Exhibit 3
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SHAREHOLDERS AGREEMENT
SHAREHOLDERS AGREEMENT, dated as of March 30, 2001, by and among (a) Grupo
Iusacell, S.A. de C.V., a corporation organized under the laws of Mexico with
its principal office located at Prolongacion Paseo de la Reforma 1236
(Penthouse), Colonia Santa Fe, Delegacion Cuajimalpa, Mexico, D.F. 05348 (the
"Corporation"), (b) Xxxx Atlantic Latin America Holdings, Inc., a Delaware
corporation with its principal office located at 0000 Xxxxx Xxxxx Xxxxx Xxxx,
Xxxxxxxxx, XX 00000 ("BALAH"), (c) Xxxx Atlantic International, Inc., a Delaware
corporation with its principal office located at 0000 Xxxxx Xxxxx Xxxxx Xxxx,
Xxxxxxxxx, XX 00000 ("BAII"), (d) Xxxx Atlantic New Zealand Holdings, Inc., a
Delaware corporation with its principal office located at 0000 Xxxxx Xxxxx Xxxxx
Xxxx, Xxxxxxxxx, XX 00000 ("BANZHI"), and (e) Vodafone Americas B.V., a limited
liability company duly organized under the laws of the Netherlands with its
principal office located at Max Xxxxxxxx 00, 0000 XX Xxxxxxxxx, Xxx Xxxxxxxxxxx
("Vodafone"). Capitalized terms not otherwise defined shall have the meanings
set forth in Section 1.1 hereof.
WITNESSETH:
WHEREAS, pursuant to the terms and conditions of the Purchase and Sale
Agreement, Vodafone is to purchase shares representing thirty-four and
fifty-three hundredths percent (34.53%) of the corporate capital (capital
social) of the Corporation for a purchase price in excess of U.S.$250,000; and
WHEREAS, it is a condition precedent to Vodafone's obligations under the
Purchase and Sale Agreement that Vodafone enter into a joint venture,
shareholders or similar agreement with BALAH, BAII, BANZHI and any other
Affiliate of Verizon that owns shares in the Corporation, in order to establish
certain governance rights of the parties in the Corporation, as well as certain
other agreements among them; and
WHEREAS, the parties hereto desire to enter into this Shareholders
Agreement in order to set forth their rights, duties and obligations with
respect to the control and management of the Corporation and to set forth
certain other agreements; and
WHEREAS, by the Effective Date of this Agreement, the bylaws of the
Corporation and of each of its Subsidiaries will have been amended to the extent
possible under Mexican law and/or regulation to reflect the governance and
managerial provisions hereof.
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
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1.1 Defined Terms. In addition to the terms defined elsewhere in this
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Agreement, the following terms shall have the meanings set forth for them below
when used herein:
"Accountants" means (whether one or more) such firm or firms of independent
certified public accountants as shall be engaged from time to time by the
Corporation or any Subsidiary.
"Affiliate" means, when used with reference to a specific Person, any
Person that at the time of determination of Affiliate status directly or
indirectly, whether through one or more intermediaries, controls, is controlled
by or is under common control with such specific Person; provided, however, that
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without limiting the foregoing, for purposes of this Agreement the Corporation,
the Subsidiaries and Vodafone are deemed to be Affiliates of each other, and the
Corporation, the Subsidiaries, BALAH, BAII and BANZHI are deemed to be
Affiliates of each other. For purposes of this Agreement, the term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities, by Contract or otherwise.
"Agreement" means this Shareholders Agreement, as originally executed and,
as the same may be amended, modified or supplemented from time to time in
accordance with its terms.
"Annual Plan" means, collectively, the annual operating and capital budgets
and business plan of the Corporation and the Subsidiaries.
"Board of Directors" means the Board of Directors of the Corporation.
"Business Day" means any day other than a Saturday, Sunday or federal
holiday for national banks in Mexico.
"Bylaws" means the estatutos sociales of the Corporation, as in effect on
the Effective Date and as thereafter amended from time to time.
"Committee" means any committee of the Board of Directors.
"Concession" means any concession, permit, license, approval or
authorization granted by any Governmental Entity to the Corporation or any of
its Subsidiaries, or any amendment to or renewal of any of the foregoing, that
permits the Corporation or such Subsidiary to engage in the Telecommunications
Business or a related business.
"Contract" means (a) any written lease, agreement, contract, commitment or
license or (b) any enforceable understanding or enforceable oral lease,
agreement, contract, commitment or license.
"Corporation Officer" means an Officer of the Corporation (including,
without limitation, the Chairman of the Board of Directors, the Chief Executive
Officer, the President, the Director General and the Chief Operating Officer of
the Corporation). For purposes of this Agreement, an individual shall be deemed
a "Corporation Officer" or an "Officer of the Corporation" if he meets the
definition of "Officer" with respect to the Corporation, notwithstanding the
fact that he is not formally elected as an officer within the meaning of the
Bylaws or the LGSM.
"Covered Obligations" means the obligations of the Vodafone Shareholder
Group set forth in Section 3.1(a) hereof to (a) elect the Vodafone Series A
Director, if applicable, from
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among those Persons proposed to the Vodafone Shareholder Group by the Verizon
Shareholder Group in writing and remove and replace the Vodafone Series A
Director as and when, and only as and when, directed in writing by Verizon in
the event that the Vodafone Shareholder Group beneficially owns Series V Shares
representing less than ten percent (10%) of the Corporation's total capital, and
(b) elect the Verizon Series V Director from among those Persons proposed to the
Vodafone Shareholder Group by the Verizon Shareholder Group in writing and
remove and replace the Verizon Series V Director as and when, and only as and
when, directed in writing by Verizon in the event that the Vodafone Shareholder
Group beneficially owns Series V Shares representing ten percent (10%) or more
of the Corporation's total capital.
"Directors" means the Series A Directors and/or the Series V Directors.
"Effective Date" means the date the Closing (as defined in the Purchase and
Sale Agreement) takes place.
"estatutos sociales" means the corporate organizational and governance
documents bearing such name under Mexican legal principles.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended.
"Executive Committee" means the Executive Committee of the Board of
Directors established pursuant to Section 3.1(c) hereof or pursuant to the
Bylaws.
"Extraordinary Shareholders Meeting" means an asamblea general
extraordinaria de accionistas of the Corporation, held in accordance with
Articles 182, 190, 191 and any other applicable provisions of the LGSM, as well
as the applicable provisions of the Bylaws.
"GAAP" means generally accepted accounting principles, applied on a
consistent basis.
"Governmental Entity" means any nation or sovereign entity, or any state,
territory, possession, county, municipality or other subdivision thereof, or any
court, tribunal, department, commission, ministry, agency, board, bureau,
dependency or other instrumentality thereof (including, without limitation, all
functionaries and representatives thereof acting in their official or authorized
capacity).
"Indebtedness" of any Person means all obligations, contingent or
otherwise, which in accordance with GAAP should be classified upon a Person's
balance sheet as liabilities (other than trade payables and operating lease
payables, tax liabilities, employee profit sharing and seniority premium
liabilities, and commitments and contingencies (as determined in accordance with
GAAP)) and shall include, in any event and without limitation, (a) indebtedness
for borrowed money, (b) indebtedness incurred or assumed in connection with the
acquisition of assets, (c) liabilities secured by any Lien on property owned or
acquired by such Person, whether or not the liability secured thereby shall have
been assumed by such Person, (d) capitalized lease obligations and (e) all
guarantees by such Person of Indebtedness of another Person.
"LGSM" means the Ley General de Sociedades Mercantiles of Mexico, as
amended from time to time.
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"Lien" means, whether absolute, accrued, contingent or otherwise, any
mortgage, lien, lease, pledge, encumbrance, charge, restriction, security
interest, judgment lien, claim, license, easement, purchase option, call or
similar right of a third party, preemptive right of a third party, right of a
third party under any voting or shareholder agreement or other restriction,
proxy, limitation on voting rights or adverse claim.
"Material" as to any matter relating to the Corporation or any Subsidiary
means a matter (including, without limitation, any act, omission, occurrence,
transaction, event, obligation, breach of obligation, situation or governmental
action) the effect of which to the Corporation and the Subsidiaries (taken as a
whole, and including the business, assets, operations, results of operations or
financial condition thereof) in the event of the occurrence or non-occurrence of
such matter (whether individually or together with any related or similar
matters) is, or could reasonably be expected to be, more than U.S.$5,000,000.
"Mexican GAAP" means GAAP, as applied in Mexico.
"Mexico" means the United Mexican States.
"Officer" (whether or not such term is capitalized) means an individual
with significant responsibilities for operations or policy making duties for any
Person that is not an individual.
"Person" (whether or not such term is capitalized) means any individual,
partnership, corporation, limited liability company, joint venture, trust,
business trust, Governmental Entity, union, association, instrumentality,
commission or other entity.
"Prospectus" means a prospectus within the meaning of the Securities Act or
its closest equivalent under the securities laws of a country other than the
United States.
"Purchase and Sale Agreement" means that certain Conditional Purchase and
Sale Agreement dated as of January 5, 2001, by and among Vodafone Group Plc and
certain other Persons pursuant to which Vodafone is to purchase shares of the
Corporation's corporate capital, as the same may be amended from time to time.
"Region" means each of the nine geographic regions in Mexico for which
concessions to provide wireless telephony services have been granted.
"Registrable Securities" means any and all of (a) the Shares beneficially
owned as of the Effective Date by the Verizon Shareholder Group and Vodafone,
for so long as such Shares are held (i) by BAII, BALAH, BANZHI or Vodafone or
(ii) by any Affiliate of Verizon or Vodafone to which such Shares are
Transferred pursuant to Section 6.2 hereof, and (b) any other securities issued
or issuable with respect to any such Registrable Securities by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise
which are held by a Person described in clause (a) above; provided, however,
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that to the extent such securities to be received are convertible or exercisable
into stock of the issuer thereof, then any such shares of stock as are issued or
issuable upon conversion or exercise of said convertible or exercisable
securities also shall constitute Registrable Securities; provided further that
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securities shall cease to be Registrable Securities when they are Transferred
pursuant to an effective Registration Statement, in a public offering,
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or otherwise Transferred pursuant to a transaction effected over the Bolsa
Mexicana de Valores, S.A. de C.V. or the New York Stock Exchange, Inc.
"Registration Rightsholder" means any beneficial owner of outstanding
Registrable Securities.
"Registration Statement" means a registration statement within the meaning
of the Securities Act or its closest equivalent under the securities laws of a
country other than the United States.
"Required Shareholding" means the beneficial ownership of Shares which in
the aggregate represent at least twenty-five percent (25%) of the Corporations
total corporate capital, provided that such Shares include (i) Series A Shares
representing at least ten percent (10%) of the Corporation's total corporate
capital, and (ii) Series V Shares representing at least eleven percent (11%) of
the Corporation's total corporate capital.
"SEC" means the United States Securities and Exchange Commission, or any
successor agency thereto.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Series A Directors" means those members of the Board of Directors who,
pursuant to the Bylaws or this Agreement, are nominated and elected by the
beneficial owners of the Series A Shares; provided, however, that such term does
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not include the Series V Directors.
"Series A Shares" means the ordinary, nominative Series A Shares of the
Corporation that are authorized by the Bylaws and outstanding from time to time.
"Series V Directors" means those members of the Board of Directors who,
pursuant to the Bylaws or this Agreement, are nominated and elected by the
beneficial owners of the Series V Shares; provided, however, that such term does
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not include the Series A Directors.
"Series V Shares" means the ordinary, nominative Series V Shares of the
Corporation that are authorized by the Bylaws and outstanding from time to time.
"Shareholder" means each member of the Verizon Shareholder Group and of the
Vodafone Shareholder Group.
"Shares" means the Series A Shares and the Series V Shares.
"Subsidiaries" means the Persons in which the Corporation shall at any
time, directly or indirectly, beneficially own an equity interest equal to or
greater than fifty percent (50%), or which the Corporation shall, at any time,
directly or indirectly control.
"Subsidiary Officer" means an Officer of a Subsidiary.
"Supermajority Vote" means (a) with respect to action by the Board of
Directors, the affirmative vote of a majority of the Directors present at a
meeting at which a quorum is present,
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which majority includes the affirmative vote of (i) a majority of the Series A
Directors and (ii) the Vodafone Series A Director for so long as Vodafone has
the right pursuant to the applicable provisions of the LGSM and the Bylaws to
appoint a Series A Director, (b) with respect to action by any Committee, the
affirmative vote of a majority of the Committee members present at a meeting at
which a quorum is present, which majority includes the affirmative vote of (i) a
majority of the Committee members designated by the holders of the majority of
the Series A Shares and (ii) for so long as Vodafone maintains the Required
Shareholding, at least one Committee member designated by Vodafone, and (c) with
respect to action by the shareholders, the affirmative vote of a majority of the
outstanding Shares at an Extraordinary Shareholders Meeting at which a quorum is
present, which majority includes the affirmative vote of at least seventy-five
percent (75%) of the outstanding Series A Shares.
"Taxes" means all federal, state, local or foreign net income, alternative
or add-on minimum, assets, gross income, gross receipts, sales, use, ad valorem,
value-added, franchise, profits, license, withholding, communications, payroll,
employment, excise, severance, stamp, occupation, premium, profit-sharing
payments, property, social benefits contribution, windfall profits or similar
taxes, duties, assessments, fees, levies or other similar governmental charges
of any kind whatsoever, together with any interest, penalties, additions to tax
or additional amounts imposed thereon or imposed with respect to any such
interest, penalties, additions to tax or other additional amounts.
"Telecom Act" means the Telecommunications Act of 1996 enacted by the
United States Congress.
"Telecommunications Business" means any of the following: (a) the
ownership, management, operation or maintenance of a network for the
transmission, by any means, of data, voice or video signals, (b) the provision
of transmission services, by any means, of data, voice, or video signals, (c)
the provision of customer premises equipment, and (d) the provision of value
added services. The marketing of such goods and services on a wholesale, retail
or reseller basis shall constitute the operation of the Telecommunications
Business.
"Transfer" means any transfer, assignment or sale, or any pledge,
hypothecation or other encumbrance, or any other change of ownership of any
kind. For purposes of this Agreement, any event, transaction or proposed
transaction which results or would result in a Shareholder no longer being an
Affiliate of Verizon or Vodafone, as applicable, shall be deemed to constitute a
Transfer or proposed Transfer, as applicable, of all of the Series A Shares held
by such Shareholder.
"U.S. GAAP" means GAAP as applied in the United States.
"United States" and "U.S." mean the United States of America.
"Verizon" means Verizon Communications Inc., a Delaware corporation with
its principal office located at 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000.
"Verizon Series A Designated Director" means the Series A Director
designated by the Verizon Shareholder Group, as beneficial owner of the majority
of Series A Shares, to serve in such capacity. The initial Verizon Series A
Designated Director is Fares X. Xxxxxxx.
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"Verizon Series V Director" has the meaning assigned to it in Section
3.1(a).
"Verizon Shareholder Group" means BALAH, BAII, BANZHI and any of their
respective transferees or successive transferees, pursuant to the terms of
Section 6.2 or Section 6.4(f) hereof.
"Verizon Subject Transfer" means a Transfer of Series A Shares by any
member of the Verizon Shareholder Group which is not proposed to be consummated
with an Affiliate of Verizon and which would result in (a) Verizon and its
Affiliates collectively owning less than a majority of the Series A Shares, or
(b) Verizon losing the ability to report the earnings and results of operations
of the Corporation on a consolidated basis to the same extent as it did
immediately prior to the proposed Transfer.
"Vodafone Officer" means any one of the following four Officers of the
Corporation and/or any applicable Subsidiary as determined from time to time by
the Board of Directors or the Executive Committee: (a) Chief Operating Officer
(or in the absence of such position, the Chief Sales Officer), (b) Chief
Financial Officer, (c) Chief Marketing Officer, or (d) Chief Technical Officer.
"Vodafone Series A Director" means the Series A Director (including, where
applicable, his or her alternate) elected by the Vodafone Shareholder Group in
exercise of the rights granted to it pursuant to Article 144 of the LGSM and the
applicable provisions of the Bylaws.
"Vodafone Shareholder Group" means Vodafone and any of its respective
transferees or successive transferees, pursuant to the terms of Section 6.2 or
Section 6.4(f) hereof.
"Vodafone Subject Transfer" means a Transfer of Series A Shares by any
member of the Vodafone Shareholder Group which is not proposed to be consummated
with an Affiliate of Vodafone.
1.2 Construction. As used in this Agreement, (a) each term defined in this
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Agreement has the meaning assigned to it, (b) each accounting term not otherwise
defined in this Agreement has the meaning assigned to it in accordance with
Mexican GAAP, if any, and if such term has no meaning under Mexican GAAP, then
under U.S. GAAP, (c) as the context may require, words in the singular include
the plural and words in the plural include the singular, (d) as the context may
require, words in the masculine or neuter gender include the masculine, feminine
and neuter genders, (e) all references to Schedules or Exhibits refer to
Schedules or Exhibits delivered herewith or attached hereto (each of which is
deemed to be a part of this Agreement), (f) all references to Sections or
Articles refer to Sections or Articles of this Agreement, (g) all references to
"U.S.$", "$" or "dollars" refer to United States dollars, (h) any amount to be
paid in "$" or "dollars" shall be paid in United States dollars, but any amount
to be measured for purposes of determining compliance with a standard set forth
in this Agreement in "$" or "dollars" may be so measured in a foreign currency
and shall be translated into United States dollars on the basis of the then
prevailing exchange rates applicable to the discharge of obligations denominated
in foreign currency and payable in the Mexican Republic (tipo de cambio para
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solventar obligaciones denominadas en moneda extranjera pagaderas en la
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Republica Mexicana), as published by the Banco de Mexico in the Diario Oficial
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de la
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Federacion, (i) the terms "herein," "hereunder," "hereby," "hereto" and terms of
similar import refer to this Agreement in its entirety, and not to any
particular Article, Section, paragraph or subparagraph. No provision of this
Agreement will be construed in favor of, or against, any of the parties hereto
by reason of the extent to which such party or its counsel participated in its
drafting or by reason of the extent to which this Agreement or any provision
hereof is inconsistent with any prior draft hereof or thereof. All references in
this Agreement to the beneficial ownership of Shares shall be deemed to include
Shares deposited into any trust the beneficiary interest in which is held by any
member of the Verizon Shareholder Group or the Vodafone Shareholder Group, as
well as any Shares held of record by any member of the Verizon Shareholder Group
or the Vodafone Shareholder Group and, with respect to references to other
Persons being a beneficial owner, the parties agree that such term shall be
translated into Spanish as "beneficiario". For purposes of this Agreement,
references to the office of President and/or Director General of the Corporation
are deemed to be references to the office of the Corporation currently held by
Ing. Xxxxxx Xxxxxx del Xxxxx.
ARTICLE II
ORGANIZATIONAL MATTERS
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2.1 Establishment of Shareholders Agreement. The Shareholders hereby
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establish and enter into this Agreement for the purpose of making certain
agreements stated herein regarding, among other things, the control and
management of the Corporation and the Subsidiaries, limitations on the
activities of the parties in the Telecommunications Business in Mexico, and the
sale of Shares.
2.2 Term of Agreement. The term of this Agreement shall commence on the
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Effective Date and shall terminate as of the date on which either the Verizon
Shareholder Group or the Vodafone Shareholder Group ceases to beneficially own
any Shares; provided that Section 5.6, Article IX and Section 10.3 shall survive
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the termination of this Agreement indefinitely. The terms of Articles III (other
than Sections 3.1 and 3.4), IV and V (other than Section 5.6) shall terminate
upon the first date on which either (i) Verizon and its Affiliates in the
aggregate beneficially own Shares which in the aggregate represent less than
twenty-five percent (25%) of the Corporation's total corporate capital, or (ii)
Vodafone and its Affiliates in the aggregate beneficially own less than the
Required Shareholding. The terms of Section 3.1 shall terminate upon the first
date on which Verizon and its Affiliates in the aggregate cease to beneficially
own a majority of the outstanding Series A Shares. The terms of Article VII
shall terminate as to any Registration Rightsholder whose Registrable Securities
represent less than five percent (5%) of the outstanding capital stock of the
Corporation. No Person shall have any obligations of any kind under this
Agreement in the event that the Closing (as defined in the Purchase and Sale
Agreement) does not take place.
ARTICLE III
GOVERNANCE OF THE CORPORATION
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3.1 Board of Directors, Committees and Certain Officers.
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(a) The Board of Directors will consist of twelve (12) Directors, seven
(7) of whom shall be Series A Directors and five (5) of whom shall be Series V
Directors.
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The Verizon Shareholder Group shall nominate all of the Series A Directors
and their alternates other than the Vodafone Series A Director if applicable,
and both the Verizon Shareholder Group and the Vodafone Shareholder Group shall
vote their Series A Shares to elect such nominees. In order to induce the
members of the Verizon Shareholder Group to enter into this Agreement, the
Vodafone Shareholder Group agrees that if at any time the Series V Shares
beneficially owned by the Vodafone Shareholder Group represent less than ten
percent (10%) of the Corporation's total corporate capital, the Vodafone
Shareholder Group shall elect the Vodafone Series A Director, if applicable,
from among those Persons proposed to the Vodafone Shareholder Group by the
Verizon Shareholder Group in writing.
Without prejudice to the rights accorded to the Corporation's shareholders
pursuant to Article 144 of the LGSM and the applicable provisions of the Bylaws,
the Vodafone Shareholder Group shall nominate all of the Series V Directors and
their alternates; provided, however, that in the event non-Shareholders having a
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right pursuant to the applicable provisions of the LGSM and the Bylaws to elect
one or more Series V Directors exercise such right, then the Vodafone
Shareholder Group shall nominate all remaining Series V Directors and their
alternates. In order to induce the members of the Verizon Shareholder Group to
enter into this Agreement, the Vodafone Shareholder Group agrees that in any
case, at any time when the Series V Shares beneficially owned by the Vodafone
Shareholder Group represent ten percent (10%) or more of the Corporation's total
corporate capital, the Vodafone Shareholder Group shall elect as the Series V
Director (or as one of the Series V Directors) which it has the right to elect
pursuant to Article 144 of the LGSM and the applicable provisions of the Bylaws
(the "Verizon Series V Director") from among those Persons proposed to the
Vodafone Shareholder Group by the Verizon Shareholder Group in writing. Both the
Verizon Shareholder Group and the Vodafone Shareholder Group shall vote their
Series V Shares to elect all such nominees nominated by the Vodafone Shareholder
Group (including the Verizon Series V Director).
The Series A Directors shall serve at the pleasure of the beneficial owners
of the Series A Shares (the majority of which shall have the right to remove and
replace the Series A Directors in accordance with applicable law); provided that
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the VodafoneSeries A Director, if any, shall serve at the pleasure of the
Vodafone Shareholder Group (which shall have the right to remove and replace the
Vodafone Series A Director in accordance with applicable law); provided further
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that in order to induce the members of the Verizon Shareholder Group to enter
into this Agreement, the Vodafone Shareholder Group agrees that if the Vodafone
Series A Director shall have been nominated pursuant to the last sentence of the
second paragraph of Section 3.1(a), the Vodafone Shareholder Group shall remove
and replace the Vodafone Series A Director as and when, and only as and when,
directed in writing by Verizon. The Series V Directors shall serve at the
pleasure of the beneficial owners of the Series V Shares (the majority of which
shall have the right to remove and replace the Series V Directors in accordance
with applicable law) or at the pleasure of such shareholders of the Corporation
as shall have elected them in accordance with Article 144 of the LGSM and the
applicable provisions of the Bylaws, as applicable; provided that in order to
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induce the members of the Verizon Shareholder Group to enter into this
Agreement, the Vodafone Shareholder Group agrees that the Vodafone Shareholder
Group shall remove and replace the Verizon Series V Director as and when, and
only as and when, directed in writing by Verizon. Alternate Directors for each
such member of the Board of Directors shall be appointed as set forth above
(which alternates shall serve in place of any Director or Directors for whom
such alternate has been elected as an alternate) and, in the event that for any
reason
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whatsoever a Director ceases to or is unable to continue or perform in his
capacity as Director, he will be replaced by an alternate so appointed. The
quorum for meetings of the Board of Directors held following any call shall be
one-half (1/2) of all Directors, which must include at least a majority of the
Series A Directors.
(b) Subject to the other provisions of this Agreement and the Bylaws,
the Board of Directors, by majority vote of the Directors present at a meeting
at which a quorum is present, shall elect or appoint, or cause to be elected or
appointed, the Corporation Officers, Subsidiary Officers (to the extent not
restricted by law, Contract or otherwise) and employees or agents of the
Corporation or any Subsidiary in any manner it deems appropriate; provided,
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however, that the Chairman of the Board of Directors shall be Fares X. Xxxxxxx
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until his resignation or retirement from such position, disability or death
(provided that in any such case his successor or any successive successor shall
be designated by a majority of the Series A Directors or by the holders of the
majority of the Series A Shares). The Chairman of the Board of Directors or his
alternate, as the case may be, shall have the right and power to cast an
additional vote to break a tie or deadlock, except on any matter which requires
a Supermajority Vote.
The number and types of employees hired, retained or dismissed by the
Corporation and the Subsidiaries shall be consistent with the scope of the
operations of the Corporation and the Subsidiaries and the Annual Plan.
(c) The Shareholders or, if so authorized, the Board of Directors shall
appoint such Committees as they deem appropriate, with authority to act on all
matters delegated to each such Committee in accordance with the Bylaws. Each
Committee shall have an even number of members. Such Committees shall include an
Executive Committee, a finance and audit Committee, a human resources and
compensation Committee, and a strategic planning and technology Committee, the
duties and functions of which Committees are set forth in the Bylaws.
The Executive Committee shall be comprised of eight (8) members, six (6) of
whom shall be designated by the holders of a majority of the Series A Shares
voting at a duly constituted shareholders meeting and two (2) of whom shall be
designated by the holders of a majority of the Series V Shares voting at a duly
constituted shareholders meeting. A majority of the members of each other
Committee shall be designated by a majority vote of the Series A Shares, and the
remaining members shall be designated by a majority vote of the Series V Shares.
The foregoing notwithstanding, for so long as Vodafone and its Affiliates
maintain the Required Shareholding, it shall be entitled to designate one (1)
member of each Committee (which member shall be one of the members who is, or
who otherwise would be, designated by majority vote of the Series V Shares).
The Verizon Shareholder Group and the Vodafone Shareholder Group shall each
vote the Shares beneficially owned by them in favor of all nominees and their
alternates nominated by the Vodafone Shareholder Group or the Verizon
Shareholder Group pursuant to this Section 3.1(c).
The quorum for meetings of any Committee held following any call shall be
one-half (1/2) of the members of such Committee. Subject to any Supermajority
Vote requirements,
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Committee action will be effective only if approved by a majority of the members
present at a meeting at which a quorum is present, which majority includes a
majority of the members designated by the holders of the Series A Shares.
(d) The power to appoint (without prejudice to Section 3.1(e)) and
dismiss the Chief Executive Officer, the President, the Director General, the
Chief Operating Officer, the Vice President of Commercial Operations, the Vice
President of Marketing and the Vice President of Technical Operations of the
Corporation shall reside with Fares X. Xxxxxxx or any of his successors as
Chairman of the Board of Directors, provided that the Verizon Series A
Designated Director must agree in writing to such appointment or dismissal. The
power to appoint (without prejudice to Section 3.1(e)) and dismiss all other
Officers shall reside with the Chief Executive Officer.
(e) For so long as Vodafone and its Affiliates in the aggregate
maintain the Required Shareholding, Vodafone shall be entitled to (i) appoint a
Vodafone Officer of the Corporation, (ii) designate a statutory examiner
(comisario) of the Corporation, and (iii) determine the manner in which the
Corporation votes the shares it holds in each Subsidiary with respect to the
following matters: (A) in the case of each Subsidiary in which the Corporation
is entitled to designate at least two (2) members of the board of directors or
other managing body, the election of one (1) regular and alternate member of
such board of directors or other managing body; and (B) in the case of each
Subsidiary in which the Corporation beneficially owns a greater than fifty
percent (50%) voting interest, (1) the appointment of a Vodafone Officer,
provided that the legal entity in question has one or more Officers serving the
functions of a Chief Operating Officer (or, if applicable, Chief Sales Officer),
Chief Financial Officer, Chief Marketing Officer or Chief Technical Officer, and
(2) the designation of a statutory examiner (comisario).
3.2 Actions of Board of Directors, Committees and Shareholders.
---------------------------------------------------------------------
(a) Except as otherwise expressly provided herein, by law or in the
Bylaws, all actions of the Board of Directors, any Committee or the shareholders
of the Corporation shall be taken upon or pursuant to a majority vote of the
Board of Directors, Committee members or of the beneficial owners of Shares
entitled to vote, respectively, who are present at the corresponding meeting
(provided a quorum exists).
(b) The Corporation, the Board of Directors, each Committee and the
Shareholders shall not (and (subject to any rights of other shareholders in such
Subsidiaries) the Corporation shall cause its Subsidiaries to not, and shall use
its best efforts to cause any other entity in which it holds an equity interest
to not) take any of the actions, enter into any commitment to take any of the
actions, or otherwise agree to take any of the actions, specified below, unless
such action has been first approved by a Supermajority Vote:
(i) the acquisition of any business which is not a
Telecommunications Business for a purchase price in excess of U.S.$30,000,000 in
the aggregate;
(ii) the entering into or approval of any joint venture,
partnership or merger plan or transaction within the Telecommunications Business
which involves the
-11-
investment of more than, or the merger with a business with assets which exceed,
U.S.$100,000,000 in the aggregate (other than any plan to merge or consolidate
with the properties controlled by Affiliates of Motorola, Inc. or its successors
in interest in Regions 1, 2, 3 and 4 or any investment in any Subsidiary or a
joint venture established to provide wireless telephony services in the 1.8 GHz
frequency band in Regions 1 and 4);
(iii) any sale or sales of assets (other than sales of inventory or
superseded or obsolete equipment in the ordinary course of business) or
businesses for consideration exceeding U.S.$30,000,000 in the aggregate during
any fiscal year,
(iv) the incurrence, in any single or any series of related
transactions, of Indebtedness in an amount exceeding U.S.$100,000,000 in the
aggregate during any fiscal year (other than indebtedness which constitutes the
refinancing or successive refinancing of existing Indebtedness, Indebtedness
which constitutes vendor financing and Indebtedness which constitutes project
financing);
(v) the issuance of capital stock, in any single or any series of
related transactions, in an amount exceeding U.S.$50,000,000 in the aggregate
during any fiscal year (other than capital stock issued pursuant to any plan to
merge or consolidate with the properties controlled by Affiliates of Motorola,
Inc. or its successors in interest in Regions 1, 2, 3 and 4 or any investment in
any Subsidiary or a joint venture established to provide wireless telephony
services in the 1.8 GHz frequency band in Regions 1 and 4);
(vi) the entering into, amending the terms of or terminating
Contracts or transactions with or for the benefit of: (A) any Affiliate of the
Corporation (other than Contracts or transactions solely between or among the
Corporation or a Subsidiary and one or more other Subsidiaries that are at least
ninety percent (90%) owned by the Corporation); or (B) any of the signatories to
this Agreement or any of their respective Affiliates; provided, however, that no
-------- -------
Supermajority Vote approval shall be required for any renewal, extension,
successive renewal or successive extension, on substantially similar terms and
conditions (provided that the parties thereto may be Affiliates of the current
parties), or assignment in whole or in part to another Subsidiary, of (x) the
Master Technical Services Agreement by and between BAII and Sistecel, S.A. de
C.V. effective as of January 1, 1997, and (y) the Agreement for the
Reimbursement of Compensation Expense (Secondment Agreement) by and between BAII
and Sistecel, S.A. de C.V. effective as of January 1, 1997; provided further,
-------- -------
however, that the aggregate payments to BAII or one of its Affiliates in any one
calendar year under the Master Technical Services Agreement referred to in
clause (x) above or any renewal, extension, successive renewal or successive
extension thereof cannot exceed U.S.$3,000,000 without a Supermajority Vote and
that the aggregate payments to BALI or one of its Affiliates in any one calendar
year under the Agreement for the Reimbursement of Compensation (Secondment
Agreement) referred to in clause (y) above or any renewal, extension, successive
renewal or successive extension thereof cannot exceed U.S.$10,000,000 without a
Supermajority Vote;
(vii) the termination or disposition of the cellular, fixed
wireless, long distance or satellite transmission business in which the
Corporation or any Subsidiary is engaged (or the related network assets) in any
contiguous geographic area from which consolidated annual revenues from the
service proposed to be terminated in each of the two most recent fiscal
-12-
years exceeded U.S.$10,000,000, including the termination of the provision of
cellular, fixed wireless local telephony, long distance or satellite
transmission services in any Region;
(viii) the making of any request or application or the taking of
any other action to terminate any Concession relating to cellular, fixed
wireless local telephony, long distance or satellite transmission service,
including without limitation any application to eliminate radio spectrum
licensed or granted for such services;
(ix) the determination of the manner in which shares or other
equity interests held by the Corporation in any other legal entity in which the
Corporation beneficially owns at least a ten percent (10%) equity interest are
voted in connection with any of the matters set forth in (A) clauses (i) - (x)
of this Section 3.2(b), and/or (B) Section 3.2(d)(i)-(iii), as well as the
issuance of proxies for the voting of such shares or other equity interests in
connection with such matters; and
(x) any authorization or grant of any general or limited power of
attorney to any Person with respect to, or any delegation of authority in
connection with, any of the foregoing matters.
(c) The Corporation, the Board of Directors, each Committee and the
Shareholders shall not (and (subject to any rights of other shareholders in such
Subsidiaries) the Corporation shall cause its Subsidiaries to not, and shall use
its best efforts to cause any other entity in which it holds an equity interest
to not) take any of the actions, enter into any commitment to take any of the
actions, or otherwise agree to take any of the actions, specified below, unless
such action has been first approved (either in writing or by the casting of an
affirmative vote at a duly constituted meeting of the Board of Directors or an
authorized Committee) by the Verizon Series A Designated Director:
(i) the issuance of capital stock or any recapitalization or other
change in capital or capital structure (including, without limitation, any stock
split or conversion of stock to another Series), or any determination that
additional financial support is required from the Shareholders, whether by means
of additional capital contributions, Indebtedness, guarantees or otherwise, or
any granting of registration rights with respect to the capital stock;
(ii) the acquisition of any securities, including the securities of
any other Person;
(iii) the declaration or payment of dividends or oilier
distributions either (A) in any fiscal year, in excess of twenty-five percent
(25%) of consolidated net income for the prior fiscal year (consolidated net
income shall be calculated in accordance with Mexican GAAP provided that if such
amount is more than one hundred and ten percent (110%) of consolidated net
income under U.S. GAAP for the same period, then consolidated net income shall
be calculated in accordance with U.S. GAAP for purposes, of subclause (A) of
this clause (iii) and for purposes of Section 3.7) or (B) except as otherwise
contemplated in Section 3.7, which would trigger a Mexican Tax upon payment to
any Shareholder;
(iv) the declaration or payment of dividends (except as otherwise
required by any future Contract approved by a Supermajority Vote or by the
Verizon Series A
-13-
Designated Director pursuant to this Section 3.2(c)) or other distributions to
any security holder (other than the Corporation or a wholly-owned Subsidiary of
the Corporation) of any Subsidiary;
(v) the increase or decrease of the number of Directors comprising
the Board of Directors, or any such change to the board of directors of any
Subsidiary;
(vi) the termination or disposition of a business or a line of
business (or the related assets), including the termination of the provision of
goods or services in a geographic area; provided, however, that the termination
-------- -------
of a line of business from which consolidated annual revenues in each of the two
most recent fiscal years of the Corporation were less than U.S.$1,000,000 shall
not require approval of the Verizon Series A Designated Director;
(vii) the commencement of any business or line of business (by
start-up, acquisition, expenditure or otherwise), or the expansion of the scope
of any business or line of business into any country other than Mexico, except
for the following businesses or lines of business in the following countries:
(A) the ownership, management, operation and maintenance of networks for the
transmission by the Corporation or any Subsidiary, wholly within the national
borders of Mexico, of data and voice signals using cellular technology and
spectrum in the 825-835 MHz and 870-880 MHz ranges, and (B) any action or
transaction in any country contemplated under an Annual Plan approved in
accordance with clause (xx) of this Section 3.2(c);
(viii) the incurrence, in a transaction or series of related
transactions, of any Material Indebtedness, the incurrence within any
twelve-month period beginning on the Effective Date of Indebtedness which in the
aggregate exceeds U.S.$20,000,000, the extension of any loan or guaranty, or
series of related loans or guaranties in an amount exceeding U.S.$5,000,000 or
the extension, within any twelve-month period beginning on the Effective Date,
of loans or guaranties which in the aggregate exceed U.S.$20,000,000;
(ix) the making, in a transaction or series of related
transactions, of any Material sale of assets or sale of business or any Material
acquisition of or investment in assets, or a business, or, whether or not
Material, any acquisition of or investment in equity securities (including
securities convertible into equity securities) issued by, or an equity interest
in, any Person;
(x) the making, within any twelve-month period beginning on the
Effective Date, of sales of assets (other than sales of inventory or superseded
or obsolete equipment in the ordinary course of business) or businesses for
consideration which, in the aggregate, exceeds U.S.$20,000,000, or of
acquisitions of or investments in assets (other than inventory acquired in the
ordinary course of business) or businesses for consideration which, in the
aggregate, exceeds U.S.$20,000,000;
(xi) entering into, amending the terms of or terminating Contracts
or transactions with or for the benefit of (A) any Affiliate (other than
transactions solely between or among Subsidiaries in which the Corporation,
directly or indirectly, holds ninety percent (90%) or more of the capital stock
or solely between or among the Corporation and one or more of such
Subsidiaries), or (B) any of the signatories hereto or their Affiliates;
-14-
(xii) the entering into or approval of any transaction or plan of
merger, consolidation, dissolution or liquidation;
(xiii) the subjection of any Concession to any Lien or, except in
the ordinary course of business to secure an obligation that is not for a
Material amount, the subjection of any other property or assets to any Lien;
(xiv) the making of any request or application to obtain, modify or
terminate any Concession including, without limitation, any application to
eliminate, add to or modify radio spectrum, or the taking of any other action to
obtain, modify or terminate any Concession or the willful failure to take any
action necessary to maintain or protect any such Concession;
(xv) the amendment or modification of the Bylaws or the estatutos
sociales of any Subsidiary, or the amendment or modification, or consent or
approval thereto or thereof, to the organizational or governing documents
(including, without limitation, estatutos sociales) of any Person in which the
Corporation or any Subsidiary has a direct or indirect equity interest
(including, without limitation, the amendment or modification of the stated
purpose of any such Person as stated in any such documents);
(xvi) the appointment, nomination, election, removal, dismissal or
replacement of the Corporation's Officers or any Subsidiary Officer (subject to
the terms of, and except as otherwise provided in, Section 3.1), or a change in
the remuneration of the Chairman of the Board of Directors, the Chief Executive
Officer, any other executive officer of the Corporation or a Subsidiary, and any
other employee who would be compensated following the taking of such action, at
a rate in excess of U.S.$50,000 on an annualized basis (which amount shall be
calculated to include the value of any fringe benefits not given to
substantially all employees of the Corporation and the Subsidiaries);
(xvii) any appointment or removal of Accountants or any approval of
financial statements;
(xviii) the entering into of any Material Contract (or series of
related Contracts that together are Material);
(xix) the making of any Tax election or the adoption of any Tax
accounting method for Tax purposes, or any agreement or settlement with any
Governmental Entity in connection with the Tax returns or Tax obligations;
(xx) the approval or modification of the annual three-year
strategic plan or the Annual Plan or any deviation from actions required to be
taken under the Annual Plan,
(xxi) (A) the approval of the terms or the making of any private or
public offering or sale of securities or (B) the approval of any documentation
or communication prepared or otherwise made for any private or public offering
or sale of securities;
-15-
(xxii) the authorization or granting of any general power of
attorney for acts of administration or negotiable instruments or of any general
or limited power of attorney for acts of dominion to any Person;
(xxiii) the sharing with any Person or disposition of any
non-public or proprietary technology;
(xxiv) the making of any gift or donation, or series of related
gifts or donations, in an amount exceeding U.S.$5,000 in any calendar year to
any Person;
(xxv) any institution, settlement or default with regard to any
Material (or potentially Material) litigation, or any settlement or default with
regard to any litigation (whether or not Material) in which any Shareholder, any
of the signatories hereto or their Affiliates have interests adverse to the
Corporation or any Subsidiary; and
(xxvi) the agreement to be bound by any Contract to not compete
with another Person or otherwise not engage in any business.
(d) If any of the actions specified in Section 3.2(b) or 3.2(c) is
presented for approval at a shareholders meeting, such action shall not be taken
by the Corporation or its Subsidiaries (and (subject to any rights of other
shareholders in such Subsidiaries) the Corporation shall cause its Subsidiaries
to not, and shall use its best efforts to cause any other entity in which it
holds an equity interest to not, take such action, enter into any commitment to
take such action, or otherwise agree to take such action), unless such action
has been approved by a Supermajority Vote of the Extraordinary Shareholders
Meeting or shall previously have been approved by a Supermajority Vote of the
Board of Directors or of a Committee or approved by the Verizon Series A
Designated Director, as applicable.
The Corporation and the Shareholders shall not (and (subject to any rights
of other shareholders in such Subsidiaries) the Corporation shall cause its
Subsidiaries to not, and shall use its best efforts to cause any other entity in
which it holds an equity interest to not) take any of the actions, enter into
any commitment to take any of the actions, or otherwise agree to take any of the
actions specified below, unless such action has been approved by a Supermajority
Vote of the Extraordinary Shareholders Meeting:
(i) any anticipatory dissolution and the designation of liquidators
in connection therewith;
(ii) any fixed or variable capital increases in an aggregate amount
exceeding U.S.$50,000,000 during any fiscal year, other than capital increases
whose proceeds will be used (A) to implement or effect any plan to merge or
consolidate with the properties controlled by Affiliates of Motorola, Inc. or
its successors in interest in Regions 1, 2, 3 or 4, or (B) to make an investment
in any Subsidiary or joint venture established to provide wireless telephone
services in Regions 1 and 4 using 1.8 GHz frequency band; and
(iii) any amendment to that provided in Articles Three, Five, Six,
Seven, Eleven, Section II of Article Thirteen, Fifteen, Sixteen, Seventeen,
Eighteen, Nineteen,
-16-
Twenty, Twenty-One, Twenty-Two, Twenty-Three, Twenty-Four, Twenty-Five,
Twenty-Six, Twenty-Seven, Twenty-Eight, Twenty-Nine, Thirty-One or Thirty-Two of
the Bylaws.
3.3 Annual Plan and Three-Year Strategic Plan. The Shareholders will
---------------------------------------------
cooperate to cause the majority of the Directors to agree upon an annual
three-year strategic plan and an Annual Plan that is acceptable to the
Shareholders. The approval of an Annual Plan which contemplates an action that
requires a Supermajority Vote and/or the approval of the Verizon Series A
Designated Director shall not constitute the requisite approval of such action
(and such shall not be implemented by the Corporation unless separately approved
by Supermajority Vote and/or by the Verizon Series A Designated Director, as
applicable), unless (a) the action was clearly and accurately described in the
Annual Plan, (b) the Annual Plan presented to the Board of Directors and
approved by it explicitly stated that such action is a "Supermajority Action
Item," and (iii) the Annual Plan so presented was approved by Supermajority Vote
and/or by the Verizon Series A Designated Director, as applicable.
3.4 Contracts with Affiliates. The Corporation will not, and will not
---------------------------
permit any Subsidiary to, enter into any Contract or transaction with or for the
benefit of any of their Affiliates (other than transactions with, between or
among wholly-owned Subsidiaries) or any of the signatories hereto or their
Affiliates, which is not at prices and on other terms at least as favorable to
the Corporation or the Subsidiary as those which could be obtained on an
arms-length basis from an unaffiliated third party.
3.5 Limitation on Acts of Shareholders. Except to the extent expressly
------------------------------------
provided herein, no Shareholder in such capacity shall have the power to bind or
commit the Corporation or any other Shareholder to any obligation or Contract
with any third party.
3.6 Conditions to Offerings. The parties acknowledge and agree that, among
-----------------------
other conditions that the Series A Directors may establish from time to time in
connection with their vote on any matter, the majority of Series A Directors
shall have the right to condition any approval regarding any private or public
offering or sale of securities of the Corporation or any Subsidiary upon the
timely receipt prior to the closing of any such transaction by the Verizon
Shareholder Group of a "comfort letter" from the Accountants relating to such
transaction in form and substance reasonably acceptable to the Verizon
Shareholder Group, and upon the satisfaction of the majority of Series A
Directors with the form and substance of any documentation or communication
proposed to be used in connection with any such offering or sale.
3.7 Dividends. Each of the Verizon Shareholder Group and the Vodafone
---------
Shareholder Group shall have the right to unilaterally require that the
Corporation pay dividends during any fiscal year in an amount of up to
twenty-five percent (25%) of the Corporation's consolidated net income
(calculated in accordance with Section 3.2(c)(iii)) for the prior fiscal year;
provided that such payment of dividends is not prohibited by applicable law or
--------
any Contract of the Corporation and does not adversely affect the reasonably
foreseeable cash flow or capital requirements of the Corporation; provided
--------
further that the Subsidiaries of the Corporation are not prohibited or otherwise
-------
restricted by applicable law or Contract from upstreaming sufficient dividends
to the Corporation to pay such dividends. Each time that the Verizon Shareholder
Group or the Vodafone Shareholder Group exercises its rights pursuant to
-17-
this Section 3.7, the Shareholders shall vote, and shall cause the Series A
Directors and Series V Directors to vote, in favor of the prompt payment of the
required dividend.
ARTICLE IV
ACCOUNTS, REPORTS, RIGHT OF INSPECTION AND
OTHER FINANCIAL MATTERS
-----------------------
4.1 Fiscal Year. The fiscal year of the Corporation and each Subsidiary
-----------
shall end on December 31 of each year.
4.2 Books, Records and Reports.
--------------------------
(a) The Corporation shall maintain, and shall cause each Subsidiary to
maintain, proper books and accounts on an accrual basis and in accordance with
Mexican GAAP. Such books and records shall also be maintained in such a manner
as to permit the preparation of quarterly and annual reports in accordance with
U.S. GAAP. The books and records of the Corporation and the Subsidiaries shall
be kept in the Spanish language, except that books and records maintained in a
country other than Mexico in connection with the Corporation's or a Subsidiary's
conduct of business in such country may be maintained in the official language
of such country. The minute books, the reports referenced in Section 4.2(b)
below and any special report a Shareholder shall from time to time request shall
be kept in both the Spanish and English languages and as between the
Shareholders, or as between the Shareholders and the Corporation or any
Subsidiary, the English language version of any such documents, other than the
minute books, shall govern and be controlling. As to the minute books, as
between the Shareholders, or as between the Shareholders and the Corporation or
any Subsidiary, the Spanish language version shall govern and be controlling.
Annually upon the close of the year (and at such other times as shall be
approved by the Board of Directors), all such books and accounts shall be
audited by the Accountants.
(b) Each of the Vodafone Shareholder Group and the Verizon Shareholder
Group shall be furnished with the following:
(i) within 21 days after the end of each calendar month, unaudited
monthly consolidated and consolidating statements of income and of sources and
uses of cash, and an unaudited consolidated and consolidating month-end balance
sheet for the Corporation and each Subsidiary;
(ii) within 30 days after the end of each of the first three
quarters of each fiscal year, an unaudited consolidated and consolidating
balance sheet of the Corporation and each Subsidiary as of the end of such
quarter and the related unaudited statements of income, shareholders' equity and
changes in financial situation for such quarter and for the year to date, in
each case prepared in accordance with Mexican GAAP, setting forth all
adjustments necessary to convert to U.S. GAAP, and setting forth in comparative
form the figures as at the end of and for the comparable period in the previous
fiscal year and such other unaudited financial and operating information as may
be reasonably requested by any Shareholder;
(iii) within 120 days after the end of each fiscal year, audited
consolidated and consolidating financial statements, including a consolidated
and consolidating
-18-
balance sheet of the Corporation and each Subsidiary as at the end of such year,
and the related statements of income, shareholders' equity and changes in
financial situation for such year, in each case prepared in accordance with each
of Mexican GAAP and U.S. GAAP and setting forth in each case in comparative form
the figures as at the end of and for the previous fiscal year, together with all
necessary footnotes, and the report of the Accountants on such financial
statements; and
(iv) upon written request, promptly after the sending or receipt
thereof, copies of all communications between the Corporation or any Subsidiary
and any Governmental Entity that relate to any Concession or to compliance with
applicable securities laws.
4.3 Right of Inspection. Each of the Vodafone Shareholder Group and the
--------------------
Verizon Shareholder Group or any of their respective duly authorized
representatives shall have full and complete access, at any time during normal
business hours and upon reasonable notice, to the books and records, accounts,
properties and/or operations of the Corporation and each Subsidiary for the
purposes of inspection, examination or copying or for any other purpose
including, without limitation, an audit of the Corporation or any Subsidiary.
The full cooperation of the Corporation, each Subsidiary, its respective
directors, officers and employees and the Accountants will be extended for such
purposes. Such examination and inspection may be conducted by a Shareholder's
employees, by its independent certified public accountants and/or by its other
agents. The Corporation shall also furnish, and shall cause each Subsidiary to
furnish, to each of the Vodafone Shareholder Group and the Verizon Shareholder
Group (or any of their respective duly authorized representatives) such other
records, reports and data as such Shareholder or Shareholder representative may
reasonably require for compliance with legal and contractual obligations,
including Mexican and U.S. tax reporting requirements.
4.4 Financial Policy Control.
------------------------
(a) Overall Policy. The overall financial policy of the Corporation and
--------------
each Subsidiary shall be established by the Board of Directors in accordance
with the provisions of Section 3.2.
(b) Annual Operating and Capital Budgets. The Annual Plan and a
----------------------------------------
three-year strategic plan forecasting annual financial performance for such
period will be prepared by the Director General pursuant to policies established
by the Board of Directors and submitted to the Board of Directors for approval
pursuant to Section 3.2. All plans and budgets will be divided by Region for
Mexico and by country elsewhere. The Director General shall circulate successive
drafts of each year's Annual Plan and three-year strategic plan to the Vodafone
Shareholder Group and the Verizon Shareholder Group for review prior to
submission to the Board of Directors. The President shall submit to the Board of
Directors no later than November 15 of each year his final proposed Annual Plan
and three-year strategic plan for the period beginning on the next January 1st.
The President shall consult with, and shall afford the Vodafone Shareholder
Group and the Verizon Shareholder Group reasonable opportunity to comment on,
each successive draft as well as the final version of the Annual Plan and the
three-year strategic plan to be submitted to the Board of Directors.
-19-
4.5 Dividend Instructions. The Corporation shall comply with any and all
----------------------
lawful instructions of any Shareholder as to the method of making any dividend
payment or payments to or on behalf of said Shareholder or of depositing or
utilizing such payment or payments.
ARTICLE V
NON-COMPETITION; CERTAIN CORPORATE
OPPORTUNITIES, CONFIDENTIALITY
------------------------------
5.1 Certain Definitions. For purposes of this Article V only:
---------------------
(a) The term "Acquisition" means the acquisition, in a single
transaction or series of related transactions, of some or all of the equity
securities or assets of a Person or a Group (as hereinafter defined), if such
Person or Group (in the case of an acquisition of securities) engages in the
Telecommunications Business in Mexico or if such assets (in the case of an
acquisition of assets) are used and/or are contemplated to be used following
such acquisition to engage in the Telecommunications Business in Mexico.
(b) The term "Merger" means the merger or consolidation with or into a
Person or Group if such Person or Group engages in the Telecommunications
Business in Mexico.
(c) The term "Group" means a group of Persons who are Affiliates of
each other.
(d) To "engage in" the Telecommunications Business means: (i) actively
engaging in, supervising or managing such business; or (ii) entering into or
attempting to enter into such business, either alone or with any other Person or
Group.
(e) The term "`Publicly Traded" shall mean, as to securities,
securities listed on the Bolsa Mexicana de Valores, registered under the
Exchange Act, or listed or traded on any European or Asian stock exchange.
5.2 Non-Competition. Except as otherwise set forth in this Section 5.2,
---------------
each Shareholder covenants and agrees that neither it nor any of its Affiliates
(other than the Corporation and the Subsidiaries) will, directly or indirectly,
on behalf of itself or on behalf of any other Person, engage in the
Telecommunications Business in Mexico. Notwithstanding anything to the contrary
contained in this Article V (other than the immediately succeeding paragraph
except for subparagraph (d)), each Shareholder covenants and agrees that neither
it nor any of its Affiliates (other than the Corporation and the Subsidiaries)
shall (i) provide consulting services, advisory services or software with
respect to the Telecommunications Business in Mexico to Telefonos de Mexico,
S.A. de C.V., its successors, or any of its or their Affiliates or subsidiaries,
or any other major direct competitor of the Corporation in Mexico, or (ii)
directly or indirectly market, on a wholesale, retail or reseller basis, any
services with respect to the Telecommunications Business in Mexico provided by
Telefonos de Mexico, S.A. de C.V., its successors, or any of its or their
Affiliates or subsidiaries, or any other major direct competitor of the
Corporation in Mexico. Except as stated in the preceding sentence, nothing in
this Section 5.2 shall be deemed to prohibit a Shareholder or any of its
Affiliates from providing consulting
-20-
services, advisory services or software with respect to the Telecommunications
Business in Mexico.
The preceding paragraph of this Section 5.2 shall not prohibit the
Shareholders from directly or indirectly engaging in the Telecommunications
Business in the following instances:
(a) A Shareholder and/or any of its Affiliates may own, in the
aggregate, not more than five percent (5%) of any Publicly Traded securities of
a Person, provided that such ownership represents a passive investment and
neither such Shareholder nor its Affiliates in any way, either directly or
indirectly, manages or exercises control over any such Person, guarantees any of
such Person's financial obligations, otherwise takes any part in such Person's
business (other than exercising the rights of the Shareholder or Affiliate as a
passive shareholder), or seeks to do any of the foregoing, except as otherwise
permitted under this Article V.
(b) Subject to Section 5.5, a Shareholder or any of its Affiliates may
engage in a Telecommunications Business in Mexico if such engagement in a
Telecommunications Business results from an Acquisition by, or Merger involving,
such Shareholder or any of its Affiliates, unless a significant part of the
------
assets directly or indirectly acquired in such Acquisition or Merger are used to
engage in Telecommunications Businesses in Mexico. Such test for significance
shall be met only if both of the following conditions are met: (i) the net book
value of any such assets directly or indirectly acquired in such Acquisition or
Merger that are used primarily to engage in the Telecommunications Business in
Mexico exceeds ten percent (10%) of the net book value of all assets directly or
indirectly acquired in such Acquisition or Merger; and (ii) the total revenues
derived in the calendar year immediately preceding such Acquisition or Merger
primarily from the Telecommunications Business in Mexico acquired in such
Acquisition or Merger exceeds ten percent (10%) of the total revenues during
such year of the Person or Group whose assets or securities the Shareholder (or
any Affiliate) acquired in any such Acquisition or with or into which the
Shareholder (or any Affiliate) merged or consolidated with or into as a result
of such Merger.
(c) The Shareholders and their respective Affiliates may provide
telecommunications goods in Mexico.
(d) Subject to the first paragraph of this Section 5.2, a Shareholder
or any of its Affiliates may engage in a Telecommunications Business in Mexico
if the Opportunity (as hereinafter defined) was brought to the Corporation in
accordance with Section 5.3 and the terms of such Section permit such
Shareholder or Affiliate to engage in such Telecommunications Business.
(e) Vodafone or its Affiliates may engage in a Telecommunications
Business in Mexico if and to the extent the Verizon Shareholder Group has
determined that the Corporation and the Subsidiaries may not engage in such
Telecommunications Business pursuant to Section 10.2(c).
(f) The Shareholders and their Affiliates may provide to, or purchase
from, any Person tariffed services and any other services which must be provided
by virtue of the provider's status as a common carrier or by virtue of a legal
or regulatory requirement.
-21-
(g) A Shareholder's Affiliate that, at the time hereof or in the
future, provides telecommunications services in countries outside of Mexico (i)
may provide transit to or through Mexican carriers, (ii) may provide facilities
for the termination of traffic outside of Mexico that originates within Mexico,
(iii) may provide facilities for the origination of traffic outside of Mexico
that terminates in Mexico, and (iv) may freely obtain transit facilities within
Mexico. A Shareholder's Affiliate may also freely contract for and provide
roaming services for its own subscribers in Mexico, and may provide roaming
services within its own service area for subscribers of other cellular carriers.
(h) Subject to Section 5.2(a) and Section 5.5, a Shareholder and/or any
of its Affiliates may continue to own and hold (and need not Transfer in whole
or in part) any interest in a Person which has Publicly Traded equity securities
if, at the time such interest was acquired, such Person did not engage, and to
the knowledge of the Shareholder or its Affiliates did not intend to engage, in
the Telecommunications Business in Mexico but after such interest was acquired
such Person began to engage in the Telecommunications Business in Mexico.
(i) Subject to Section 5.5, the applicable Vodafone Affiliates may
continue to participate in the ownership and management of Globalstar de Mexico,
S. de X.X. de C.V., a Mexican variable capital limited liability company
incorporated pursuant to Public Instrument No. 65,914 dated September 4, 1996,
granted before Lic. Xxxx Xxxxxx del Xxxxx, Public Notary No. 92 of Mexico City,
Federal District and recorded in the Public Commercial Registry of said Federal
District under Mercantile Folio No. 212857 which is a provider of
satellite-based digital telecommunications services.
(j) Subject to Section 5.5, (i) the applicable Verizon Affiliates may
continue to participate in the ownership and management of (A)
Aerocomunicaciones, S.A. de C.V., a provider of in-air telecommunications
services, and (B) Mexfone, S.A. de C.V., a provider of maintenance, billing and
other services to providers of in-air telecommunications services; and (ii) the
applicable Verizon Affiliates may continue to own a no greater than 10% equity
interest in Movitel del Noroeste, S.A. de C.V., the A-Band cellular
concessionaire in the Mexican states of Sonora and Sinaloa, Movicelular, S.A. de
C.V., the commercializer of the services of Movitel del Noroeste, S.A. de C.V.,
and Moviservicios, S.A. de C.V., the provider of human resources to Movitel del
Noroeste, S.A. de C.V. and Movicelular, S.A. de C.V.
(k) The applicable Verizon Affiliates may continue to own a no greater
than 10% equity interest in Genuity Inc. ("Genuity"), a facilities-based
provider of managed Internet infrastructure services to enterprises and service
providers, and may exercise their rights to increase their ownership interests
in Genuity and thereafter to hold such increased interests and participate in
the management of Genuity; provided that if following the date, if any, when
--------
Verizon or its Affiliates increase their ownership interests in and assume
control of the management of Genuity, Genuity shall enter into new lines of
business or expand its then- existing businesses in such a way that it becomes a
major direct competitor of the Corporation, Verizon shall be required to comply
with Section 5.5 with respect to its investment in Genuity.
5.3 Corporate Opportunities. Each Shareholder agrees that it shall bring to
-----------------------
the Corporation any and all opportunities in respect of the Telecommunications
Business in Mexico
-22-
(each an "Opportunity") available to it or its Affiliates other than the
Opportunities described in Sections 5.2(a)-(c) and (e)-(k) above.
Once an Opportunity is brought to the Corporation by written notice to the
Chairman of the Board of Directors and the Director General of the Corporation
describing the terms of such Opportunity in reasonable detail, the Shareholder
and/or any Affiliate shall be free to engage in the Telecommunications Business
to which such Opportunity relates either (a) to the full extent of such
Opportunity, if the Corporation declines to participate in such Opportunity
pursuant to this Section 5.3 and Section 5.4 or, (b) in the event the
Corporation elects to participate only in part in such Opportunity, to the
extent of any interest the Corporation does not take pursuant to this Section
5.3 and Section 5.4.
If with respect to an Opportunity that the Shareholder is required to bring
to the Corporation pursuant to this Section 5.3, the investment Opportunity
available to the Shareholder (or Affiliate of the Shareholder) is not at the
corporate or entity level of the Telecommunications Business in Mexico (but is
rather at the parent company level or at another level between the parent
company level and the corporate or entity level of such Telecommunications
Business in Mexico), the Shareholder shall offer to sell the required interest
to the Corporation at the corporate or entity level of such Telecommunications
Business in Mexico unless, in the opinion of the Shareholder, it is
impracticable to make such offer at such level, in which case such offer shall
be made at the level at which the Opportunity is available to the Shareholder
(or Affiliate). If such offer is made at the level at which the Opportunity is
available to the Shareholder (or Affiliate), the offered interest shall equal
one hundred percent (100%) of the quotient of the value of such
Telecommunications Business in Mexico divided by the total value of the
Opportunity available to the Shareholder (or Affiliate), determined as of the
date of such Acquisition or Merger. The price to be paid by the Corporation for
any such interest offered to it shall equal the proportional price paid for such
Opportunity by the Shareholder (or Affiliate), if readily determinable from the
total Acquisition or Merger price or, if not readily determinable therefrom,
shall equal the fair market value of the Opportunity presented to the
Corporation.
5.4 Special Vote. The Chairman of the Board of Directors or the Director
-------------
General of the Corporation shall promptly call a special meeting of the
Executive Committee or of the Board of Directors to be held within 15 days
following receipt of the written notice of any Opportunity offered by a
Shareholder pursuant to Section 5.3. At such meeting, the Executive Committee or
the Board of Directors, acting pursuant to a Special Vote (as hereinafter
defined), shall determine whether the Corporation wishes to pursue such
Opportunity (in whole or in part or not at all) and shall give written notice of
such determination to such Shareholder. If the Corporation gives notice that it
does not wish to pursue such Opportunity or accept such offer, if it gives no
notice within the 15-day period following receipt of the written notice of any
Opportunity, or if it gives notice of intention to pursue the Opportunity or
accept such offer but then fails to do so within a reasonable period of time,
then the Shareholder may engage in the Telecommunications Business described in
its notice without regard to the terms of Section 5.3. A "Special Vote" means
(a) the affirmative vote of a majority of the total Series V Directors and the
Vodafone Series A Director, if any, in the case of Opportunities brought by the
Verizon Shareholder Group or an Affiliate thereof, or (b) the affirmative vote
of a majority of the Series A Directors (excluding the Vodafone Series A
Director, if any) in the case of Opportunities brought by the Vodafone
Shareholder Group; for purposes of this Section, a
-23-
Special Vote may occur at a meeting of the Board of Directors that does not meet
the quorum requirements if such quorum requirements are not met due to the
absence of (i) any Series A Director in the case of opportunities brought by the
Verizon Shareholder Group or an Affiliate thereof or (ii) any Series V Director
and/or the Vodafone Series A Director, if any, in the case of Opportunities
brought by the Vodafone Shareholder Group or an Affiliate thereof.
5.5 Disposition Requirement. If a Shareholder or any of its Affiliates
------------------------
shall engage in the Telecommunications Business in Mexico as permitted by
Sections 5.2(b), 5.2(h), 5.2(i), 5.2(j) or (to the extent provided therein)
5.2(k), and the Person engaging in such Telecommunications Business becomes a
major direct competitor of the Corporation, the Corporation may notify the
Shareholder of such fact. If such notice is given, the Shareholder shall, within
60 days of receipt of such notice, either (a) offer (or cause the relevant
Affiliate to offer) the Corporation the opportunity to purchase a one hundred
percent (100%) interest in the Shareholder's or such Affiliate's share of such
Telecommunications Business in Mexico at a price equal to one hundred percent
(100%) of the fair market value of the Shareholder's (or its Affiliate's)
interest and otherwise on the same terms and conditions as are then applicable
to the Shareholder or such Affiliate, (b) if the Telecommunications Business in
Mexico is not at the corporate or entity level of the Person in whom the
Shareholder or its Affiliate owns an interest, but is rather at a subsidiary
level, and it is impractical for the Shareholder to offer to sell the required
interest to the Corporation at the corporate or entity level of such
Telecommunications Business in Mexico, offer (or cause the relevant Affiliate to
offer) the Corporation the opportunity to purchase an interest at the level at
which the opportunity is available to the Shareholder or Affiliate (in which
case the offered interest shall equal one hundred percent (100%) of the quotient
of the value of such Telecommunications Business in Mexico divided by the total
value of the interest owned by and opportunity available to the Shareholder (or
Affiliate), determined as of the date of the proposed sale, and the price shall
be the fair market value of the offered interest), (c) agree to divest itself of
its interest in such Telecommunications Business in Mexico within one year of
the date of the Corporation's notice, or (d) in the case of the Vodafone
Shareholder Group, offer to sell to the Verizon Shareholder Group or its
designee all of its Shares and, in the case of the Verizon Shareholder Group,
offer to sell to any one or more members of the Vodafone Shareholder Group all
of its Shares, in each case, at a price equal to the then current market value
of such Shares, or if no market exists for such Shares, at the then fair market
value thereof, in which case the Vodafone Shareholder Group or the Verizon
Shareholder Group, as the case may be, shall have 15 days following written
notice of such offer to accept such offer. The fair market value of any Series A
Shares for which no market exists shall be the average closing market price on
the New York Stock Exchange of the Series V American Depositary Share over the
ten trading days immediately preceding the date of the written notice of such
offer divided by the number of shares represented by such American Depositary
Share.
5.6 Confidentiality.
---------------
(a) For purposes of this Agreement, "Confidential Information" shall
mean any financial, technical, operational or other information (including,
without limitation, trade secrets, inventions, processes, customer lists and
know-how) which (i) originates from the Corporation or a Subsidiary in the
course of its business activities and is conspicuously marked "confidential",
"proprietary" or words of similar meaning, (ii) is provided to the Corporation
or a
-24-
Subsidiary by a Shareholder or its Affiliates, and is conspicuously marked
"confidential," "proprietary" or words of similar meaning, (iii) is orally
disclosed to a Shareholder or its Affiliates by the Corporation or a Subsidiary
and is identified at the time of disclosure as being confidential or (iv) is
orally disclosed to the Corporation or its Subsidiary by a Shareholder or its
Affiliates and is identified at the time of disclosure as being confidential.
(b) Any Confidential Information provided to the Corporation or a
Subsidiary by a Shareholder, regardless of whether such information originates
from the Shareholder or any of its Affiliates, shall be and remain the
disclosing Shareholder's exclusive property. For the three (3) year period
following the date of disclosure (or such longer period as the Shareholder
making such disclosure shall reasonably require prior to any such disclosure),
any recipient Shareholder and the Corporation and the Subsidiaries shall (i)
keep such Confidential Information confidential and provide the same to their
respective employees and agents only on a need-to-know basis, (ii) not publish
or disclose such Confidential Information to others without the prior consent of
the disclosing Shareholder, (iii) use such Confidential Information only in
connection with the business of the Corporation and the Subsidiaries, and (iv)
promptly return such Confidential Information to the supplying Shareholder upon
the latter's written request.
(c) For the three-year period after the disclosure by the Corporation
or any Subsidiary to a Shareholder or Affiliate of a Shareholder of its
Confidential Information (or such longer period as the Corporation shall
reasonably require prior to any such disclosure), the recipient Shareholder and
its Affiliates shall (i) keep such Confidential Information confidential, (ii)
not publish or disclose such Confidential Information to anyone other than its
Affiliates without the prior written consent of the Corporation, (iii) not
publish or disclose such Confidential Information to any Affiliate without the
prior written consent of the ultimate parent entity of the other Shareholder
Group (namely Vodafone for the Vodafone Shareholder Group, and Verizon for the
Verizon Shareholder Group) if such Affiliate, or any beneficial owner of such
Affiliate other than such Shareholder, is a direct or indirect competitor of the
Corporation or of any Person in which the ultimate parent entity of the other
Shareholder Group owns a direct or indirect beneficial interest, and (iv)
promptly return such Confidential Information to the Corporation or the
appropriate Subsidiary upon the written request therefor by the Corporation or
such Subsidiary.
Notwithstanding anything herein to the contrary, a recipient Shareholder
shall have the right to disclose Confidential Information of the Corporation or
any Subsidiary to unaffiliated third parties retained by it (including, without
limitation, attorneys, accountants and consultants) for the internal purposes of
the recipient Shareholder; provided, however, that such unaffiliated third party
-------- -------
shall execute a written agreement with the recipient Shareholder or its
Affiliate in which it agrees to keep such Confidential Information confidential,
and provided further that such recipient Shareholder shall be responsible to the
-------- -------
Corporation or the disclosing Subsidiary, as the case may be, for any breach by
the unaffiliated third party of the confidentiality of the Confidential
Information.
(d) The restrictions set forth in clauses (b) and (c) shall cease to
apply or shall not apply, as the case may be, to any Shareholder, Shareholder's
Affiliate or the Corporation, as the case may be, regarding any Confidential
Information which or whose substance (i) is already in the possession of such
recipient Person without accompanying use or disclosure restrictions
-25-
prior to such Person's receipt thereof from the supplying Shareholder,
Shareholder's Affiliates or the Corporation or a Subsidiary, as the case may be;
(ii) becomes or has been made publicly available by any Person other than the
recipient Shareholder, Shareholder's Affiliate or the Corporation or a
Subsidiary; or (iii) has been independently developed by the recipient
Shareholder, Shareholder's Affiliate or the Corporation or a Subsidiary prior to
such Person's receipt of the related Confidential Information. Additionally,
neither any Shareholder or Shareholder's Affiliate nor the Corporation or any
Subsidiary shall be deemed in breach of this Section 5.6 if it discloses
Confidential Information in the course of any legal or regulatory proceeding or
to any Governmental Entity pursuant to lawful demand made therein or thereby or
if such disclosure is otherwise required by law (including applicable securities
laws) or applicable stock exchange regulation; provided, however, that if a
-------- -------
Shareholder, such Shareholder's Affiliate or the Corporation or a Subsidiary
receives any such demand or otherwise believes it is compelled by law to
disclose Confidential Information of the other Shareholder or the Corporation or
any of its Subsidiaries, such recipient shall give written notice thereof to the
party (the Shareholder, Shareholder's Affiliates, the Corporation or the
applicable Subsidiary) which supplied the Confidential Information sought by
such demand, so as to afford the supplying party an opportunity to contest the
demand or legal requirement.
ARTICLE VI
TRANSFERS OF SHARES AND OTHER INTERESTS
---------------------------------------
6.1 Prohibited Transfers.
--------------------
(a) Notwithstanding anything to the contrary herein, no Shareholder may
Transfer any Shares to a Governmental Entity that is not Mexican at any time
hereafter if such Transfer is not permissible under Mexican law or regulations.
(b) Any Transfer of Shares made without full compliance with the
provisions of this Article VI shall be null, void and of no force or effect, and
the Corporation shall not record any such Transfer on its books or shareholders
register.
6.2 Transfers to and Purchases by Affiliates. The Verizon Shareholder Group
----------------------------------------
may at any time after the Effective Date Transfer any of the Shares beneficially
owned by it to any Affiliate of Verizon, and the Vodafone Shareholder Group may
at any time after the Effective Date Transfer any of the Shares beneficially
owned by it to any Affiliate of Vodafone; provided, however, that any such
-------- -------
transferee must agree in writing to be bound by all of the provisions of this
Agreement as a member of the Transferring Shareholder's Shareholder Group before
such Transfer may occur or be committed to, and such transferee shall be deemed
a Shareholder, a member of the Transferring Shareholder's Shareholder Group and
a party hereto immediately upon such Transfer.
6.3 Reporting Obligations Upon Transfers of Shares. Promptly after any
-------------------------------------------------
Transfer of Shares (a) by any Shareholder to any of its Affiliates, or (b) by
any Person to any Shareholder or Affiliate of a Shareholder, the transferring
Shareholder, the acquiring Shareholder or the Shareholder whose Affiliate
acquired Shares shall (i) notify the Corporation and the other Shareholders in
writing of the number of Shares Transferred, the Series of such Transferred
-26-
Shares and the date of the Transfer, and (ii) file any required disclosure
document relating to the Transfer or any amendment thereto with the SEC.
6.4 Right of First Refusal.
----------------------
(a) In the event that a member of the Verizon Shareholder Group desires
to make a Verizon Subject Transfer, or in the event that a member of the
Vodafone Shareholder Group desires to make a Vodafone Subject Transfer (each
such member of the Verizon Shareholder Group and the Vodafone Shareholder Group
in such circumstance a "Transferring Shareholder") (i) it must have received,
prior to making or agreeing to make such Transfer, a bona fide written offer for
---------
such Series A Shares from a Person not Affiliated with such Transferring
Shareholder or (ii) it must have irrevocably decided to make a sale of such
Series A Shares in one or more public securities markets on which such Series A
Shares are traded (a "Market Sale") and, before making or agreeing to make such
Transfer, shall give notice to each member of the Verizon Shareholder Group, in
the case of a Vodafone Subject Transfer, or to each member of the Vodafone
Shareholder Group, in the case of a Verizon Subject Transfer (such intended
recipient or recipients of such notice are referred to as the "Offeree
Shareholders", whether one or more) and to the Corporation of the number of
Series A Shares proposed to be Transferred (the "Offered Shares"), of the
proposed transferee thereof (or, in the case of a proposed Market Sale, that a
Market Sale is intended) and of the price and all other material terms and
conditions of the proposed Transfer (such notice shall include a copy of any
bona fide written offer and is hereinafter referred to as the "Offer Notice");
---------
provided, however, that in the case of a Verizon Subject Transfer, the Offer
-------- -------
Notice shall also separately include a two percent (2%) premium on the purchase
price to be paid by the Vodafone Shareholder Group in the event it exercises its
rights of first refusal under this Section 6.4. The price specified in the Offer
Notice with respect to a Market Sale shall be the average price at which the
Series A Shares last traded during the preceding five trading days on the
principal exchange or in the principal market on or in which such Market Sale is
proposed to be effected (the "Market Price"). The Offer Notice shall constitute
an irrevocable offer (the "Right of First Refusal Offer") subject to the
provisions of this Article VI by the Transferring Shareholder to sell to the
Offeree Shareholders (and their respective designates, if any) all (but not less
than all) of the Offered Shares, upon the terms set forth in the Offer Notice
or, at the option of the Offeree Shareholders (and such designates), pursuant to
the all cash alternative purchase price established pursuant to Section 6.4(c)
hereof.
(b) The Offer Notice shall be considered to be delivered to each
Offeree Shareholder and the Corporation when deemed delivered pursuant to
Article IX hereof. The date on which the Offer Notice is delivered to the
Verizon Shareholder Group is referred to herein as the "Notice Date."
(c) In the event that the bona fide written offer transmitted with the
---------
Offer Notice provides for consideration to be paid by the proposed transferee
other than wholly in cash, the Transferring Shareholder shall, in good faith,
specify in the Offer Notice an all cash alternative purchase price of equivalent
value (discounted to present value). In the event that the Offeree Shareholders
and/or their respective designates representing a majority of the number of
Series A Shares beneficially owned by all Offeree Shareholders shall determine
by vote or consent on or before fifteen (15) days after the Notice Date that the
all cash alternative purchase
-27-
price proposed by the Transferring Shareholder is not acceptable, they shall so
notify the Transferring Shareholder in writing on or before such fifteenth day,
specifying in such notice their proposed all cash alternative purchase price of
equivalent value (discounted to present value), stating in such notice the name,
address and telecopier number of the Offeree Shareholder or Offeree Shareholder
designate who shall be the notice party for the Offeree Shareholders and such
designate(s) for purposes of communications relating to this Section 6.4(c) for
the duration of the then-current Right of First Refusal Offer and designating in
such notice an evaluator who is a member of an investment banking firm of
national reputation in the United States or Mexico who they reasonably believe
to be expert in such valuations. If for whatever reason no such notice is
delivered to the Transferring Shareholder by the Offeree Shareholders and/or
Offeree Shareholder designates on or before such fifteenth day, the all cash
alternative purchase price specified in the Offer Notice by the Transferring
Shareholder shall be the all cash alternative purchase price. If such notice is
timely delivered to the Transferring Shareholder, the Transferring Shareholder
shall on or before the fifth day after receipt of such notice designate in
writing to the Offeree Shareholders as a second evaluator another investment
banker meeting such description (unless the Transferring Shareholder agrees in
writing within such five day period to the all cash alternative purchase price
specified, or to abide by the decision of the evaluator specified, by the
Offeree Shareholders and/or Offeree Shareholder designates). If the Transferring
Shareholder does not designate such second evaluator in writing to the Offeree
Shareholders (or does not agree in writing to the cash alternative purchase
price specified, or to abide by the decision of the evaluator specified by the
Offeree Shareholders and/or the Offeree Shareholder designates) on or before
such fifth day, the Transferring Shareholder shall be deemed to have agreed to
the all cash alternative purchase price specified by the Offeree Shareholders
and/or such designates. If a second evaluator is timely designated by the
Transferring Shareholder, the two evaluators shall each specify a fair all cash
equivalent purchase price on or before the tenth day after the appointment of
the second evaluator. If such two cash equivalent purchase prices vary by less
than ten percent (10%) of the higher of such prices, the average of such two
prices shall be the all cash equivalent purchase price. If such two prices vary
by such percentage or more than such percentage, the two evaluators shall on or
before the third day after such determination designate a third evaluator
meeting the above description for evaluators. If the first two evaluators cannot
agree in a timely manner on the choice of a third evaluator, they shall so
notify the parties and any party may request the appropriate official of the
International Chamber of Commerce to appoint an impartial third Person to act as
the third evaluator. Once designated, the third evaluator shall specify a fair
all cash equivalent purchase price on or before the tenth day after the
designation of such third appraiser. The determination of two of the three
evaluators shall be binding and shall be the all cash alternative; provided,
--------
however, that, if no two evaluations agree as to the fair all cash equivalent
-------
purchase price, the average of the two closest all cash equivalent purchase
prices shall be the all cash equivalent purchase price. The expenses of the
evaluators shall be shared one-half each by the Transferring Shareholder and the
Offeree Shareholders who (directly or through their respective designates) voted
that the all cash alternative purchase price proposed by the Transferring
Shareholder was not acceptable.
(d) The Offeree Shareholders and/or Offeree Shareholder designates may
at their option accept the Right of First Refusal Offer on the terms of the
Offer Notice or, if so determined by Offeree Shareholders and/or Offeree
Shareholder designates representing a majority of the number of Series A Shares
beneficially owned by all Offeree Shareholders
-28-
wishing to acquire (or to have its designates acquire) Offered Shares, at the
all cash alternative purchase price. The Right of First Refusal Offer may be
accepted on such terms, but only in whole, by delivering written notice (the
"Acceptance Notice") to the Transferring Shareholder on any date on or before
the 30th day (or 10th day in the case of a Market Sale) following the later of
the Notice Date or the date the all cash alternative purchase price is finally
determined pursuant to Section 6.4(c). The number of Offered Shares to be
acquired by each Offeree Shareholder or Offeree Shareholder designate shall be
determined as agreed to in writing prior to the delivery of the Acceptance
Notice among the Offeree Shareholders and Offeree Shareholder designates
electing to accept such Right of First Refusal Offer.
(e) Acceptance of Offer; Closing. If the Offeree Shareholders and/or
-----------------------------
Offeree Shareholder designates accept the Right of First Refusal Offer in a
timely manner, the Transfer of the Offered Shares shall close at the principal
office of the Corporation on or before the 30th day (or second Business Day in
the case of a Market Sale) after receipt of all necessary governmental or
regulatory approvals (or if no such approvals are necessary, on or before the
30th day after the delivery of the Acceptance Notice); provided, however, that
-------- -------
no such Transfer of Series A Shares shall be required of the Transferring
Shareholder if such Transfer would result in a transaction that would be
substantially less favorable, from a financial point of view (including due to
differences in tax results), to the Transferring Shareholder than the Transfer
contemplated in the Offer Notice (it being understood and agreed that if the
Transferring Shareholder declines to make such Transfer, any proposed Verizon
Subject Transfer or Vodafone Subject Transfer, as applicable, by the
Transferring Shareholder, including without limitation the Transfer contemplated
in the Offer Notice, shall again be subject to the provisions of this Section
6.4). At such closing, the Transferring Shareholder shall, against payment,
execute and deliver to the Offeree Shareholders and Offeree Shareholder
designates participating in the transaction contemplated by the Offer Notice all
documents required to effectuate the transfer of the Offered Shares free of any
security interests, Liens or other encumbrances whatsoever (other than the
preemptive rights provided in the Bylaws or by law).
(f) Transfer to Third Party; Subsequent Transfers. If the Offeree
-------------------------------------------------
Shareholders and/or Offeree Shareholder designates do not accept the Right of
First Refusal Offer in a timely manner, the Transferring Shareholder shall,
subject to the terms and conditions set forth in this Article VI, be permitted
to Transfer all (but not less than all) of the Offered Shares if it still
desires to do so. Such Transfer must (i) be made to the proposed transferee
identified in the Offer Notice (except in the case of a Market Sale), and shall
only be made in strict accordance with the price (which, in the case of a Market
Sale, must be at least ninety percent (90%) of the Market Price specified in the
Offer Notice) and other terms of the proposed Transfer described in the Offer
Notice, and (ii) be consummated not later than the 90th day (or the 45th day in
the case of a Market Sale) following the later of (A) the Notice Date and (B)
the date on which the all cash alternative purchase price, if any, is
determined. Except in the case of a Market Sale, the transferee in any such
Transfer must agree in writing (by execution and delivery to the Company and the
non-Transferring Shareholders of a written agreement in form and substance
reasonably satisfactory to the Company and the non-Transferring Shareholders) to
be bound by all of the provisions of this Agreement as a member of the
Transferring Shareholder's Shareholder Group before such Transfer may occur or
be committed to, and such transferee shall be deemed a Shareholder, a member of
the Transferring Shareholder's Shareholder Group and a party hereto immediately
upon such Transfer. The Transferring
-29-
Shareholder shall give the Offeree Shareholders at least ten days prior written
notice of the date, time and place of such consummation, and the Offeree
Shareholders may designate an individual, whom the Transferring Shareholder must
permit to attend the closing of such Transfer, to confirm compliance with the
terms hereof (including by examination of the documents implementing such
Transfer). In the event the Transferring Shareholder fails, prior to the date
provided for above, to consummate such proposed Transfer on the terms set forth
herein, then such Transfer may not be made and, prior to any subsequent Transfer
of all or any portion of the Transferring Shareholder's Series A Shares, the
Transferring Shareholder again shall be required to give the other Shareholders
and the Corporation notice thereof in accordance with this Section 6.4, and the
restrictions on Transfer and the procedures regarding a Right of First Refusal
Offer shall again be applicable with respect thereto.
ARTICLE VII
REGISTRATION RIGHTS
-------------------
7.1 Demand Registration.
-------------------
7.1.1 Demand Registration. At any time and from time to time on or
--------------------
after the Effective Date, (a) BALAH, BAIL or BANZHI may request on behalf of any
member of the Verizon Shareholder Group or any Affiliate of the Verizon
Shareholder Group beneficially owning Registrable Securities that the
Corporation on two separate occasions file a Registration Statement with the SEC
and/or any other Governmental Entity for a bona-fide underwritten public
offering and on one occasion a "shelf' registration for sale in a bona-tide
public offering for a period not to exceed 180 days and (b) Vodafone may request
on behalf of any member of the Vodafone Shareholder Group or any Affiliate of
the Vodafone Shareholder Group beneficially owning Registrable Securities that
the Corporation on two separate occasions file a Registration Statement with the
SEC and/or any other Governmental Entity for a bona-fide underwritten public
offering and on one occasion a "shelf' registration for sale in a bona-fide
public offering for a period not to exceed 180 days; provided, however, that an
-------- -------
"occasion" shall be deemed to have occurred for purposes of this sentence only
if such offering went effective and closed or failed to close after going
effective because of the failure by the Registration Rightsholder that requested
the subject registration to satisfy a closing condition that was in its sole
control. In case the Corporation shall receive from either BALAH, BAII, BANZHI
or Vodafone, at any time on or after the Effective Date, a written request that
the Corporation file a Registration Statement with the SEC and/or any other
Governmental Entity and effect any registration, qualification or compliance
with applicable federal, state or other securities laws, with respect to all or
a part of the Registrable Securities, the Corporation will:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all Registration Rightsholders; and
(ii) use its diligent good faith efforts to effect, as soon as
practicable, all such registrations, qualifications and compliances (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under the applicable state or other
securities laws and appropriate compliance with exceptive regulations issued
under any law (including, without limitation, the Securities Act) and any other
governmental requirements or regulations) as may be so requested and as would
permit or
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facilitate the sale and distribution of all or such portion of such Registrable
Securities as is specified in such request, together with all or such portion of
the Registrable Securities of any other Registration Rightsholder or
Registration Rightsholders joining in such request as is specified in a written
request received by the Corporation within 30 days after such written notice by
the Corporation is delivered.
Subject to the foregoing, the Corporation shall prepare and file a
Registration Statement with the SEC and/or any other Governmental Entity
covering the Registrable Securities so requested to be registered as soon as
practicable and, in any event, within 90 days after such request is received.
7.1.2 Underwriting. BALAH, BAII, BANZHI and Vodafone shall include in
------------
each of their respective requests for any underwritten public offering made
pursuant to Section 7.1.1 the name of the managing underwriter or underwriters
that the requesting parties propose to employ in connection with the public
offering proposed to be made pursuant to the registration requested. The
Corporation shall include in the written notice referred to in Section 7.1.1 the
name or names of such underwriter or underwriters to be employed. If any sale
proposed pursuant to Section 7.1.1 is to be effected pursuant to an underwritten
public offering, the right of any Registration Rightsholder to registration
pursuant to Section 7.1 shall be conditioned upon such Registration
Rightsholder's participation in such underwriting and the inclusion of such
Registration Rightsholder's Registrable Securities in the underwriting to the
extent provided herein. The Corporation shall (together with all Registration
Rightsholders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form (which form
must be reasonably acceptable to the Shareholders requesting such registration)
with the underwriter or underwriters selected for such underwriting in the
manner set forth above. Notwithstanding any other provisions of Section 7.1, if
the managing underwriter advises the Corporation in writing that marketing
factors require a limitation of the number of Registrable Securities to be
"underwritten, then the Corporation shall so advise all beneficial owners of
Registrable Securities which would otherwise be registered and underwritten
pursuant hereto, and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated first among the
Shareholders requesting such registration in proportion, as nearly as practical,
to the respective amounts of Registrable Securities that were proposed to be
sold by such Registration Rightsholders and second, to the extent that the
limitation established by the managing underwriter is not exhausted by the
Shareholders which requested the registration, among the Corporation and other
Persons that are not members of such group of Shareholders which requested the
registration in proportion, as nearly as practical, to the respective amounts of
Registrable Securities that were proposed to be sold by such Persons. No
Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration If any
Registration Rightsholder disapproves of the terms of the underwriting, he may
elect to withdraw therefrom by written notice to the Corporation and the
managing underwriter. The Registrable Securities so withdrawn shall also be
withdrawn from registration; provided, however, that, if by the withdrawal of
-------- -------
such Registrable Securities a greater number of Registrable Securities
beneficially owned by other Registration Rightsholders may be included in such
registration (up to the maximum of any limitation imposed by the underwriters),
then the Corporation shall offer to all Registration Rightsholders who have
included Registrable Securities in the registration the right to include
additional Shares in the same proportion used in effecting the limitation
referred
-31-
to above in this Section 7.1. The Corporation shall undertake any reasonable
measures within its control to cause the Registrable Securities sold in any
underwritten public offering to be widely disseminated.
7.2 Piggyback Registration.
----------------------
7.2.1 Right to Inclusion. If at any time or from time to time on or
-------------------
after the Effective Date, the Corporation shall determine to register any of its
equity securities (including securities that are convertible into equity
securities) pursuant to a Registration Statement filed with the SEC and/or any
other Governmental Entity in a bona-fide underwritten public offering, whether
for its own account or the account of a security holder or security holders,
then the Corporation will:
(i) promptly deliver to each Registration Rightsholder written
notice thereof (which shall include a list of the jurisdictions in which the
Corporation intends to attempt to qualify the offer and sale of such securities
under the applicable state or other securities laws); and
(ii) include in such registration (and any related qualification
under state or other securities laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in any
written request or requests by any Registration Rightsholder or Registration
Rightsholders received by the Corporation within 30 days after such written
notice by the Corporation is delivered.
7.2.2 Underwriting. If the applicable sale of securities is to be
------------
effected pursuant to an underwritten public offering, the right of any
Registration Rightsholder `to registration pursuant to Section 7.2 shall be
conditioned upon such Registration Rightsholder's participation in the
underwriting and the inclusion of such Registration Rightsholder's Registrable
Securities in the underwriting to the extent provided herein. All Registration
Rightsholders proposing to distribute their securities through such underwriting
(together with the Corporation and other beneficial owners distributing their
securities through such underwriting) shall enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting.
Notwithstanding any other provisions of Section 7.2, if the managing
underwriter advises the Corporation in writing that marketing factors require a
limitation of the number of shares to be underwritten, the Registrable
Securities and the other securities to be included in any registration and
underwriting may be limited. In such event, the Corporation shall so advise all
Registration Rightsholders and all beneficial owners of such other securities
which would otherwise be registered and underwritten pursuant hereto, and the
number of shares of Registrable Securities and such other outstanding securities
(if any) that may be included in the registration and underwriting shall be
allocated among all Registration Rightsholders and other beneficial owners
thereof in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities and such other securities that were proposed to be sold
by such Registration Rightsholders and other beneficial owners. In the event of
any conflict between the terms of Section 7.1.2 and the terms of this Section
7.2.2, the terms of Section 7.1.2 shall prevail.
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No Registrable Securities excluded from the underwriting by reason of
the managing underwriter's marketing limitation shall be included in such
registration. If any Registration Rightsholder disapproves of the terms of the
underwriting, he may elect to withdraw therefrom by written notice to the
Corporation and the managing underwriter. The Registrable Securities so
withdrawn shall also be withdrawn from registration; provided, however, that, if
-------- -------
by the withdrawal of such Registrable Securities a greater number of Registrable
Securities beneficially owned by other Registration Rightsholders may be
included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Corporation shall offer to all Registration
Rightsholders who have included Registrable Securities in the registration the
right to include additional shares in the same proportion used in effecting the
limitation referred to above in this Section 7.2. The Corporation shall
undertake any reasonable measures within its control to cause the Registrable
Securities sold in any underwritten public offering to be widely disseminated.
7.3 Expenses of Registration. To the fullest extent permitted by law, all
-------------------------
expenses incurred by the Registration Rightsholders in connection with any
registration, qualification or compliance pursuant to this Article VII other
than fees and disbursements of counsel to the Registration Rightsholders,
including, without limitation, all registration, filing and qualification fees,
printing expenses, escrow fees, underwriters' expenses (but not underwriters'
fees or discounts, which shall be borne by the Registration Rightsholder), fees
and disbursements of counsel for the Corporation and fees and expenses of
accountants incidental to or required by such registration, shall be borne by
the Corporation.
7.4 Registration Procedures. In the case of such registration,
-------------------------
qualification or compliance effected by the Corporation pursuant to this Article
VII, the Corporation will keep each Registration Rightsholder participating
therein advised in writing as to the initiation of each registration,
qualification and compliance and as to the completion thereof. At its expense,
the Corporation will:
(a) Keep such registration, qualification or compliance pursuant to
Sections 7.1 or 7.2 effective until the Registration Rightsholder or
Registration Rightsholders have completed the distribution described in the
Registration Statement relating thereto or for a period of at least 180 days for
any underwritten public offering, whichever occurs first; and
(b) Furnish such number of Prospectuses and other documents incident
thereto as any Registration Rightsholder from time to time may reasonably
request.
7.5 Related Registration Matters. The Corporation shall enter into an
------------------------------
underwriting agreement in connection with any registration of an underwritten
public offering subject to the provisions of Sections 7.1 and 7.2, which
agreement shall contain such terms, provisions and agreements as are customary
and appropriate for such registration. In connection with the registration, to
the extent not provided in the underwriting agreement related to such
registration, the Corporation also shall:
(a) List the Registrable Securities included in such registration on
any national securities exchange on which the Registrable Securities are
approved for listing;
-33-
(b) Engage a bank or other company to act as transfer agent and
registrar for the Registrable Securities;
(c) Cause customary opinions of counsel, comfort letters of accountants
and other appropriate documents to be delivered by representatives of the
Corporation; and
(d) As soon as practicable after the effective date of the Registration
Statement, and, in any event, within 45 days after the end of the 12-month
period beginning with the first day of the Corporation's first fiscal quarter
commencing after the effective date of the Registration Statement, make
"generally available to its security holders" (within the meaning of Rule 158
under the Securities Act) an earnings statement complying with Section 11(a) of
the Securities Act and covering the 12-month period set forth above.
7.6 Indemnification and Contribution. In connection with any registration
---------------------------------
of Registrable Securities pursuant to this Article VII, the Corporation and each
Registration Rightsholder (and the underwriters, if any) will enter into an
agreement (which shall be the underwriting agreement in the case of an
underwritten offering) containing mutual indemnification and contribution rights
and procedures in form and substance satisfactory to the beneficial owner or
owners of at least a majority of the Registrable Securities to be included in
the registration; provided, however, that in any event the liability of each
-------- -------
seller of Registrable Securities pursuant to such indemnification and
contribution provisions shall be limited to the net proceeds (after all expenses
are paid by such seller) from the disposition of the Registrable Securities
disposed of by such seller pursuant to such registration.
7.7 Information by Registration Rightsholders. Each Registration
----------------------------------------------
Rightsholder requesting to be included in any registration shall furnish to the
Corporation such information regarding such Registration Rightsholder and the
distribution proposed by such Registration Rightsholder as the Corporation may
request in writing and as shall be required in connection with any registration,
qualification or compliance referred to in this Article VII.
7.8 Transfer of Registration Rights. The rights to cause the Corporation to
-------------------------------
register Registrable Securities under Sections 7.1 and 7.2 may be assigned by
any Registration Rightsholder of Registrable Securities to an Affiliate of such
Registration Rightsholder to whom Registrable Securities are transferred
pursuant to Section 6.2 hereof; provided that the Corporation shall be given
--------
written notice by such Registration Rightsholder of Registrable Securities at
the time of or within 60 days after said Transfer, setting forth the name and
address of said transferee or assignee and identifying the Registrable
Securities with respect to which such registration rights are being assigned.
7.9 Restrictions on Public Sale by the Corporation; Future Rights. The
----------------------------------------------------------------
Corporation agrees not to effect any public sale or distribution of any
securities similar to those being registered, or any securities convertible into
or exchangeable or exercisable for such securities, during the 21 days prior to,
and during the 90 days following, the effective date of any Registration
Statement in which the Registration Rightsholders are participating (except
pursuant to such Registration Statement). The Registration Rightsholders agree
not to exercise their rights under Section 7.1 for 90 days after the effective
date of any Registration Statement filed by the Corporation pursuant to which
the Corporation is selling shares of its capital stock for its own
-34-
account and the gross proceeds to the Corporation exceed, or are expected to
exceed, U.S.$30,000,000.
The Corporation represents and warrants that it has not on or prior to the
date of this Agreement granted any registration rights to any Person (other than
the registration rights granted pursuant to this Article VII) and, after the
date of this Agreement, the Corporation will not grant to any Person any
registration rights with respect to securities of the Corporation other than
registration rights that (a) are subordinate to and of a lesser priority than
the registration rights granted herein, (b) are approved in writing by the
Verizon Series A Designated Director and the Vodafone Series A Director, if any,
and (c) are not inconsistent with this Agreement.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES; COVENANTS
-----------------------------------------
8.1 The Verizon Shareholder Group. Each member of the Verizon Shareholder
------------------------------
Group represents and warrants that (a) it is duly organized, validly existing
and in good standing in the jurisdiction of its incorporation and it has full
power and authority to enter into this Agreement and to perform its obligations
hereunder, (b) the execution of this Agreement by it has been duly authorized by
all necessary action, (c) this Agreement constitutes its legal, valid and
binding obligation, enforceable against it in accordance with the terms hereof,
except as may be limited by bankruptcy, insolvency and the availability of
equitable remedies and (d) the execution of this Agreement and performance of
its obligations hereunder will not conflict with, or result in a breach of or
default under, any agreement or instrument to which it is a party or by which it
is bound, or any order, decree or judgment of any Governmental Entity.
8.2 Vodafone. Vodafone represents and warrants that (a) it is duly
--------
constituted, validly existing, and in good standing under the laws of the
Netherlands, it is an indirect wholly-owned subsidiary of Vodafone Group Plc,
and it has full power and authority to enter into this Agreement and to perform
its obligations hereunder, (b) the execution of this Agreement by it has been
duly authorized by all necessary action, (c) this Agreement constitutes its
legal, valid and binding obligation, enforceable against it in accordance with
the terms hereof; except as may be limited by bankruptcy, insolvency and the
availability of equitable remedies and (d) the execution of this Agreement and
performance of its obligations hereunder will not conflict with, or result in a
breach of or default under, any agreement or instrument to which it is a party
or by which it is bound, or any order, decree or judgment of any Governmental
Entity.
8.3 Covenant. In the event that Article 144 of the LGSM is repealed, or is
--------
amended in such a manner that the Vodafone Shareholder Group's right to elect
the Vodafone Series A Director is adversely affected (for purposes of this
Section, a "Change in Law"), the Verizon Shareholder Group shall continue to
honor such right in the Vodafone Shareholder Group as if such Change of Law had
not occurred and, if necessary, the Verizon Shareholder Group and the Vodafone
Shareholder Group shall to the fullest extent permitted by applicable law cause
the Bylaws to be amended so as to preserve that right on the same terms on which
it existed prior to such Change in Law.
-35-
ARTICLE IX
NOTICES
-------
All notices, requests, demands, and other communications (herein
collectively called a "Notice") under this Agreement shall be in writing and
shall be delivered personally, sent by overnight courier or mailed by certified
mail, postage prepaid and return receipt requested, or by telegram or
telecopier, as follows:
To the Corporation: GRUPO IUSACELL, S.A. DE X.X.
Xxxx. Paseo de la Reforma 1236 (Penthouse)
Col. Santa Fe, Deleg. Cuajimalpa
Mexico, D.F. 05348
Attn.: Director General and
Attn.: General Counsel
Telecopy No.: 00-0-000-0000
With a copy (which shall not itself constitute notice) to:
De Xxxxxx x Xxxxxxxx del Xxxxx
Bosque de Alisos 00-X, Xxxxxxxx 000
Xxxxxxx Xxxxxxx xx xxx Xxxxx
Xxxxxx, D.F. 05120
Attn: Xxxxxx Xxxxxxxx del Xxxxx
Telecopy No.: 52-5-259 5259
With a copy (which shall not itself constitute notice) to:
XXXX ATLANTIC LATIN AMERICA HOLDINGS, INC.
XXXX ATLANTIC INTERNATIONAL, INC.
XXXX ATLANTIC NEW ZEALAND HOLDINGS, INC.
0000 Xxxxx X'Xxxxxx Xxxxxxxxx
Mail Stop HQL06C03
Xxxxxx, XX 00000
Attn: Fares X. Xxxxxxx
Telecopy No. 0-000-000-0000
With a copy (which shall not itself constitute notice) to:
Xxxxx Xxxxxxxxxx, Esq.
0000 Xxxxx X'Xxxxxx Xxxxxxxxx, Sixth Floor
Mail Stop HQL06B06
Xxxxxx, XX 00000
Telecopy No. 0-000-000-0000
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With a copy (which shall not itself constitute notice) to:
VODAFONE AMERICAS B.V.
Max Xxxxxxxx 00
0000 XX Xxxxxxxxx
Xxx Xxxxxxxxxxx
Attn: Xxxx de Rijk and Xxx xx Xxxx
Telecopy No. 00-00-000 7722
With a copy to: Pillsbury Winthrop LLP
00 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000-0000
Attn: Xxxx Xxxxxx, Esq.
Telecopy No. 1-415-983-1200
To the Verizon XXXX ATLANTIC LATIN AMERICA HOLDINGS, INC.
Shareholder Group: XXXX ATLANTIC INTERNATIONAL, INC.
XXXX ATLANTIC NEW ZEALAND HOLDINGS, INC.
0000 Xxxxx X'Xxxxxx Xxxxxxxxx
Mail Stop HQL06C03
Xxxxxx, XX 00000
Attn: Fares X. Xxxxxxx
Telecopy No. 0-000-000-0000
With a copy (which shall not itself constitute notice) to:
Xxxxx Xxxxxxxxxx, Esq.
0000 Xxxxx X'Xxxxxx Xxxxxxxxx, Sixth Floor
Mail Stop HQL06B06
Xxxxxx, XX 00000
Telecopy No. 0-000-000-0000
To Vodafone: VODAFONE AMERICAS B.V.
Max Xxxxxxxx 00
0000 XX Xxxxxxxxx
Xxx Xxxxxxxxxxx
Attn: Xxxx de Rijk and Xxx xx Xxxx
Telecopy No. 00-00-000 7722
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With a copy (which shall not itself constitute notice) to:
Legal Department
Vodafone Americas Asia Inc.
0000 Xxx Xxxx
00xx Xxxxx
Xxxxxx Xxxxx, XX 00000
Telecopy No. 0-000-000-0000
With a copy (which shall not itself constitute notice) to:
Pillsbury Winthrop LLP
00 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000-0000
Attn: Xxxx Xxxxxx, Esq.
Telecopy No. 1-415-983-1200
Notice given by personal delivery, mail or overnight courier shall be
effective upon actual receipt. Notice given by telegram or telecopier shall be
effective upon actual receipt if received before 5:00 p.m., local time, or at
8:00 a.m., local time, on the beginning of the next Business Day after receipt
if not received before 5:00 p.m. All Notices by telegram or telecopier shall be
confirmed promptly after transmission in writing by certified mail, overnight
courier or personal delivery. Any party may change any address to which Notice
is to be given to it by giving Notice as provided above of such change of
address. The above-named counsel for the parties should be provided with a copy
of all Notices given to their respective clients, but the failure to provide
such a copy to counsel does not affect the validity of any Notice given.
Any notice required or desired to be given under this Agreement shall be in
the English language, unless the parties hereto in any specific case otherwise
agree.
ARTICLE X
GENERAL PROVISIONS
------------------
10.1 Compliance with Laws Generally. The signatories to this Agreement
--------------------------------
acknowledge that the Verizon Shareholder Group is subject to the laws of the
United States and agree to use their reasonable efforts not to cause the Verizon
Shareholder Group to fail to be in compliance with the provisions of any
national, federal, state, provincial and local laws, rules, ordinances and
regulations of the United States, including without limitation, all provisions
of the U.S. Foreign Corrupt Practices Act, the U.S. Trading With the Enemy Act,
the U.S. Cuban Democracy Act, the U.S. Cuban Assets Control Regulations, the
Cuban Liberty and Democratic Solidarity (Libertad) Act of 1996, the Securities
Act and the Exchange Act (all as amended from time to time), and all U.S. Export
Control regulations and licenses issued thereunder covering, for example, the
export or re-export of technical data. In addition, each party agrees to comply
with the provisions of all applicable national, federal, state, provincial and
local laws, rules, ordinances and regulations of Mexico, the United States and
any other country in which activities are being carried out under this Agreement
or by the Corporation or any Subsidiary, including without limitation, all
provisions of the Mexican Ley Federal de Competencia
-38-
Economica, the Mexican Ley del Xxxxxxx de Valores, the U.S. Foreign Corrupt
Practices Act, the U.S. Trading With the Enemy Act, the U.S. Cuban Democracy
Act, the U.S. Cuban Assets Control Regulations, Cuban Liberty and Democratic
Solidarity (Libertad) Act of 1996, the Securities Act and the Exchange Act (all
as amended from time to time), and all U.S. Export Control regulations and
licenses issued thereunder covering, for example, the export or re-export of
technical data. Each party agrees to advise all of its and its Affiliates'
employees and representatives engaged in implementing this Agreement of the
terms of such laws, rules, ordinances' and regulations, and to take appropriate
steps to ensure that it and its Affiliates, and their respective employees and
representatives, comply with such laws, rules, ordinances and regulations with
respect to the subject matter of this Agreement and the activities of the
Corporation or any Subsidiary.
10.2 Telecommunications Act of 1996.
------------------------------
(a) Each member of the Vodafone Shareholder Group and the Corporation
acknowledges that the Verizon Shareholder Group and their parent Verizon are
subject to the terms of the Telecom Act, and that the activities of the
Corporation, the Subsidiaries, entities in which the Corporation or any
Subsidiary has an equity interest, and entities over which the Corporation or
any Subsidiary has, directly or indirectly, the power or ability to influence or
control the management thereof, may be attributed to the Verizon Shareholder.
Group and Verizon under the Telecom Act. Accordingly, the parties shall cause
the Corporation and each Subsidiary to act in conformity and compliance with the
Telecom Act, and to not undertake any activities, or own any assets, that would
be prohibited to any member of the Verizon Shareholder Group under the Telecom
Act.
(b) The Verizon Shareholder Group shall provide to the Corporation and
the Subsidiaries advice and direction with respect to compliance with the
Telecom Act. Such advice and direction shall include written guidelines
("Guidelines"), to be provided by the Verizon Shareholder Group from time to
time, setting forth a description of those assets in which the Corporation
should not acquire a direct or indirect interest, and those activities in which
the Corporation should not directly or indirectly engage, without fast receiving
"Guidance." "Guidance" shall mean (i) a written memorandum, opinion or similar
writing, prepared by counsel to the Verizon Shareholder Group, stating that the
Corporation may acquire the asset, or engage in the activity, in question; or
(ii) the affirmative vote by the "Telecom Act Board Member," in his capacity as
a Director, approving the acquisition of the asset, or the undertaking of the
activity, in question, unless he is given inaccurate information with respect to
such acquisition or undertaking in connection with such affirmative vote. The
"Telecom Act Board Member" shall mean a Series A Director who is designated from
time to time by the holders of the majority of Series A Shares as the "Telecom
Act Board Member"; provided, however, that such Person shall be the Verizon
-------- -------
Series A Designated Director until such time as the holders of the majority of
Series A Shares designate otherwise and so notify in writing the Corporation and
the Vodafone Shareholder Group.
(c) In the event that any member of the Verizon Shareholder Group or
Verizon determines that the Corporation or any Subsidiary is directly or
indirectly engaging in any activity or owns any asset which could cause any
member of the Verizon Shareholder Group or Verizon to not be in compliance with
the Telecom Act, or which could cause a Governmental
-39-
Entity to so allege, members of the Verizon Shareholder Group may require that
the Corporation's shareholders and Board of Directors cause the Corporation or
the relevant Subsidiary to rescind or otherwise cancel the transaction which
constitutes a violation of the Telecom Act or take such other action as may be
required to assure compliance. Alternatively, if in the Verizon Shareholder
Group member's sole discretion, such cancellation or rescission will not
adequately cure the potential or alleged Telecom Act violation, the Verizon
Shareholder Group member may require the Corporation or relevant Subsidiary to
immediately divest itself of the Corporation's or Subsidiary's ownership
interest in the assets which gave rise to the potential or actual Telecom Act
violation. If the Corporation or any Subsidiary; or any Person in which the
Corporation or any Subsidiary owns an equity interest or has the power to
control, shall acquire an asset or engage in an activity in reliance upon the
Guidelines or Guidance, and such Guidelines or Guidance were in error, the
Verizon Shareholder Group shall reimburse the Corporation for any direct damages
caused by such a rescission, cancellation or divestiture described in the
preceding two sentences, including any indemnity payments the Corporation must
make to any member of the Vodafone Shareholder Group. If two or more actions
that would effect a cure of an actual or potential Telecom Act violation equally
meet the Verizon Shareholder Group's needs for speed and completeness in cure,
the action which is in the best economic interest of the Corporation shall be
taken.
If in the written opinion of the General Counsel to Verizon none of the
actions set forth in the preceding paragraph would remedy the alleged Telecom
Act violation or satisfy the relevant Governmental Entities, the Verizon
Shareholder Group may Transfer the Shares without compliance with any of the
provisions of Article VI. In the event of such a proposed Transfer, BALAH, BAII
and BANZHI shall have the rights set forth in Section 7.1 without regard to
whether it shall have already exhausted the number of demand registrations
provided for therein.
10.3 Dispute Resolution. Except as provided in the last sentence of this
-------------------
Section 10.3, any controversy or claim arising out of or relating to this
Agreement or any document or instrument delivered in connection herewith, or any
breach hereof or thereof, that is not resolved within thirty (30) days after any
Shareholder gives notice to the other Shareholders involved in the dispute shall
be resolved in final and binding arbitration as set forth in this Section 10.3.
The arbitration shall be held in the city and state of New York and, except to
the extent inconsistent with this Agreement, shall be conducted in accordance
with the International Rules of the American Arbitration Association ("AAA").
The arbitration shall be conducted in the English language, although documentary
evidence and/or testimony may be submitted in either English or Spanish. The
arbitration proceedings, all documents and all testimony, written or oral,
produced in connection therewith, and the arbitration award shall be
confidential. The arbitration panel shall consist of three arbitrators. The
party or parties initiating the arbitration (whether one or more, the
"Claimant") shall appoint its or their arbitrator in its or their demand (the
"Demand"). The other party or parties (whether one or more, the "Respondent')
shall appoint its or their arbitrator within thirty (30) days after receipt of
the Demand and shall notify the Claimant of such appointment in writing. If the
Respondent fails to appoint an arbitrator within such thirty (30) day period,
the arbitrator named in the Demand shall decide the controversy or claim as a
sole arbitrator. Otherwise, the two arbitrators appointed by the parties shall
appoint a third arbitrator with experience in international commercial disputes
within forty-five (45) days after the Respondent has notified the Claimant of
the appointment of the Respondent's arbitrator. When the arbitrators appointed
by the Claimant and the Respondent
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have appointed a third arbitrator and the third arbitrator has accepted such
appointment, the two arbitrators shall promptly notify the parties and the AAA
of the appointment of the third arbitrator. If the two arbitrators appointed by
the parties fail or are unable to appoint a third arbitrator within the time
period provided above, they shall so notify the parties, and any party may
request the appropriate official of the AAA to appoint an impartial third
arbitrator with experience in international commercial disputes. That official
shall appoint the third arbitrator within thirty (30) days after such request
and shall notify the parties of the appointment. The third arbitrator shall act
as chairman of the panel. In addition to the authority conferred on the
arbitrators by the Rules of the AAA, which the parties agree governs, the
arbitrators shall have the authority to order such discovery and to make such
orders for interim relief, including temporary and preliminary injunctive
relief, as they may deem just and equitable. The arbitral award may grant any
relief deemed by the arbitrators to be just and equitable, including without
limitation, injunctive relief and/or specific performance, together with
damages. The arbitral award shall state the reasons for the award and relief
granted, shall be final and binding upon the parties to the arbitration, and may
include an award of costs, including reasonable attorney's fees and
disbursements. Any award rendered by the arbitration panel may be confirmed,
judgment upon any award rendered may be entered, and such award or the judgment
thereon may be enforced in any court of any state or country having jurisdiction
over the parties and/or their assets. Each Shareholder hereby irrevocably
consents to the personal jurisdiction over it, for purposes of enforcement of
any such award and for any claim brought pursuant to the last sentence of this
Section 10.3, of each and every Federal court, and each state court of
appropriate subject matter jurisdiction, located in the State of New York. Any
claim by Verizon for liquidated damages as provided for in Section 10.6(b)
hereof, or for specific performance or injunctive relief to enforce the
provisions of clause (y) of Section 10.6(b) hereof, may be brought by Verizon
directly in any court having jurisdiction, and in the event Verizon brings any
such claim directly in court, Vodafone shall have the right to plead in such
action any mandatory counterclaim which would be barred if not pleaded in such
action.
10.4 Legend. In addition to any other legend that may be required under
------
applicable law or by Contract, each certificate representing any of the Series A
Shares shall be stamped or otherwise imprinted with a legend substantially in
the following form:
"NO SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT PURSUANT
TO THE TERMS AND CONDITIONS OF A SHAREHOLDERS AGREEMENT DATED AS OF
MARCH [__], 2001 AMONG GRUPO IUSACELL, S.A. de C.V. AND CERTAIN OF ITS
SHAREHOLDERS. GRUPO IUSACELL, S.A. de C.V. SHALL NOT BE REQUIRED TO
RECORD ANY SUCH SALE, TRANSFER, ASSIGNMENT, PLEDGE, OR ENCUMBRANCE
UNLESS MADE AS AFORESAID. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT
NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF GRUPO IUSACELL, S.A. de C.V."
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10.5 Severability. If any term or provision of this Agreement is invalid,
------------
illegal or incapable of being enforced by any rule of law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect and such invalid, illegal or unenforceable term or provision
shall be reformed automatically so as to comply with the applicable law or
public policy and to effect the original intent of the parties as closely as
possible:
10.6 Specific Performance and Other Remedies.
---------------------------------------
(a) The obligations of the parties hereto under this Agreement are
unique. If any party should default in its obligations under this Agreement, the
defaulting party acknowledges that it would be extremely impracticable to
measure the resulting damages. Accordingly, in addition to any other available
rights or remedies, the nondefaulting party or parties may make a claim in
equity for specific performance and each defaulting party expressly waives the
defense that a remedy in damages will be adequate.
(b) The parties acknowledge and agree that the Covered Obligations
constitute a fundamental basis for this entire Agreement and inducement for the
Verizon Shareholder Group to enter into this Agreement; that Verizon would be
substantially injured by any breach of the Covered Obligations; and that it
would be extremely difficult and impracticable to determine the amount of the
damages suffered by Verizon as a result of any such breach, but that such breach
could result in Verizon having less control of the Corporation than it otherwise
would have, and that accordingly a fair measure of such damages would be
one-half of the control premium attributable to possession of full control of
the Corporation. The parties agree for purposes hereof that a fair measure of
such full control premium would be thirty percent (30%) of the trading value of
that number of Series V Shares equal to the total number of Shares owned by the
Verizon Shareholder Group, or approximately U.S.$200,000,000 as of the date of
this Agreement. Accordingly, the Vodafone Shareholder Group agrees that if the
Vodafone Shareholder Group, or any member thereof, shall breach any of the
Covered Obligations and Vodafone shall fail to (i) within five (5) days after
written notice of such breach from Verizon to Vodafone, provide Verizon with a
written undertaking to cure such breach as promptly as possible, or (ii) after
having provided such an undertaking, cure such breach within ten (10) days after
such notice from Verizon to Vodafone, or if cure of such breach requires the
convening of a shareholders meeting of the Corporation, then at the next
shareholders meeting of the Corporation:
(x) Vodafone shall be liable to Verizon for liquidated damages in the
amount of One Hundred Million Dollars (U.S.$100,000,000) (the "Liquidated
Damages"); and
(y) Verizon shall have the right (the "Option"), exercisable by notice
(the "Option Notice") from Verizon to Vodafone given at any time after any
failure of Vodafone to take an action required by clause (i) or (ii) above
and while such breach remains uncured, to purchase from Vodafone or any
transferee member of the Vodafone Shareholder Group, that number of Series
A Shares (the "Option Shares") which would result in the Vodafone
Shareholder Group, after giving effect to such purchase, owning nine and
nine-tenths percent (9.9%) of the Corporation's total corporate capital in
the form of Series A Shares. The per share purchase price for any such
purchase shall be
-42-
equal to one percent (1%) of the average closing price for the
Corporation's Series V ADRs on the New York Stock Exchange (or if not then
traded on the New York Stock Exchange, then on the principal exchange or
principal market on which the Series V ADRs are then traded) during the
five trading days preceding the date of the Option Notice, or if the Series
V ADRs are not then traded on any exchange or market, then ten percent
(10%) of the average closing price for the Series V Shares on the principal
exchange or principal market on which the Series V Shares were traded
during the five trading days preceding the date of the Option Notice, or if
the Series V Shares were not then traded on any exchange or market, then
ten percent (10%) of the quotient of (i) the Corporation's net asset value,
as determined on the basis of its most recent quarterly financial
statements, divided by (ii) the total number of shares of capital stock of
the Corporation outstanding on the date of the Option Notice. The aggregate
purchase price so determined for the Option Shares (the "Option Purchase
Price") shall be paid in cash by wire transfer of immediately available
U.S. funds. The closing of the purchase and sale of the Option Shares shall
take place at the Corporation's principal office on the fifth Business Day
following the date of the Option Notice, or if Verizon determines that any
regulatory approvals are required for such purchase and sale, then on the
fifth Business Day following the receipt of all such regulatory approvals.
Vodafone agrees to cooperate and use its best efforts to obtain any such
regulatory approvals. Vodafone hereby grants to Verizon an irrevocable
proxy to vote all of its Series A Shares, which proxy shall become
effective on the date of any Option Notice, and which proxy shall
automatically expire upon the closing of the purchase and sale of the
Option Shares pursuant to Verizon's exercise of the Option. Vodafone agrees
to take any other action requested by Verizon to perfect such proxy. If at
the time of the Option Notice the Vodafone Shareholder Group includes
Persons other than Vodafone, Verizon shall have the right to purchase the
Option Shares from any one or more members of the Vodafone Shareholder
Group in such respective amounts as shall be determined by Verizon. The
Option shall not be exercisable if Vodafone shall have paid the Liquidated
Damages to Verizon and waived all rights to contest or appeal such payment.
If such payment shall not have been made at the time of the closing of the
purchase of the Option Shares pursuant to the Option, Vodafone shall have
the right, exercisable not later than the sixtieth (60th) day following
such closing, to repurchase the Option Shares from Verizon for an amount
equal to the sum of (A) the Option Purchase Price plus (B) One Hundred
Million Dollars (U.S.$100,000,000), which payment shall be made in cash by
wire transfer of immediately available U.S. funds.
10.7 Rights of Parties. No Person not a party hereto will have any rights
-----------------
hereunder, except that any provision hereof which is expressly stated to be for
the benefit of, or in which an obligation is expressly undertaken to, an
Affiliate of a party, a transferee of a party or a Registration Rightsholder is
intended to be enforceable by them.
10.8 Assignment. The provisions of this Agreement will be binding upon and
----------
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that the terms of this Section 10.8 shall not limit or modify
--------
the terms of Section 6.2.
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10.9 Headings. The subject headings of the Articles, Sections, paragraphs
--------
and subparagraphs of this Agreement are included for purposes of convenience
only, and shall not affect the construction or interpretation of any of its
provisions.
10.10 Modification and Waiver. This Agreement constitutes the entire
-------------------------
agreement among the parties pertaining to the subject matter contained herein
and supersedes all prior agreements, representations and understandings of the
parties, whether written or oral. No supplement to, or modification or amendment
of, this Agreement shall be binding unless it is in writing and executed by all
of the parties hereto. No waiver shall be binding unless executed in writing by
the party against whom the waiver is to be effective. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar, nor shall any waiver constitute a
continuing waiver. Except as expressly provided in this Agreement, no failure or
delay by any party in exercising any right, power or privilege hereunder will
operate as a waiver thereof nor will any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.
10.11 Remedies Cumulative. The remedies provided in this Agreement shall be
-------------------
cumulative and shall not preclude assertion by any party hereto of any other
rights or the seeking of any other remedies against any other party hereto.
10.12 Further Assurances. The signatories hereto shall promptly take the
-------------------
necessary actions, execute such further or other documents and exercise all
voting rights conferred upon them by any stock of the Corporation, whether
currently beneficially owned by them or acquired subsequent to the execution of
this Agreement, in such manner as to ensure that the provisions, intent and
spirit of this Agreement shall be complied with and carried into full effect.
10.13 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws of the State of New York.
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10.14 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date and year fast written above.
GRUPO IUSACELL, S.A. DE C.V.
Witness:
_________________________ By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxxxxx
Title: Legal Representative
XXXX ATLANTIC LATIN AMERICA
Witness: HOLDINGS, INC.
_________________________ By /s/ Xxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
XXXX ATLANTIC NEW ZEALAND
Witness: HOLDINGS, INC.
_________________________ By /s/ Xxxxxx X. Xxxxxxxxxx
------------------------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: President
-00-
XXXX XXXXXXXX INTERNATIONAL, INC.
Witness:
_________________________ By /s/ Xxxxxxx X. Xxxxxxx
----------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Vice President
VODAFONE AMERICAS B.V.
Witness:
_________________________ By /s/ Xxxxxxx X. Xxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: under power of attorney
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