convertible into equity securities;
(c) Any amendment to the dividend policy established in Article III of
this Agreement or the declaration of dividends or other distributions to
shareholders if such dividend or distribution is not consistent with such
policy;
(d) Except for agreements in effect prior to the date hereof to which the
Corporation is a party, transactions between the Corporation or any of its
subsidiaries, on the one hand and any member of the Purchaser Group or any
Affiliate thereof, on the other hand, involving an aggregate dollar amount in
any fiscal year of more than $1,000,000 as to each such member and its
Affiliates (as used in this Agreement, the term "Affiliate" means, with respect
to any Person, any other Person directly or indirectly controlling or controlled
by or under direct or indirect common control with such specified Person;
"Person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a trust, an unincorporated organization and a government or other
department, agency or subdivision thereof; "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of voting
securities, by agreement or otherwise); and
(e) Any amendment to the Corporation's Certificate of Incorporation or
Bylaws adversely affecting the rights of the
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Puerto Rico Entities as shareholders of the Corporation or the rights of the
Government Directors.
The above matters may not be delegated to any Committee of the Board.
2.3 Supermajority Requirements for Certain Actions by Shareholders. The
following Shareholder actions require approval by PRTA for so long as the Puerto
Rico Entities collectively continue to own at least 10% of the issued and
outstanding Shares:
(a) Any amendment to the Certificate of Incorporation of the Corporation
adversely affecting the rights of any Puerto Rico Entity as a shareholder of the
Corporation or the rights of the Government Directors;
(b) The liquidation, merger, consolidation or split up of the Corporation
(other than any merger in which the Corporation is the survivor or any merger of
the Corporation into any wholly-owned subsidiary of the Corporation; provided,
that, in either instance such transaction does not result in a Transfer of
Shares not otherwise permitted by this Agreement); and
(c) The sale of assets in any fiscal year representing 25% or more of the
total assets of the Corporation. 2.4 Resolution of Deadlock. If there is a
deadlock at the Shareholder or Board level on an issue subject to the above
supermajority provisions, consultations shall take place among the Directors,
senior management of Purchaser and, if requested by Purchaser, senior management
of the Corporation to attempt to resolve the deadlock.
ARTICLE III
DECLARATION OF DIVIDENDS
From the time of the Closing until such time as the Board chooses to
modify the Corporation's dividend policy pursuant to Section 2.2(c) of this
Agreement, the Shareholders agree to the
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following dividend policy (the "Dividend Policy"): the Shares shall bear a
dividend, payable on a quarterly basis, to the extent funds are legally
available therefor and subject to any restrictions in the documents relating to
the Financing (as defined in the Stock Purchase Agreement), other financings to
which the Corporation may become a party or refinancings thereof, that is at
least equal to the product of the Corporation's consolidated net income,
calculated in accordance with generally accepted accounting principles in the
United States consistently applied, multiplied by 50% divided by the number of
issued and outstanding Shares. Dividends shall be payable quarterly and shall be
paid by the Corporation within 30 days after the approval of the corresponding
quarterly financial statements (the audited annual financial statements in the
case of the fiscal year's last quarter) by the Board. The Shareholders will take
all actions necessary to cause the Corporation to pay a dividend consistent with
such Dividend Policy.
ARTICLE IV
RESTRICTION ON DISPOSITION OF SHARES AND PURCHASER INTERESTS
4.1 General Restriction. During the term of this Agreement, (i) no
Shareholder shall, directly or indirectly, voluntarily or involuntarily, sell,
assign, transfer, pledge, hypothecate or in any other way dispose of or
encumber, by gift, operation of law, bankruptcy, or otherwise, any Shares or
Purchaser Interests, in each instance owned on the date hereof or hereafter
acquired other than in open market purchases after the initial public offering
of the Shares (each such event, a "Transfer"), (ii) nor may Purchaser directly
or indirectly issue any Purchaser Interests, in each case except as expressly
permitted by the terms of this Agreement and except for the sale and transfer of
Shares by the Authority upon the exercise of the
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Option (as defined below) pursuant to Sections 1.01 through 1.04 of the Option
Agreement (as defined below). No Transfer shall be valid, effective, entitled to
recognition for any purpose, including dividend rights, or made on the books of
the Corporation or Purchaser, respectively, if made in violation of the
provisions of this Agreement, and the transferor shall continue to be the owner
of such Shares or Purchaser Interests, as applicable, for all purposes. In the
event the Corporation or Purchaser is a party to any permitted reorganization,
recapitalization, reclassification, readjustment or other change in its capital
structure wherein any other stock or securities of the Corporation or Purchaser
are to be issued in respect of the Shares or Purchaser Interests, respectively,
then such other stock or securities shall likewise be subject to all of the
terms and provisions of this Agreement. The formation documents and agreements
between Purchaser and Strategic Purchaser shall contain provisions consistent
with this Article IV, which provisions may not be amended without the prior
written consent of PRTA.
4.2 Permitted Transfers by Purchaser.
(a) After the fifth anniversary of the date hereof, Purchaser and its
permitted successors and assigns will be permitted to Transfer any and all
Shares;
(b) Any Transfer to any GTE Permitted Transferee shall be permitted at any
time; and
(c) After the third anniversary of the date hereof, and provided Purchaser
shall continue to own after giving effect to such Transfer at least 35% of the
Shares, Purchaser shall be entitled to Transfer (i) Shares owned by Purchaser on
the date hereof plus (ii) a number of Shares equal to the greater of (x) 331/3%
of the Shares acquired by Purchaser upon exercises of the Option and (y) 5% of
the total outstanding Shares of the Company
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if no Shares are issued to any Person other than Purchaser upon exercise of the
Option, in either case only in a widely distributed private placement or public
offering (or if the Corporation is publicly traded, in open market
transactions).
4.3 Permitted Transfers by Purchaser Group.
(a) Prior to the third anniversary of the date hereof, members of the
Purchaser Group (other than Strategic Purchaser, Purchaser and GTE Permitted
Transferees) will be permitted to: (i) Transfer Shares to any other member of
the Purchaser Group or to any wholly owned subsidiaries of such member
(collectively, the "Permitted Transferees"); or (ii) Transfer Shares by will or
devise or by operation of law.
(b) At any time after the third anniversary of the date hereof, members of
the Purchaser Group (other than Purchaser, Strategic Purchaser and GTE Permitted
Transferees) will be permitted to Transfer any or all of their Shares.
(c) After the fifth anniversary of the date hereof, Strategic Purchaser,
and its respective permitted successors and assigns, will be permitted to
Transfer their Purchaser Interests, and Purchaser will be permitted to issue
additional Purchaser Interests.
(d) At any time after an initial public offering of the Shares of the
Corporation and prior to the third anniversary of the date hereof, Popular, Inc.
shall be entitled to sell not more than an aggregate of 1/3 of its Initial
Ownership Interests of Shares in one or more registered public offerings
pursuant to Section 6.2(e)(ii) or 6.3, but subject to Section 6.2(f) hereof, or
in transactions permitted by Rule 144 of the Securities Act of 1933, as amended.
4.4 Tag-Along Rights.
(a) In the event that Purchaser, Popular, Inc., Strategic Purchaser and/or
their GTE Permitted Transferees or Permitted
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Transferees, as applicable (each a "Seller"), proposes to Transfer, directly or
indirectly, any Shares or Purchaser Interests, as applicable, other than to GTE
Permitted Transferees or to Permitted Transferees and other than in public
offerings or widely distributed private placements (the "Offered Shares") in one
or a series of related transactions permitted under this Article IV, which (i)
in the aggregate comprise (directly or indirectly) over 7.5% of the total number
of outstanding Shares of the Corporation, or (ii) would result in the transferee
owning, directly or indirectly, over 20% of the Shares, such Sellers shall
promptly give written notice to PRTA at least twenty (20) days prior to the
closing of such proposed sale. The notice (the "Tag-Along Notice") shall
describe in reasonable detail the proposed Transfer including, without
limitation, the name of, and the number of Shares to be directly or indirectly
Transferred by the Seller, the per Share sale price, any other significant terms
of such sale and the date such proposed sale will be consummated.
(b) The Puerto Rico Entities shall have the right, exercisable upon
written notice to the Sellers, within fifteen days after receipt of the
Tag-Along Notice, to participate in such sale, by selling the applicable pro
rata portion of the aggregate number of Shares then owned (excluding any Shares
not acquired or received from the Corporation, its successor or any other Puerto
Rico Entity) by all of them (the "Total PR Shares") to the buyer on the same
terms and conditions as set forth in the Tag-Along Notice, as determined in
accordance with the calculation set forth below (a "Tag-Along Transaction"). If
the Puerto Rico Entities elect to participate in the sale described in the
Tag-Along Notice, they shall indicate in their notice of election to the
Sellers, as applicable, the maximum number of Shares they desire to sell in
connection with such sale. To the
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extent the Puerto Rico Entities exercise such right of participation in
accordance with the terms and conditions set forth in this Section 4.4(b), and
the buyer agrees to purchase the additional Shares indicated by the Puerto Rico
Entities in their notice of election (an "Additional Purchase Election"), the
Puerto Rico Entities may sell the same percentage of their Shares as the Sellers
are selling (the "pro rata portion"). In the event there is no Additional
Purchase Election, the number of Shares or Purchaser Interests, as applicable,
that the Sellers may sell, in the transaction shall be correspondingly reduced
by the number of shares entitled to be sold by the Puerto Rico Entities. For
purposes of this Section 4.4(b), in the event of the failure by the Buyer to
exercise the Additional Purchase Election, "pro rata portion" of the Puerto Rico
Entities shall be the Total PR Shares multiplied by a fraction, (i) the
numerator of which is the number of Shares proposed to be, directly or
indirectly, sold by Sellers in the Tag-Along Notice and (ii) the denominator of
which is the sum of (A) the total number of Shares, directly or indirectly,
owned by the Sellers immediately prior to the sale proposed in the Tag-Along
Notice and (B) the Total PR Shares. In the event that the Tag-Along transaction
involves the sale of Purchaser Interests, the Puerto Rico Entities shall be
entitled to sell to the buyer thereunder that number of Shares constituting its
pro rata share calculated in accordance with the preceding sentence as if
immediately prior thereto Purchaser was liquidated, each equity holder thereof
received a total distribution of Shares and each such equity holder was the
Seller for purposes of this Section. Not later than five (5) days prior to the
date scheduled for such sale, Sellers, as applicable shall provide notice to
each Puerto Rico Entity of the "pro rata portion" of Shares to be sold by such
Puerto Rico Entity in such sale. If the Puerto
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Rico Entities would own 5% or less of the Shares after giving effect to their
participation in a Tag-Along Transaction, the Purchaser shall have the
additional option (exercisable within 15 days of receipt of notice from the
Puerto Rico Entities to participate in the Tag-Along Transaction) of (i)
requiring that the Puerto Rico Entities sell all their remaining Shares to the
buyer, providing the buyer is willing to purchase such Shares, or (ii) requiring
that the Puerto Rico Entities sell to the buyer such number of Shares owned by
the Puerto Rico Entities as the buyer is willing to purchase and sell the
remaining Shares owned by the Puerto Rico Entities to Purchaser; such sale in
either instance to be on the same price, terms and conditions and to close at
the same time, as the Tag-Along Transaction.
(c) The Puerto Rico Entities shall effect their participation in the sale
by delivering, on the date scheduled for such sale, to Seller, for its own
account or for delivery to the prospective transferee, as applicable, one or
more certificates, in proper form for transfer, which represent the number of
Shares which each Puerto Rico Entity is entitled to sell in accordance with
Section 4.4(b). Such stock certificate or certificates shall be delivered on
such date to such transferee in consummation of the sale of the Offered Shares
pursuant to the terms and conditions specified in the Tag-Along Notice (provided
that the Puerto Rico Entities shall not be required to make any representations,
warranties or indemnities that are broader than those made or given by the
Sellers) and the Sellers shall concurrently therewith remit to the Puerto Rico
Entities that portion of the sale proceeds to which the Puerto Rico Entities are
entitled by reason of their participation in such sale. Sellers' sale of Shares
or Purchaser Interests, as applicable, in any sale proposed in a Tag-Along
Notice shall be effected on the terms and conditions set forth
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in such Tag-Along Notice. In no event shall any Seller receive special
consideration or a control premium in such sale.
(d) The exercise or non-exercise of the right of the Puerto Rico Entities
to participate in one or more sales subject to this Section 4.4 shall not
adversely affect the Puerto Rico Entities' right to participate in subsequent
sales of Shares or Purchaser Interests subject to this Section 4.4.
(e) In the event that the buyer of Offered Shares fails or refuses to
purchase the Shares which the Puerto Rico Entities are entitled to sell pursuant
to this Section 4.4, and if the transaction giving rise to such right closes,
then the Sellers shall be obligated to purchase the same, simultaneously with
the closing of the Tag-Along Transaction, for the same per Share price as that
received by the Sellers in the Tag-Along Transaction.
4.5 Purchaser Group's Right of First Refusal.
(a) Any time during the term of this Agreement, each of the Puerto Rico
Entities may Transfer any or all of its Shares other than Shares whose Transfer
is restricted by the Option; provided, that, if any of the Puerto Rico Entities
proposes to Transfer any Shares in one or more transactions, by any means (other
than through a widely disseminated private placement or a public offering
pursuant to Article VI or private placements on or after the 180th day after the
date hereof of not more than an aggregate of 5% of the outstanding Shares to any
Person other than a Person primarily engaged in the telecommunications industry,
such Persons to be subject to the reasonable approval of Purchaser or a Transfer
to any other Puerto Rico Entity), the Puerto Rico Entities shall promptly
provide a written notice (an "Offer Notice") to the Purchaser Group and the
Purchaser Group shall have the first refusal rights with respect to such Shares
set forth below. The Offer Notice shall contain (i) the number
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of Shares that the Puerto Rico Entities desire to Transfer, (ii) the proposed
purchase price and other material terms and conditions of the proposed Transfer,
including such information as may be reasonably necessary to analyze any
non-cash component of the proposed purchase price, and (iii) if at the time of
providing the Offer Notice, the Puerto Rico Entities have a bona fide offer from
an unaffiliated third party (the "Proposed Transferee") to acquire such Shares,
a copy of the written offer received from the Proposed Transferee, including its
identity and address. The Offer Notice shall be deemed to contain an irrevocable
offer (an "Offer") to sell the Shares at a price equal to the price and
substantially upon the same terms as the terms contained in the Offer Notice.
(b) The Purchaser Group shall have the irrevocable right and option,
exercisable as provided below, to accept the Offer, as to all but not less than
all of the Shares described in the Offer Notice (the "Acceptance"). If the
Purchaser Group desires to exercise such option, it will provide the Puerto Rico
Entities with irrevocable written notice within twenty (20) business days after
the date the Offer Notice is given and shall purchase the Shares subject to the
Offer Notice within twenty (20) business days after the date of Acceptance, or
immediately after the receipt of all required legal and regulatory approvals or
the satisfaction of the terms and conditions contained in the Offer Notice.
(c) In the event the Purchaser Group does not exercise its rights under
this Section 4.5, or fails to purchase the Shares as provided in this Section
4.5, the Puerto Rico Entities shall have the right for a period of 180 days
thereafter to sell the Shares subject to the Offer Notice on terms no less
favorable to the Puerto Rico Entities than those set forth in the Offer Notice.
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ARTICLE V
OPTION
5.1 Option to Acquire Shares. PRTA has granted Purchaser an option (the
"Option") pursuant to the Option Agreement dated as of the dated hereof among
PRTA, the Corporation, Purchaser and Strategic Purchaser (the "Option
Agreement").
ARTICLE VI
REGISTRATION RIGHTS
6.1 Definitions. For purposes of this Article VI:
(a) The terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the United States Securities Act of 1933, as
amended (the "Act"), and the declaration or ordering of effectiveness of such
registration statement or document;
(b) The term "Registered Securities" means any Shares which have been
included in an effective registration statement pursuant to the terms hereof;
(c) The term "Holder" means any Person owning Shares or any assignee
thereof in accordance with this Agreement; and
6.2 Required Registration.
(a) At any time on or after the 550th day after Closing, if any Puerto
Rico Entities propose to dispose of at least the Minimum Number (as defined in
Paragraph 6.2(c)) of Shares in a registered offering, they may request the
Corporation in writing to effect the registration of such Shares (other than
Shares subject to the Option, which may not be so disposed of until expiration
or termination of the Option with respect to any such Shares, except with the
prior consent of Purchaser, which Purchaser may withhold in its sole
discretion), stating the
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number of Shares to be disposed of and the intended method of disposition of
such Shares. The Corporation will use all commercially reasonable efforts to
effect promptly the registration under the Act of all Shares specified in the
request of Puerto Rico Entities. The managing underwriters that will place the
Registered Securities shall be those mutually acceptable to the (i) PRTA, if it
owns Shares, or GDB otherwise, and (ii) the Corporation.
(b) If a majority of the Board determines, in response to a request for
registration of Shares pursuant to Section 6.2(a), that the filing of a
registration statement under the Act would not be in the best interests of the
Corporation, it may delay acting upon such request for a period (not to exceed
180 days from the Corporation's receipt of such request) that the Board deems
reasonable so as to be in the best interests of the Corporation.
(c) The "Minimum Number" shall mean the Shares having an aggregate
estimated disposition price (before deduction of underwriting discounts and
expenses of sales) of at least $50 million (but in no event in an initial public
offering less than an amount to create a viable public trading market).
(d) The Corporation shall not be required to effect more than three
registrations pursuant to Section 6.2(a). For purposes of the foregoing
sentence, in the event that the Corporation shall have filed a registration
statement upon the request of the Puerto Rico Entities, and thereafter such
request shall have been withdrawn by the Puerto Rico Entities other than after a
delay caused by the Corporation pursuant to Section 6.2(b), such withdrawn
registration shall be considered to be a registration.
(e) (i) The Corporation shall not be required to cause a registration
statement requested pursuant to Section 6.2(a) to
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become effective prior to 180 days following the effective date of the most
recent registration by the Corporation of equity or equity-linked securities
under the Act (other than a registration effected solely to implement an
employee benefit plan or a transaction to which Rule 145 of the Securities and
Exchange Commission (the "SEC") is applicable); provided, however, that the
Corporation shall use all commercially reasonable efforts to achieve such
effectiveness promptly following such 180 day period if the request pursuant to
Section 6.2(a) has been made prior to the expiration of such 180 day period.
(ii) Except as set forth in Sections 4.3(d) and 6.2(f) hereof, prior
to the fifth anniversary hereof so long as the Puerto Rico Entities continue to
own at least 15% of the outstanding Shares, the Corporation shall not: (x)
register equity or equity-linked securities for sale for its own account or for
the account of any other Person, in either case in any registration requested
pursuant to Section 6.2(a) unless permitted to do so by the written consent of
PRTA; or (y) grant rights to Persons (other than as set forth in Section 6.2(a))
to register equity or equity-linked securities of the Corporation which would
constitute an initial public offering other than offerings to occur after the
fifth anniversary hereof. Notwithstanding the foregoing, the Corporation may
grant "piggy back" registration rights (A) to Popular, Inc. for offerings to
occur (i) prior to the third anniversary hereof, subject to Sections 4.3(d) and
6.2(f) below and (ii) after the third anniversary hereof, subject to Section
6.2(f) below and (B) after the third anniversary hereof, subject to Section
6.2(f) below, to the trusts or plans referred to in Section 8.02(l) of the Stock
Purchase Agreement. The Corporation may not cause any other registration of
equity or equity-linked securities for
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sale for its own account (other than a registration effected solely to implement
an employee benefit plan or a transaction to which Rule 145 of the SEC is
applicable) to become effective less than 90 days after the effective date of
any registration requested pursuant to Section 6.2(a).
(f) The Corporation shall not grant any Person any "piggy back"
registration rights with respect to the first registration pursuant to this
Section 6.2(a) which results in an initial public offering closing; and if
"piggy back" registration rights are granted and exercised with respect to any
other registration pursuant to Section 6.2(a) prior to the fifth anniversary
hereof, any required reduction in the total number of Shares offered thereunder
shall first apply to such "piggy back" registration rights Shares and no
reduction shall be made in the number of Shares to be registered by the Puerto
Rico Entities until all the Shares being offered pursuant to such "piggy back"
registration rights have been excluded from the sale.
6.3 Corporation Registration. Subject to Sections 6.2(e)(ii) and 6.2(f),
if at any time the Corporation determines to register any Shares under the Act
in connection with the public offering of such securities by the Corporation
solely for cash (other than a registration relating solely to the sale of
securities to participants in a Corporation employee benefit plan or a
transaction to which Rule 145 of the SEC applies, or a registration on any form
which does not include substantially the same information as would be required
to be included in a registration statement covering the sale of the Shares other
than information on selling shareholders), the Corporation shall, at such time,
promptly give each Shareholder written notice of its intention to effect such
registration. Upon the written request of each Shareholder given within twenty
(20) days after mailing of such notice by the Corporation in
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accordance with Section 6.4, the Corporation shall use commercially reasonable
efforts, subject to the provisions of Section 6.4, to cause to be registered
under the Act all of the Shares that each Shareholder has requested to be
registered (a "Piggy Back Registration"); provided that the Corporation shall
have the right to postpone or withdraw any such registration effected pursuant
to this subsection without obligation to any Shareholder; and provided further,
that any such sale of Shares by Purchaser and Popular, Inc. shall comply with
Article IV of this Agreement.
6.4 Registration Procedures.
(a) Obligations of the Corporation. Whenever required under this Agreement
to use all commercially reasonable efforts to effect the registration of any
Shares, the Corporation shall, as expeditiously as reasonably possible:
(i) Prepare and file with the SEC a registration statement with
respect to such Shares and use all commercially reasonable efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Shares registered thereunder, keep such registration
statement effective for up to one hundred twenty (120) days.
(ii) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(iii) Furnish to the holders of Registered Securities such numbers
of copies of a prospectus, including a preliminary prospectus, in conformity
with the requirements of the Act, and such other documents as they may
reasonably request in order to
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facilitate the disposition of Registered Securities owned by them.
(iv) Use all commercially reasonable efforts to register and qualify
the Registered Securities under such other securities or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Holders thereof, provided
that the Corporation shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(v) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(vi) Notify each Holder covered by such registration statement in
the event the Corporation has delivered preliminary or final prospectuses to any
such Holder and, after having done so, such prospectus is amended to comply with
the requirements of the Act. Upon such notification, such Holders shall
immediately cease making offers of Registered Securities and return all
prospectuses to the Corporation. The Corporation shall promptly provide such
Holders with revised prospectuses and, following receipt of the revised
prospectuses such Holders shall be free to resume making offers of the
Registered Securities.
(vii) Furnish, at the request of any Holder requesting registration
of Shares pursuant to this Agreement, on the date that such Shares are delivered
to the underwriters for sale in connection with a registration pursuant to this
Agreement, if such securities are being sold through
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underwriters, or, if such securities are not being sold through underwriters, on
the date that the registration statement with respect to such securities becomes
effective, (1) an opinion, dated such date, of the counsel representing the
Corporation for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders of such Registered Securities
and (2) a "comfort" letter dated such date, from the independent certified
public accountants of the Corporation, in form and substance as is customarily
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and, to the
extent customary to address such letters to selling security Holders, to the
Holders of such Registered Securities; provided, however, the Corporation shall
not be required to include projections for the business of the Corporation in
any prospectus or offering memorandum.
(b) Furnish Information. It shall be a condition precedent to the
obligations of the Corporation to take any action pursuant to this Agreement
with respect to the Shares of any selling Holder (the "Selling Holder") that
such Selling Holder shall furnish to the Corporation such information regarding
itself, the Shares held by it, and the intended method of disposition of such
securities as shall be required to effect the registration of such Selling
Holder's Shares.
(c) Expenses of Corporation Registration. The Corporation shall bear and
pay all expenses incurred in connection with the registration, filing or
qualification of Shares with respect to all Piggy Back Registrations pursuant to
Section 6.3(a) and required registrations pursuant to Section 6.2(a) for each
Holder (which right may be assigned as provided in this
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Agreement), including (without limitation) all registration, filing and
qualification fees, printing and accounting fees relating or apportionable
thereto, and the fees and disbursements of one counsel for the Selling Holders
(provided it shall be counsel to the Corporation), but excluding underwriting
discounts and commissions relating to Shares which shall be paid pro rata by the
Selling Holders.
(d) Underwriting Requirements for Piggy Back Registrations. In connection
with any offering involving an underwriting of Shares, the Corporation shall not
be required under Section 6.3(a) above to include any of the Holders' Shares in
such underwriting unless they accept the terms of the underwriting as agreed
upon between the Corporation and the underwriters, and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Corporation. If the total amount
of Shares requested by Holders to be included in such offering exceeds the
amount of Shares sold other than by the Corporation that the underwriters
determine in their sole discretion is compatible with the success of the
offering, then the Corporation shall be required to include in the offering only
that number of Shares which the underwriters determine in their sole discretion
will not jeopardize the success of the offering (the Shares so included to be
apportioned pro rata among the Selling Holders according to the total amount of
Shares entitled to be included therein owned by each Selling Holder or in such
other proportions as shall mutually be agreed to by such Selling Holders).
(e) Delay of Registration. No Holder shall have any right to obtain or
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy
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that might arise with respect to the interpretation or implementation of this
Agreement.
(f) Indemnification. In the event any Shares are included in a
registration statement under this Agreement:
(i) To the extent permitted by law, the Corporation will indemnify
and hold harmless each Selling Holder of Shares and such Selling Holder's
officers and directors, any underwriter (as defined in the Act) for such Selling
Holder and each person, if any, who controls such Selling Holder or underwriter
within the meaning of the Act or the Securities Exchange Act of 1934 (the "1934
Act") (each, an "Indemnitee"), against any losses, claims, damages or
liabilities (joint or several) to which they may become subject under the Act,
or the 1934 Act or other federal or state law, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any of the following statements, omissions or violations (collectively a
"Violation"): (A) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (B) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (C) any violation or alleged violation by the
Corporation of the Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the Act, or the 1934 Act or any state securities
law; and the Corporation will pay to each such Indemnitee, as incurred, any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided; however, that the indemnity agreement contained in this Subsection
6.4(f) shall not apply to amounts paid in
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settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Corporation (which consent
shall not be unreasonably withheld), nor shall the Corporation be liable in any
such case for any such loss, claim, damage, liability or action to the extent
that it arises out of or is based upon a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by any such Indemnitee.
(ii) To the extent permitted by law, each Selling Holder will
indemnify and hold harmless the Corporation, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Corporation within the meaning of the Act, any underwriter, any
other Selling Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Selling Holder, against any
losses, claims, damages, or liabilities (joint or several) to which any of the
foregoing persons may become subject, under the Act, or the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Selling Holder expressly for use in connection with such registration; and each
such Selling Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
Subsection 6.4(f)(ii), in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Subsection 6.4(f)(ii) shall not apply to amounts
paid in
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settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Selling Holder, which consent
shall not be unreasonably withheld; provided, that, in no event shall any
indemnity under this Subsection 6.4(f)(ii) exceed the gross proceeds from the
offering received by such Selling Holder.
(iii) Promptly after receipt by an indemnified party under this
Subsection 6.4(f) of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Subsection 6.4(f),
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties, provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if materially prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Subsection 6.4(f) to the extent of such prejudice, but the omission so to
deliver written notice to the indemnifying party will not relieve it of any
liability that
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it may have to any indemnified party otherwise that under this Subsection
6.4(f).
(iv) The obligations of the Corporation and the Selling Holders
under this Subsection 6.4(f) shall survive the completion of any offering of
Shares under this Agreement and termination of this Agreement.
(g) "Market Stand-Off" Agreement. Each party to this Agreement hereby
agrees that, during the period of duration specified by the Corporation and an
underwriter of Shares or other equity and equity-linked securities of the
Corporation (which period shall not exceed 180 days), following the effective
date of a registration statement of the Corporation filed under the Act, it
shall not, to the extent requested by the Corporation and such underwriter,
directly or indirectly sell, offer to sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or otherwise transfer
or dispose of (other than to those who agree to be similarly bound) any equity
and equity-linked securities of the Corporation held by it at any time during
such period (except: (v) Transfers between or among the parties to the
Shareholders Agreement; (w) Shares included in such registration; (x) Shares
subject to the Option; (y) Transfers by Purchaser to GTE Permitted Transferees;
and (z) Transfers among Puerto Rico Entities).
In order to enforce the foregoing covenant, the Corporation may impose
stop-transfer instructions with respect to the Shares of each such Holder until
the end of such period.
(h) Listing. In connection with a registration pursuant to Section 6.2,
the Corporation will use all commercially reasonable efforts to qualify Shares
sold pursuant to such registration to trade on a United States national
securities exchange or on the National Association of Securities Dealers
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Automated Quotation ("NASDAQ") system and to maintain the inclusion of such
Shares on a United States national securities exchange or the NASDAQ system for
a period of four years after the effective date of a registration statement
filed with the SEC pursuant to Section 6.2. The NASDAQ system shall mean the
NASDAQ National Market.
ARTICLE VII
MISCELLANEOUS
7.1 Financial Statements. As soon as available and in any event within
four months after the close of each fiscal year of the Corporation, the
Corporation shall deliver to each Shareholder of at least 2% of the Shares the
consolidated balance sheet of the Corporation and its subsidiaries as at the end
of such fiscal year and the related consolidated statements of income and
retained earnings and statement of cash flows for such fiscal year, in each case
setting forth comparative figures for the preceding fiscal year (if applicable)
in each case certified by independent public accountants.
7.2 Books, Records and Inspections. The Corporation shall, and shall cause
its subsidiaries to, keep proper books of record and account in which full, true
and correct entries in conformity with generally accepted accounting principles
and all requirements of law shall be made of all dealings and transactions in
relation to its business and activities.
7.3 Endorsement of Stock Certificates.
(a) Each of the certificates representing the Shares, or any of them,
shall contain the following legends for the term of this Agreement:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ISSUED, ACCEPTED AND
HELD SUBJECT TO THE TERMS OF A CERTAIN SHAREHOLDERS AGREEMENT DATED
AS OF MARCH 2, 1999. A COPY OF F SUCH AGREEMENT MAY BE INSPECTED AT
THE PRINCIPAL OFFICE OF THIS
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CORPORATION. NEITHER THIS CERTIFICATE NOR THE SHARES REPRESENTED
HEREBY ARE SUBJECT TO SALE, TRANSFER OR OTHER DISPOSITION OR
ENCUMBRANCE EXCEPT AS PERMITTED IN SAID AGREEMENT. THE HOLDER OF
THIS CERTIFICATE, BY THE ACCEPTANCE HEREOF, AGREES TO ALL THE TERMS
OF SAID AGREEMENT WHICH ARE INCORPORATED HEREIN."
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT
OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE SECURITIES
LAWS OF ANY STATE OR THE COMMONWEALTH OF PUERTO RICO, AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR
TO OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS EXCEPT PURSUANT TO
AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF
AVAILABLE) OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT."
(b) A copy of this Agreement shall be delivered to the Secretary of the
Corporation, kept with the corporate records of the Corporation and shall be
shown by him to any person making inquiry concerning it and having a proper
business purpose.
(c) The Corporation agrees that it will not cause or permit the transfer
of any Shares to be made on its books unless the transfer is permitted by this
Agreement and has been made in accordance with the terms hereof.
7.4 Products and Services. The parties hereto agree that all products sold
and services provided to the Corporation by Purchaser, holders of Purchaser
Interests, Popular, Inc. or any Affiliate thereof shall be provided on terms
that are fair to the Corporation and no less favorable to the Corporation than
on an arm's length basis and subject to customary commercial terms.
ARTICLE VIII
TERMINATION
8.1 Termination. This Agreement shall terminate, and the certificates
representing the Shares shall be released from the terms of this Agreement upon
the earliest of: (a) the written
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agreement of all parties hereto; (b) the ownership in the aggregate by the
Puerto Rico Entities of less than 4% of the Shares; and (c) 10 years from the
date hereof.
8.2 Survival. Notwithstanding the termination of this Agreement, the
provisions of Sections 1.7, 4.1, 4.2 and 4.3 as they apply to Purchaser and
Strategic Purchaser, Article V and Section 7.4 (so long as the Puerto Rico
Entities own any Shares) hereof shall survive such termination and shall remain
in effect during the applicable periods provided therein.
ARTICLE IX
INTENTIONALLY OMITTED
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. Any notice or other communication under this Agreement shall
be in writing and shall be considered given when delivered in person, sent by
telefax transmission or mailed by certified mail, return receipt requested, to
the parties at the following addresses or telefax numbers (or at such other
address or telefax number as a party may specify by notice to the others):
If to the Corporation at:
Telecomunicaciones de Puerto Rico, Inc.
1515 Xxxxxxxx X. Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxx, Xxxxxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: President
with a copy to:
GTE International Telecommunications Incorporated
0000 Xxxxx X'Xxxxxx Xxxxxxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Fares Xxxxxxx
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Xxxxxx, Xxxxxx-Xxxxxxx, Colt & Mosle
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxx
If to PRTA, at:
Puerto Rico Telephone Authority
c/o Government Development Bank
for Puerto Rico
Minillas Xxxxxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: President
with a copy to:
Xxxxxxxxxxx, Xxxxxx & Xxxxxxx
Banco Popular Center
Xxxxx 0000
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxx, Xxxxxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxxxxx
Akin, Gump, Strauss, Xxxxx & Xxxx L.L.P.
0000 Xxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxx, Xx.
If to Purchaser or Strategic Purchaser, at:
GTE Holdings (Puerto Rico) LLC
0000 Xxxxx X'Xxxxxx Xxxxxxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Fares Xxxxxxx
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with a copy to:
Xxxxxx, Xxxxxx-Xxxxxxx, Colt & Mosle
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxx
If to Popular, Inc., at:
000 Xxxxx Xxxxxx Xxxxxx
Xxxx Xxx, Xxxxxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx
with a copy to:
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx
10.2 No Waiver. No waiver of any provision of this Agreement in any
instance shall be, or for any purpose be deemed to be, a waiver of the right of
any party hereto to enforce strict compliance with the provisions hereof in any
subsequent instance.
10.3 Agreement to Perform Necessary Acts. Each party hereto and its
successors and assigns shall perform any further acts and execute and deliver
any documents or procure any court order which may reasonably be necessary to
carry out the provisions of this Agreement.
10.4 Modification. No provision of this Agreement may be amended, modified
or waived without the written approval of the parties hereto, excluding any
party which owns, directly or indirectly, less than 2% of the Shares; provided,
that, no such amendment, modification or waiver may adversely affect the
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rights under this Agreement of such excluded party without such party's written
consent.
10.5 Counterparts. This Agreement may be executed in multiple
counterparts, subject to the execution of at least one of such counterparts by
each of the parties hereto.
10.6 Severability. Every provision of this Agreement is intended to be
severable and if any term or all or part of any provision hereof is held by
judicial decision to be invalid, such invalidity shall not affect the validity
of the remainder of this Agreement.
10.7 Entire Agreement. This Agreement is intended by the parties hereto as
a final expression of their agreement and understanding with respect to the
subject matter hereof and supersedes any and all prior and contemporary
agreements and understandings. To the extent this Agreement contradicts any
provisions of any agreements entered into among or between any of the
Shareholders, holders of Purchaser Interests and the Corporation, the provisions
of this Agreement shall govern.
10.8 Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of Puerto Rico without giving effect to the principles
of conflicts of laws thereof.
10.9 Headings. The headings of the several articles and sections of this
Agreement are inserted solely for convenience of reference and are not a part of
and are not intended to govern, limit or aid in the construction of any term or
provision hereof.
10.10 Construction. When necessary, the masculine shall include the
feminine or neuter and the singular shall include the plural and vice versa.
10.11 Binding Effect; Assignment. This Agreement shall be binding upon and
shall inure to the benefit of, the parties hereto. None of the rights or
obligations of the parties
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hereunder may be assigned (other than to a GTE Permitted Transferee or a
Permitted Transferee and subject to Section 10.15 hereof); provided, that (i)
PRTA may assign its rights hereunder to the Government Development Bank for
Puerto Rico ("GDB") and that no such assignment shall have the effect of being a
delegation of duties or an assumption of any obligations of PRTA, (ii) the
rights granted to the PRTA hereunder shall be assignable to Puerto Rico Entities
in connection with a Transfer of Shares thereto, and (iii) the provisions of
Article VI shall be assignable with any permitted Transfer of any Shares other
than a public offering, a widely distributed private placement, or a market
transaction permitted by Rule 144 of the Securities Act of 1933, as amended.
10.12 Equitable Relief. Each of the parties hereto acknowledges that the
other parties will be irreparably damaged and will have no adequate remedy at
law in the event of a breach or threatened breach of obligations hereunder and
shall be entitled to such equitable and injunctive relief as may be available to
restrain a violation of, or threatened violation of, or to specifically enforce,
this Agreement. Nothing herein shall be deemed to preclude any party from
pursuing any other remedies available under this Agreement or otherwise to such
party for such breach or threatened breach, including the recovery of damages.
10.13 Fees; Expenses. The parties hereto shall pay all of their own
expenses relating to the transactions contemplated by this Agreement, including,
without limitation, the fees and expenses of their respective counsel, financial
advisers and accountants.
10.14 Submission to Jurisdiction; Venue.
(a) Any legal action or proceeding with respect to this Agreement or any
party's investment in the Shares shall be
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brought in the United States District Court for the District of Puerto Rico (by
way of summary judgment in lieu of complaint if procedure so permits) or, if
such court lacks subject matter jurisdiction, in the courts of Puerto Rico
situated in San Xxxx. By execution and delivery of this Agreement, each of the
parties hereby irrevocably accepts for itself and in respect of its property,
generally and unconditionally, the jurisdiction of the aforesaid courts. Each of
the Shareholders, each member of the Purchaser Group and the Corporation further
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to such party at its address set
forth in Section 10.1, such service to become effective 30 days after such
mailing. Nothing herein shall affect the right of any party hereto to serve
process in any other manner permitted by law.
(b) Each of the parties hereto hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement brought in the courts referred to in clause (a) above and hereby
further irrevocably waives and agrees not to plead or claim in any such court
that any such action or proceeding brought in any such court has been brought in
an inconvenient forum.
(c) It is understood and agreed that the Shares owned by Puerto Rico
Entities shall be owned by entities from and after the date hereof which either
do not have, or have irrevocably waived, to the fullest extent permitted by law,
all sovereign immunity to which they or their properties may be entitled,
including but not limited to sovereign immunity from process, suit, jurisdiction
and judgment, but not immunity from prejudgment attachment. The Puerto Rico
Entities party hereto
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to whom Shares are proposed to be Transferred who own Shares shall provide to
the Corporation an opinion of counsel reasonably satisfactory to the Corporation
as to such status of such entities.
10.15 Subsequent Parties. Notwithstanding any provision of this Agreement
to the contrary, no Shares shall be Transferred to any Puerto Rico Entity, GTE
Permitted Transferee or Permitted Transferee, as applicable, or (other than with
respect to a transfer in a registered public offering, a widely distributed
private placement or in a transaction permitted by Rule 144 of the Securities
Act of 1933) to any other Person, unless such Puerto Rico Entity, GTE Permitted
Transferee, Permitted Transferee or other Person (and its private equity
owners), as the case may be, expressly agrees in writing to be bound by all the
provisions of this Agreement.
10.16 Initial Public Offering. The parties hereto, acknowledge that, in
connection with the initial public offering of the Shares, it may be necessary
to amend certain provisions of this Agreement and, consequently, PRTA or its
successor (on behalf of the Puerto Rico Entities), Strategic Purchaser,
Purchaser and Popular, Inc. hereby agree that they shall negotiate in good faith
in an attempt to effect modifications to this Agreement that will facilitate
consummation of such initial public offering.
10.17 FCC Compliance. Notwithstanding any provision in this Agreement to
the contrary, no action will be taken pursuant to this Agreement which requires
the prior approval of the Federal Communications Commission or the
Telecommunications Board of Puerto Rico without the receipt of such required
approval.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
PUERTO RICO TELEPHONE AUTHORITY
By:
--------------------------------------
Name:
Title:
GTE HOLDINGS (PUERTO RICO) LLC
By:
--------------------------------------
Name:
Title:
TELECOMUNICACIONES DE PUERTO RICO, INC.
By:
--------------------------------------
Name:
Title:
GTE INTERNATIONAL
TELECOMMUNICATIONS INCORPORATED
By:
--------------------------------------
Name:
Title:
47
POPULAR, INC.
By:
--------------------------------------
Name:
Title:
Prior to the fifth anniversary of the date of this Agreement, GTE
Corporation agrees to maintain record and beneficial ownership, directly or
indirectly, of at least a majority in vote and value of all equity or
equity-linked securities of Strategic Purchaser, and its GTE Permitted
Transferees to whom Shares or Purchaser Interests have been Transferred, unless
otherwise consented to by the Government Development Bank for Puerto Rico, which
consent shall not be unreasonably withheld.
GTE CORPORATION
By:
--------------------------------------
Name:
Title:
By:
--------------------------------------
Name:
Title:
