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EXHIBIT 10.36
SUBSCRIPTION AND SHAREHOLDERS AGREEMENT
AGREEMENT, dated as of January 21, 1997, among XXXXXXX X.X. TECNOLOGIA DA
INFORMACAO, a closed corporation ("socieda de anonima fechada") organized under
the laws of Brazil enrolled with the Income Taxpayers Registry ("C.G.C.M.F.")
under No. 71.208.516/0001-74 (herein called the "Company").
Addresses for communications:
Mail: Xx. Xxxxxxxxxx 0000, Xxxxxxxx Xxxxxxxxxx
Xxxxxxxxxx, M.G., Brazil
CEP 38405-323
Alternative Address for communications by telecopier:
(00-00) 000-0000
XXXXX X.X. - EMPREENDIMENTOS E PARTICIPACOES, a corporation organized
under the laws of Brazil, enrolled with the Income Taxpayers Registry
("C.G.C.M.F.") under No. 17.835.026/0001-52 (hereinafter referred to as the
"Sponsor")
Address for communications:
Mail: Xx. Xxxxxxxxxx 0000, Xxxxxxxx Xxxxxxxxxx
Xxxxxxxxxx, M.G., Brazil
CEP 38405-323
Alternative Address for communications by telecopier:
(00-00) 000-0000
and XXXXXXXX INTERNATIONAL TELECOM LIMITED, a private company organized under
the laws of the Cayman Islands, British West Indies (herein called "Xxxxxxxx")
which is an indirect wholly-owned subsidiary of The Xxxxxxxx Companies, Inc.
("TWC"), as reflected on the organization chart attached hereto as Exhibit A.
Addresses for communications:
Mail: x/x Xxxxxx xxx Xxxxxx
Xxxxxx Xxxxx
X.X. Xxx 000
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Xxxxxx Town
Grand Cayman
Cayman Islands,
B.W.I
with copy to:
Xxxxxxxx International
4100 Xxx Xxxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Xxxxxx Xxxxxx of America
Alternative address for communications by telecopier:
(000) 000-0000
WHEREAS:
(A) The Company is a controlled subsidiary of the Sponsor and is the
direct controlling shareholder of the Subsidiaries including CTBC;
(B) The Sponsor is engaged in an array of activities, which include
activities within the Telecommunications and Information Technology Sector
carried on, inter alia, by the Subsidiaries of the Company, including CTBC, and
intends to xxxxxx the activities of Algar Group in the Telecommunications and
Information Technology Sector, through the Company and its Subsidiaries,
including CTBC;
(C) For the purpose referred to in the preceding Clause (B), the
Sponsor requires funding from sources other than its own, and has approached
TWC to discuss an investment of Xxxxxxxx in the Company in the
Telecommunications and Information Technology Sector;
(D) Xxxxxxxx has agreed to help fund the expansion and modernization
needs of the Company within the Telecommunications and Information Technology
Sector, by making an equity investment in the Company of nineteen million,
eight hundred forty-three thousand, five hundred ninety-one dollars and
forty-four cents ($19,843,591.44) plus amounts under the Stock Purchase
Agreement and Side Letters 1, 2 and 3 set forth in Exhibit 14.2 to acquire
twenty percent (20%) of the total issued and outstanding share capital of the
Company.
(E) The authorized share capital of the Company is three hundred
million one hundred and twenty thousand (300,120,000) common and preferred
registered Shares of no par value, of
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which two hundred million (200,000,000) common Shares, and twelve million seven
hundred ninety three thousand six hundred fifty eight (12,793,658) preferred
Shares, are issued and fully paid and there are no options, warrants, rights or
other capital stock of the Company outstanding, except as contemplated in this
Agreement;
(F) Subject to the terms and conditions of this Agreement, Xxxxxxxx
has accepted to subscribe and pay for (i) sixteen million, four hundred
ninety-four thousand, seven hundred seventy-one (16,494,771) non-voting
preferred Shares in the capital of the Company as shall equal, after giving
effect to the Xxxxxxxx Subscription, six and twenty hundredths percent (6.20%)
of the total issued and outstanding Shares of the Company; and (ii) five
million, four hundred ninety-eight thousand, two hundred fifty-eight
(5,498,258) voting common Shares in the capital of the Company as shall equal,
after giving effect to the Xxxxxxxx Subscription two and seven hundredths
percent (2.07%) of the total issued and outstanding Shares of the Company;
(G) Xxxxxxxx and the Sponsor will as a result of the Xxxxxxxx
Subscription, hold collectively ninety-five and nineteen hundredths percent
(95.19%) of the issued and outstanding shares of the Company; and
(H) Xxxxxxxx, the Sponsor and the Company wish to establish their
respective rights and obligations and certain terms and conditions regarding
the transfer of the Company's shares and the exercise of voting rights.
NOW, THEREFORE, Xxxxxxxx, the Sponsor and the Company have decided to
execute this Subscription and Shareholders' Agreement pursuant to the
provisions contained in Article 118 of Brazilian Law No. 6,404, enacted on
December 15, 1976, which shall be governed by the following terms and
conditions:
ARTICLE 1
DEFINITIONS AND INTERPRETATIONS
Section 1.1 Definitions. Wherever used in this Agreement, unless the
context otherwise requires, the following terms shall have the meanings herein:
(a) "ABC Cristais" - means ABC Cristais Microeletronica S.A., a
corporation organized under the laws of Brazil;
(b) "ABC EMEP" - means ABC EMEP - Eletronica e Mecanica de Precisao
S.A., a corporation organized under the laws of Brazil;
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(c) "ABC XTAL Microeletronica" - means ABC XTAL Microeletronica S.A.,
a corporation organized under the laws of Brazil;
(d) "Affected Shareholder" - shall have the meaning set forth in
Section 11.3(a).
(e) "Affiliate" - means, with respect to any person, (i) any other
person directly or indirectly controlling, controlled by or under common
control with such relevant person; or (ii) any statutory director
("conselheiro"), officer ("diretor") or shareholder of such person, or of any
person described in clause (i) hereof. Specifically with respect to
transactions involving (A) the acquisition or ownership by one person of
250,000 or more shares of CTBC (such limit shall be automatically adjusted at
any time and from time to time in the event of any stock splits, stock
dividends or reclassification affecting the capital stock of CTBC), and (B) the
matters specified in Article 10 and provisions in this Agreement related to the
foregoing, the term "Affiliate" shall also mean, with respect to the Sponsor,
the Company and CTBC and its shareholders, statutory directors ("conselheiros")
and officers ("diretores"), the relatives, including without limitation, the
spouse, parent, aunt, uncle, sibling, first cousin, son, daughter, nephew,
niece, grandchild, grandnephew or grandniece and whether such relatives are
related by blood or by marriage ("in-law" and "step" relations) of such person
or of any person described in clause (i) or clause (ii). For the purposes of
this definition, "control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
an entity, whether through ownership of voting securities or otherwise. For the
avoidance of doubt, CTBC shall be included among the Affiliates of the Sponsor
and the Company.
(f) "Algar Bull" - means Algar Bull Computers & Communications S.A., a
corporation organized under the laws of Brazil and all of its Subsidiaries as
listed in Schedule 1.1(f) hereto;
(g) "Algar Group" - means each of the companies listed in Schedule
1.1(g) hereto and any Affiliate of such company or of the Sponsor;
(h) "Americatel" - means Americatel Brasil S.A., a corporation
organized under the laws of Brazil;
(i) "Arm's Length" - means transactions deemed to occur between
unrelated and willing parties in a competitive market (i) in the case of the
Sponsor or the Company which do not provide products or services to
non-Affiliates, at the lower of actual cost or fair market value including
appropriate discounts; (ii) in the case of Subsidiaries and Affiliates of the
Sponsor or the Company which do not provide products or services to
non-Affiliates, then at the price agreed to by Xxxxxxxx; and (iii) in the case
of Subsidiaries and Affiliates of the Sponsor or the Company which do provide
products or services to non-Affiliates, at the lowest price, including
discounts, offered for such product or service to any such non-Affiliate.
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(j) "Auditors" - means Xxxxxx Xxxxxxxx, or such other firm of
independent public accountants of international standing and sound reputation
as the relevant company of Algar Group, from time to time appoints as its
auditors;
(k) "Authority" - means any government or governmental,
administrative, fiscal, judicial, or government-owned body, department,
commission, authority, tribunal, agency or entity;
(l) "Authorization" - includes any consent, registration, filing,
agreement, notarization, certificate, license, approval, permit, authority or
exemption from, by or with any Authority, whether given or withheld by express
action or deemed given or withheld by failure to act within any specified time
period and all corporate, creditors, shareholders' and other third parties'
approvals or consents;
(m) "Authorized Representative" - means any of the persons designated
in the Certificate of Incumbency and Authority;
(n) "Banco Central" - means Banco Central do Brasil, and/or any other
Brazilian governmental Authority which may succeed to the exchange control
functions, duties and authority of Banco Central do Brasil;
(o) "Banco do Brasil" - means Banco do Brasil S.A., a state-owned
financial institution, organized under the laws of Brazil;
(p) "Book Value" - means (in relation to any person) an amount equal
to the Dollar Equivalent of the sum of (i) paid-in capital; (ii) capital
surplus; (iii) reserves appropriated and set aside; (iv) statutory reserves (if
any); (v) unappropriated surplus and retained earnings; and (vi) any reserves
by way of revaluation of assets of that person; (vii) less any losses, all as
evidenced in the Put Option Financial Statements of such person;
(q) "Brazil" - means the Federative Republic of Brazil;
(r) "Business Opportunities" - means the business, commercial or
investment opportunities of a company, in the broadest sense attributed to such
terms under the corporate laws of Brazil and the United States of America, and
by custom and usage in those countries;
(s) "Business Day" - (for any purpose) means a day when banks are open
for business in New York, New York and in any of the jurisdictions in which the
parties hereto are organized;
(t) "Cartorio de Registro de Titulos e Documentos" - means the
"Cartorio" with the functions to register and give publicity to documents in
Brazil;
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(u) "Certificado de Registro" - means each of the documents to be
issued by the Banco Central registering the Xxxxxxxx Shares and authorizing
Xxxxxxxx to receive any amounts due to Xxxxxxxx pursuant to this Agreement;
(v) "Certificate of Incumbency and Authority" - means the certificate
to be provided to Xxxxxxxx by the Company pursuant to Section 5.1(j) of this
Agreement, in the form and content attached hereto as Exhibit 1.1(v);
(w) "Closing" - means the date on which Xxxxxxxx subscribes and pays
for the Xxxxxxxx Shares under the Xxxxxxxx Subscription;
(x) "Company" - means Xxxxxxx X.X. Tecnologia da Informacao, a
corporation organized under the laws of Brazil;
(y) "Company Group" - means the Company, each of its Subsidiaries
listed in Schedule 1.1(y) hereto, and any company in which the Company and/or
any of its Subsidiaries acquires, subscribes for and/or receives as
contribution in kind an equity interest after the date of this Agreement;
(z) "Company Investment Value" - means for each Subsidiary and/or
Affiliate, the Dollar Equivalent of the amount obtained by multiplying the
value of the said Subsidiary and/or Affiliate by the Relevant Percentage. For
purposes of this definition, each Subsidiary and/or Affiliate shall be valued
as follows: (a) if publicly held, the value shall be its Market Value; or (b)
if closely held, the value shall be: (i) the sum of its Book Value and ten (10)
times its Net Income, (ii) divided by two (2);
(aa) "Concession" - means each of (i) the concession granted by the
Uniao Federal to CTBC to operate telephone business in the area described in
the Concession Agreement in accordance with Decree of December 13, 1994; (ii)
the permission granted by the Brazilian Telecommunications Ministry
("Ministerio das Comunicacoes") to CTBC pursuant to Portaria No. 1690 of
November 23, 1993 to operate a cellular telephone business; (iii) the
concession granted by the Brazilian Telecommunications Ministry ("Ministerio
das Comunicacoes") to TV Video Cabo to operate a cable television business
pursuant to Portaria No. 1.920 of December 5, 1996; and (iv) the permission
granted by the Brazilian Telecommunications Ministry ("Ministerio das
Comunicacoes") to TV Video Cabo de Uberlandia Ltda. to operate a cable
television business pursuant to Portaria No. 017 of November 27, 1990.
(ab) "Concession Agreement" - means the agreement entered into between
the Uniao Federal and CTBC on December 15, 1994 setting forth the terms and
conditions for the operation of fixed and cellular telephone business;
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(ac) "CTBC" - means Companhia de Telefones do Brasil Central, a
corporation organized under the laws of Brazil;
(ad) "Debt" - means the aggregate (as of the relevant date of
calculation) of the Dollar Equivalent of all obligations (whether actual or
contingent) of a person to pay or repay money including, without limitation:
(i) all Indebtedness for Money Borrowed;
(ii) the aggregate amount then outstanding of all liabilities of
any party to the extent the relevant person guarantees
them; and
(iii) all liabilities of a person (actual or contingent) under
any conditional sale or a transfer with recourse or
obligation to repurchase, including, without limitation, by
way of discount or factoring of book debts or receivables;
(iv) notwithstanding the foregoing, Debt will not include: (A)
operating expenses of each of the Company and CTBC; (B)
contingencies as evidenced on the audited balance sheet of
each of the Company and the CTBC for the fiscal year ended
December 31, 1995; and (C) provisions for contingencies
that are made from time to time by each of the Company and
the CTBC in accordance with the generally accepted
accounting principles in Brazil, consistently applied.
(ae) "Debt to Shareholders Equity Ratio" - (in relation to any person
as of the relevant date for calculation) means the result obtained by dividing
the Debt by the Shareholders Equity;
(af) "Dollars" and the sign "$" - mean the lawful currency of the
United States of America;
(ag) "Dollar Equivalent" - (as of the relevant date of calculation)
means the equivalent in Dollars of any amount expressed in Reais by converting
Reais into Dollars by using the Exchange Rate (this term generally will be used
with a specific amount appearing between the words "Dollars" and "Equivalent");
(ah) "Dollars Equivalent in Reais" - (as of the relevant date of
calculation) means the equivalent in Reais of any amount expressed in Dollars
by converting Dollars into Reais by using the Exchange Rate.
(ai) "Estatuto Social" - means, as the context requires, the By-laws
of each of the Company, CTBC, each of the Company's Subsidiaries and Affiliates
and all amendments thereto, all in form and substance satisfactory to Xxxxxxxx;
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(aj) "Event of Suspension and/or Cancellation" - any of the events
specified in Section 6.1 of this Agreement;
(ak) "Exercise Period" - means the period, if any, commencing on the
date of the fifth anniversary of this Agreement and ending on the IPO Date;
(al) "Exercise Price" - means the Dollar Equivalent equal to the
Xxxxxxxx Pro Rata Share multiplied by the aggregate of all the Company
Investment Values;
(am) "Exchange Rate" - (i) the official (A) rate for exchanging Reais
into Dollars (with respect to any Dollar Equivalent) or (B) rate for exchanging
Dollars into Reais (with respect to any Dollars Equivalent in Reais)
denominated as PTAX-800, option 5, for the relevant date of calculation
reported by the Banco Central on such bank's SISBACEN Data System and set forth
on Reuters page BRFR, published on the Brazilian business day following the
relevant date of calculation and applicable for the remittance of funds (X)
outside Brazil (with respect to any Dollar Equivalent or (Y) into Brazil (with
respect to any Dollars Equivalent in Reais), or (ii) if for the relevant date
of calculation the PTAX-800 is unavailable on the above-mentioned data system,
then the Exchange Rate shall be the PCOT-390, option 3, reported by the Banco
Central on the SISBACEN Data System. If the PCOT-390 rate is unavailable, then
the Exchange Rate shall be the official rate for exchanging Reais into Dollars
(with respect to any Dollar Equivalent) or for exchanging Dollars into Reais
(with respect to any Dollars Equivalent in Reais) as published in the "Diario
Oficial da Uniao" (Official Gazette-Brazilian Government official publication)
on the date following the day on which such exchange rate is to be determined.
In the case that none of the above exchange rates are available, the Exchange
Rate shall be the average of the offer side of the interbank exchange rate
replacing the PTAX-800 rate, obtained from three major financial institutions
making a market in Reais. In the event that this rate is unavailable, a
mutually acceptable substitute shall be determined;
(an) "Financial Plan" - means the financing for the Project set out in
Section 2.2(b) of this Agreement;
(ao) "Financial Statements" - (in relation to any person) means the
audited financial statements of such person for the last complete Fiscal Year;
(ap) "Fiscal Year" - means the accounting year of each company of the
Algar Group commencing on January 1 and ending on December 31 of each year, or
such other accounting period of each company of the Algar Group as, with
Xxxxxxxx'x consent, such company from time to time designates as its accounting
year;
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(aq) "Floor Price" - means the Dollar amount equal to the original
investment under this Agreement, the Stock Purchase Agreement and Side Letters
1, 2 and 3 set forth in Exhibit 14.2 plus accrued interest during the period
beginning on the date of the Closing and ending on the date Xxxxxxxx exercises
the Put Option (including both days). Interest shall accrue on the original
investment amount under this Agreement, the Stock Purchase Agreement and Side
Letters 1, 2 and 3 set forth in Exhibit 14.2 at an annual rate of LIBOR plus an
additional one point five percent (1.5%) of the original investment amount, and
shall be compounded monthly during the foregoing period.
(ar) "Indebtedness for Money Borrowed" - all obligations of a person
to repay money including, without limitation, in respect of (i) borrowed money,
(ii) the outstanding principal amount of any bonds, notes, loan stock,
commercial paper, acceptance credits, debentures and bills or promissory notes
drawn, accepted, endorsed or issued by such person, (iii) any credit to that
person from a supplier of goods or under any installment purchase or other
similar arrangement in respect of goods or services (except trade accounts
payable within ninety (90) days in the ordinary course of business), (iv)
noncontingent obligations of such person to reimburse any other person in
respect of amounts paid under a letter of credit or similar instrument
(excluding any such letter of credit or similar instrument issued for the
benefit of such person in respect of trade accounts in the ordinary course of
business), (v) amounts raised under any other transaction having the commercial
effect of a borrowing and which would be classified as a borrowing (and not as
an off-balance sheet financing) under accounting principles generally accepted
in Brazil consistently applied including, without limitation, under leases or
similar arrangements entered into primarily as a means of financing the
acquisition of the asset leased; and (vi) any fixed or minimum premium payable
on a redemption or replacement of any of the foregoing obligations;
(as) "International Finance Corporation" or "IFC" - means the
International Finance Corporation, an international organization established by
Articles of Agreement among its member countries;
(at) "Investor" - means any third party (not a Shareholder as of the
date hereof) that subscribes for any Share of the Company during the term of
this Agreement;
(au) "IPO" or "Initial Public Offering" - means the process
comprising: (i) the transformation of the Company into an open capital company
("sociedade anonima de capital aberto"); (ii) the listing and offering of the
Shares; (iii) the actual and continuous availability for trading of the listed
and actually traded Shares of the Company on the Sao Paulo Stock Exchange, the
Rio de Janeiro Stock Exchange, or any other major Brazilian and/or
international stock exchange in the aggregate trading value of at least forty
million Dollars ($40,000,000) Equivalent provided that at least seventy-five
percent (75%) of such aggregate trading value is attributable to preferred
shares of the same type and class as the Xxxxxxxx Preferred Shares; and (iv)
the underwriting of the offering referred to in (ii) above by firms of
recognized standing in Brazil or in the United States of America;
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(av) "IPO Date" means the date, any time after the Closing, on which
the IPO has been completed;
(aw) "LIBOR" - means the London Interbank Offered Rate for one month
deposits;
(ax) "Lien" - any mortgage, pledge, charge, assignment, hypothecation,
usufruct, security interest, title retention, preferential right, trust
arrangement, right of setoff, counterclaim or bankers lien, privilege or
priority of any kind having the effect of security, including, without
limitation, any designation of loss payees or beneficiaries or any similar
arrangement under any insurance policy relating to the transactions
contemplated by this Agreement;
(ay) "Lightel Servicos" - shall have the meaning set forth in Section
10.3(a)(iv).
(az) "Market Value" - means, for each publicly held Affiliate and/or
Subsidiary of the Company, the Dollar Equivalent of the amount obtained by
multiplying the Trading Price of one share of each Subsidiary and/or Affiliate
by the total issued and outstanding shares of such Subsidiary and/or Affiliate;
(ba) "Net Income" - means (in relation to any person) the Dollar
Equivalent of the net after-tax income of that person for the last four
complete calendar quarters immediately preceding the date of the issuance of
the Notice of Exercise, as set forth in the Put Option Financial Statements of
such person;
(bb) "Notice of Exercise" - means the notice given by Xxxxxxxx to the
Sponsor pursuant to Section 13.1, which shall set forth:
(i) the number of the Option Shares to be purchased by the
Sponsor under the Put Option;
(ii) the Settlement Date;
(iii) the Settlement Place; and
(iv) the Exercise Price and the manner in which it has been or
shall be determined;
(bc) "Offered Price" - means the price the Sponsor is willing to
receive and a Third Party is willing to pay for the Sponsor Disposition
Percentage;
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(bd) "Option Shares" - means:
(i) the Xxxxxxxx Shares;
(ii) all Shares subscribed or acquired by Xxxxxxxx pursuant to
the exercise of preemptive rights, options or warrants
accruing to Xxxxxxxx in relation to any of the Option
Shares;
(iii) all Shares received by Xxxxxxxx as a result of stock
splits or stock dividends on any Option Shares; and
(iv) all Shares received by Xxxxxxxx in exchange, replacement or
substitution of Option Shares;
(be) "Other Shareholder" - shall have the meaning set forth in Section
11.3(a).
(bf) "Piggy-Back Registration" - shall have the meaning set forth in
Section 9.1(a).
(bg) "Portarias" - means each of (i) Portaria Xx. 0.000 xx Xxxxxxxx 0,
0000, (xx) Portaria Xx. 000, xx Xxxxxxxx 00, 0000, xxx (xxx) Xxxxxxxx 0000, of
November 23, 1993, entitling TV Video Cabo, TV Video Cabo de Uberlandia Ltda.,
and CTBC, respectively, to operate the cable television business (TV Video Cabo
and TV Video Cabo de Uberlandia Ltda.) and the cellular telephone business
(CTBC) in the territories described in each of such Portarias; the term
"Portaria(s)" shall be deemed to include all permits, licenses and
authorizations granted by any Authority pursuant to either Portaria, or
otherwise related thereto;
(bh) "Price Per Share" - has the meaning set forth in Section 7.4 of
this Agreement;
(bi) "Project" - means the project to be carried out by the Company
and CTBC as described in Section 2.1 of this Agreement;
(bj) "Project Cost"- means the cost of the Project as set forth in
Section 2.2(a) of this Agreement;
(bk) "Put Option" - means the option of Xxxxxxxx to sell the Option
Shares to the Sponsor according to the terms set out in Article 13 hereof;
(bl) "Put Option Financial Statements" - means the audited financial
statements of each of the Company, its Subsidiaries and Affiliates, as the
context shall require, for the last four complete calendar quarters immediately
preceding the date of the issuance of the Notice of Exercise;
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(bm) "Real", "Reais" or the sign "R$" - means the lawful currency of
Brazil and includes any currency which, from time to time, may replace the Real
as the lawful currency of Brazil;
(bn) "Relevant Percentage" - means (in relation to each Subsidiary
and/or Affiliate of the Company) the percentage obtained by dividing the number
of shares held by the Company in such Subsidiary and/or Affiliate by the total
issued and outstanding shares of such Subsidiary and/or Affiliate;
(bo) "Sabe" - means Sociedade Anonima Brasileira de Empreendimentos, a
corporation organized under the laws of Brazil;
(bp) "Settlement Date" - means the date specified in the Notice of
Exercise, which shall be not more than ninety (90) days after the date of the
issuance of the Notice of Exercise;
(bq) "Settlement Place" - means the place in Brazil designated in the
Notice of Exercise where payment of the Exercise Price for the Option Shares is
to be made and the Option Shares are to be delivered;
(br) "Shareholders" - means the persons listed in Schedule 1.1(bq)
hereto and any person, including any Third Party and/or Investor, that is
admitted as a Shareholder of the Company after the date of this Agreement;
(bs) "Shareholders Equity" - means the aggregate (as of the relevant
date for calculation and in relation to any person) of:
(i) the amount paid up on the share capital of such person; and
(ii) the amount standing to the credit of the reserves (except
for revaluation reserves) of such person (including, without
limitation, any share premium account and capital redemption
reserve funds); after deducting from such aggregate any
impairment of the issued share capital of such person,
amounts set aside for dividends or taxation (including
deferred taxation);
(bt) "Shares" - means any issued and issuable shares in the capital of
the Company or in any other company into which the assets or equity of the
Company have been transferred or spun off, without par value, both common and
preferred, voting and nonvoting, the shares of the same category all ranking
equally in all respects;
(bu) "Spin-off" - means the operation under Brazilian corporate law
("cisao") whereby a company transfers all or part of its assets ("patrimonio")
to one or more companies, organized
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for such purpose or already existing, and further defined and described in
Articles 223 through 234 and related provisions of Law No. 6.404 of December
15, 1976, and related provisions of other Brazilian laws.
(bv) "Sponsor Disposition Percentage" - means the percentage obtained
by dividing the number of Shares that the Sponsor intends to sell and a Third
Party proposes to purchase from the Sponsor by the total amount of Shares then
held by the Sponsor in the share capital of the Company;
(bw) "Sponsor" - means Xxxxx X.X. Empreendimentos e Participacoes, a
corporation organized under the laws of Brazil;
(bx) "Stock Purchase Agreement" - means that certain Stock Purchase
Agreement of even date herewith, among Xxxxxxxx, the Company, the Sponsor and
ABC Industrial e Comercio S.A. - ABC INCO, attached hereto as Exhibit 1.1(bx);
(by) "Subsidiary" - means (in relation to any company of the Algar
Group, the Company Group or Xxxxxxxx) any entity: (i) over fifty percent (50%)
of whose voting capital is owned, directly or indirectly, by the relevant
company; (ii) for which the relevant company may nominate or appoint more than
fifty percent (50%) of the members of the board of directors or persons
performing similar functions; or (iii) which is otherwise effectively
controlled by the relevant company. For the avoidance of doubt, CTBC shall be
included among the Subsidiaries of the Sponsor and the Company.
(bz) "Tag Along Notice" - means each of the notices the Sponsor shall
issue to Xxxxxxxx, at any time after the Closing, pursuant to this Agreement,
informing Xxxxxxxx of its intention to dispose of and the willingness of a
Third Party to purchase the Sponsor Disposition Percentage; each such notice
shall be substantially in the form and content set forth in Exhibit 1.1(bx),
and shall set forth at minimum:
(i) the Offered Price, as well as other terms and conditions of
the sale;
(ii) the name of the Third Party; and
(iii) any other relevant aspect of the transaction, including,
but not limited to, the indication of the place and date
for the sale of such Sponsor Disposition Percentage;
(ca) "Tag Along Right" - means the right that the Sponsor grants to
Xxxxxxxx so that, at any time after the Closing, if Xxxxxxxx so wishes, the
Sponsor shall procure that Xxxxxxxx may join the Sponsor in any sale to a Third
Party of the Sponsor Disposition Percentage as provided in this Agreement;
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(cb) "Telecommunications and Information Technology Sector" - means
any and all activity within the telecommunications and information technology
sectors, including by way of example, without limitation: (i) all forms of
wireline, electrical, fiber optic, lightwave, or wireless (whether by means of
radio waves, infrared waves, or other means and whether through the earth,
atmosphere, water, buildings, pipelines, conduits or otherwise)
telecommunications products or services; (ii) any form of the following
services: satellite or cable television, telephone, telegraph, telex, audio or
video distribution, paging, or data transmission services, and access and
transmission products and services related to the above services; (iii)
electronic mail, access to the Internet or similar services, and on-line
computer-access services; (iv) all value-added services provided by means of or
in connection with telecommunications services or facilities, including but not
limited to: data processing services, video services, conferencing services,
data storage services, database services, protocol conversion, call center
services, and answering services; (v) the sale, rental, lease, distribution,
installation, repair, or maintenance of computer or telecommunications hardware
or software; (vi) installation, construction, rental or sale of
telecommunications facilities (or any right of use therein) described in,
listed in, or used to provide the services described or listed in subsections
(i) through (v); and (vii) consulting or management services provided to
existing or proposed telecommunications companies or relating to
telecommunications products (excluding manufacturing of products manufactured
by CTBC, the Company Group or the Algar Group) or services described or listed
in subsections (i) through (vi).
(cc) "Third Party" - means any person, other than any party to any of
the Transaction Documents, that proposes to acquire a Sponsor Disposition
Percentage after the date of this Agreement;
(cd) "Trading Price" - means for each publicly held Subsidiary and/or
Affiliate of the Company, the average of the Dollar Equivalent of the daily
closing price per share of such Subsidiary and/or Affiliate over the period of
thirty (30) trading days ending on the Business Day immediately preceding the
date of the issuance of the Notice of Exercise;
(ce) "Transaction Documents" - means (i) this Agreement, (ii) the
Stock Purchase Agreement; (iii) the Concession Agreement, and (iv) the
Portarias;
(cf) "TV Video Cabo" - means T.V. Video Cabo de Minas Gerais Ltda., a
Brazilian "sociedade por quotas de responsabilidade limitada" organized in
accordance with the laws of Brazil;
(cg) "Xxxxxxxx" - means Xxxxxxxx International Telecom Limited, a
private company organized under the laws of the Cayman Islands, British West
Indies, which is an indirect wholly-owned subsidiary of The Xxxxxxxx Companies,
Inc. ("TWC"), as reflected in the organization chart attached hereto as Exhibit
A;
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(ch) "Xxxxxxxx Additional Shares" - means the Shares of the Company to
be acquired by Xxxxxxxx pursuant to Exhibit 14.2;
(ci) "Xxxxxxxx Common Shares" - means five million, four hundred
ninety-eight thousand, two hundred fifty-eight (5,498,258) voting common Shares
to be subscribed for by Xxxxxxxx pursuant to the Xxxxxxxx Subscription under
this Agreement, and representing, after giving effect to the Xxxxxxxx
Subscription, two and seven hundredths percent (2.07%) of the total issued and
outstanding Shares of the Company;
(cj) "Xxxxxxxx Director" - shall have the meaning set forth in Section
8.1(a);
(ck) "Xxxxxxxx Notice" - means each of the notices Xxxxxxxx may send
to the Sponsor informing it of Xxxxxxxx' decision to also sell to the relevant
Third Party the Xxxxxxxx Tag Along Shares (or not to sell, as the case may be)
pursuant to this Agreement;
(cl) "Xxxxxxxx Offered Price" - has the meaning set forth in Section
7.4 of this Agreement;
(cm) "Xxxxxxxx Piggy-Back Notice" - means each of the notices Xxxxxxxx
may send to the Company for the purpose set forth in Section 9.1 of this
Agreement;
(cn) "Xxxxxxxx Piggy-Back Shares" - means the number of Shares
obtained by multiplying the Xxxxxxxx Total Equity by a fraction the numerator
of which is the number of Shares subject to the public offering referred to in
Section 9.1 of this Agreement and the denominator of which is the total issued
and outstanding Shares of the Company less the Xxxxxxxx Total Equity on the
relevant date;
(co) "Xxxxxxxx Preferred Shares" - means sixteen million, four hundred
ninety-four thousand, seven hundred seventy-one (16,494,771) non-voting
preferred Shares of the same class as and having the same rights as all other
existing or future preferred Shares of the Company including without limitation
preferred Shares of the Company held by the IFC, to be subscribed for by
Xxxxxxxx pursuant to the Xxxxxxxx Subscription under this Agreement, and
representing, after giving effect to the Xxxxxxxx Subscription, six and twenty
hundredths percent (6.20%) of the total issued and outstanding Shares of the
Company;
(cp) "Xxxxxxxx Preferred Shares Rights" - each of the following
rights:
(i) a minimum cumulative compulsory dividend of twenty-five
percent (25%) of the net profits per Share of the Company
ascertained at the end of each Fiscal Year according to Law
No. 6404, of December 15, 1976, or any other percentage of
such profits set forth from time to time with Xxxxxxxx'
prior consent;
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(ii) priority vis-a-vis the common Shares in the distribution of
the cash dividend referred to in (i);
(iii) participation in the balance of the net profits eligible
for distribution as cash dividends pari passu with the
common Shares, after the payment of the minimum compulsory
dividend to the common Shares;
(iv) priority vis-a-vis the common Shares in the reimbursement
of capital without premium in the event of liquidation of
the Company and;
(v) the Xxxxxxxx Preferred Shares shall rank pari passu with
all other issued and outstanding preferred Shares of the
Company, whether issued prior to, contemporaneously with or
at any time subsequent to the Xxxxxxxx Subscription.
(cq) "Xxxxxxxx Pro Rata Share" - means a fraction the numerator of
which shall be the number of the Option Shares, and the denominator of which
shall be the total issued and outstanding Shares of the Company;
(cr) "Xxxxxxxx Purchased Shares" - means the Shares of the Company to
be purchased by Xxxxxxxx pursuant to the Stock Purchase Agreement;
(cs) "Xxxxxxxx Shares" - means the Xxxxxxxx Common Shares, the
Xxxxxxxx Preferred Shares, Xxxxxxxx Additional Shares and Xxxxxxxx Purchased
Shares;
(ct) "Xxxxxxxx Subscription" - means the subscription for Shares by
Xxxxxxxx provided for in Article 4 of this Agreement;
(cu) "Xxxxxxxx Swap Notice" - means each of the notices Xxxxxxxx may
send to the Company for the purposes set forth in Section 10.7 of this
Agreement;
(cv) "Xxxxxxxx Tag Along Shares" - means the number of shares obtained
by multiplying the relevant Sponsor Disposition Percentage by the Xxxxxxxx
Total Equity;
(cw) "Xxxxxxxx Total Equity" - means, for purposes of this Agreement,
the total number of Shares held by Xxxxxxxx in the capital of the Company or in
any other company into which the assets or equity of the Company have been
transferred or spun off, at the time of the issuance of any relevant Xxxxxxxx
Tag Along Notice(s), Xxxxxxxx Piggy-Back Notice(s), or Xxxxxxxx Swap Notice(s);
(cx) "World Bank Guidelines" - means the set of policies and
guidelines laid down from
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time to time by the World Bank setting forth the environmental, safety and
health requirements of the World Bank;
(cy) "World Bank" - means the International Bank for Reconstruction
and Development, an international organization established by Articles of
Agreement among its member countries;
(cz) "Xtal S.A." - means Xtal Fibras Opticas S.A., a corporation
organized under the laws of Brazil.
Section 1.2 Interpretation. In this Agreement, unless the context
otherwise requires:
(a) headings and underlinings are for convenience only and do not
affect the interpretation of this Agreement;
(b) words importing the singular include the plural and vice versa;
(c) words importing a gender include any gender;
(d) an expression importing a natural person includes any company,
partnership, trust, joint venture, association, corporation or other body
corporate and any Authority;
(e) a reference to a Section, Article, party, Exhibit, Annex or
Schedule is a reference to that Section or Article of, or that party, Exhibit,
Annex or Schedule to, this Agreement;
(f) a reference to a document includes an amendment or supplement to,
or replacement or novation of, that document but disregarding any amendment,
supplement, replacement or novation made in breach of this Agreement;
(g) a reference to a party to any document includes that party's
successors and permitted assigns.
(h) a reference to an agreement includes an undertaking, deed,
agreement or legally enforceable arrangement or undertaking in writing;
(i) a reference to a document includes any agreement in writing, or
any certificate, notices instrument or other document of any kind; and
(j) A reference to this Agreement includes all of the Schedules and
Exhibits hereto and any other document executed and delivered by the parties at
the Closing.
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ARTICLE 2
DESCRIPTION OF THE PROJECT, PROJECT COST AND FINANCIAL PLAN
Section 2.1 The Project. The Project to be funded consists of the
provision of equity funds to the Company to make equity investments in its
direct and/or indirect Subsidiaries and Affiliates so that each of such
Subsidiaries and Affiliates may build and operate telecommunications networks
in Brazil and so that CTBC may build and operate fixed and cellular telephone
networks in Brazil. Details of the Project are described in the Schedule 2.1
hereto.
Section 2.2 Project Cost and Financial Plan.
Amounts in US$ Million
(a) The total estimated cost of the Project, is the equivalent of
US$298.5 million, as follows:
Basic Services 1996-97 Total % of Total
------------- ----------
Expansion 46.9 15.7%
Transmission Digitalization 83.5 28.0%
Data Communication 5.5 1.8%
Informatic 20.0 6.7%
SIPT (customer services) 4.0 1.3%
Modernization 18.1 6.1%
Building 5.9 2.0%
Others (vehicle, 12.7 4.3%
office equipment, building
reformation, etc.)
Total Basic Service Equipment 196.6 65.9%
Cellular Services Expansion 58.5 19.6%
Engeset & TV de MG 6.1 2.0%
TV Video Cabo de Uberlandia 30.3 10.2%
Working Capital 7.0 2.3%
------ -----
Total Project Cost 298.5 100.0%
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(b) The proposed sources of financing for the Project are as follows:
Amounts in US$ Million
Equity 1996-97 Total % of Total
------ ------------- ----------
IFC Equity 10.0 3.4%
Xxxxxxxx Equity 48.0 16.00%
Subscribers Connection Fees 29.1 9.80%
------ ------
Total 87.1 29.20%
Internal Cash Generation 149.9 50.20%
------ ------
Total Equity 237.0 79.40%
Debt
IFC Loan 25.0 8.40%
Supplier/Local Financing 36.5 12.20%
------ ------
Total Debt 61.5 20.60%
Total Project Funding 298.5 100.00%
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PARTIES
Section 3.1 Representations and Warranties of the Company. The Company
represents and warrants that:
(a) it is a corporation duly incorporated and validly existing under
the laws of Brazil and has the corporate power to own its assets, conduct its
business as presently conducted and to enter into and perform its obligations
under this Agreement, each Transaction Document to which it is a party, and any
agreements in implementation hereof and thereof. Attached as Exhibit 3.1(a) is
a copy of the By-laws of the Company and each of its Subsidiaries, together
with all amendments to date, which are duly registered with the competent
commercial registry;
(b) it has full power and authority to undertake the obligations under
this Agreement, each Transaction Document to which it is a party, and any
agreements in implementation hereof and thereof, to execute and deliver this
Agreement and each such Transaction Document, to perform its obligations
hereunder and thereunder and observe the terms and provisions mentioned herein
and therein;
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(c) the authorized share capital of the Company is three hundred
million one hundred and twenty thousand (300,120,000) common and preferred
registered Shares of no par value of which two hundred million (200,000,000)
common Shares and twelve million seven hundred ninety-three thousand six
hundred fifty-eight (12,793,658) preferred Shares have been issued and fully
paid, and no options, warrants, rights or other capital stock of the Company
are outstanding. Set forth in Schedule 3.1(c) is the authorized and issued
share capital of each of the Subsidiaries of the Company, which issued share
capital is fully paid;
(d) the Xxxxxxxx Shares, after giving effect to the Xxxxxxxx
Subscription under this Agreement to the Stock Purchase Agreement and to the
provisions of Side Letters 1, 2 and 3 set forth in Exhibit 14.2, shall
represent twenty percent (20%) of the total issued and outstanding Shares of
the Company. Except as set forth in Schedule 3.1(d), the Xxxxxxxx Shares shall
be available at the Closing for: (i) subscription by Xxxxxxxx under the
Xxxxxxxx Subscription; (ii) for purchase by Xxxxxxxx under the Stock Purchase
Agreement; and (iii) for issuance to Xxxxxxxx under the provisions of Side
Letters 1, 2 and 3 set forth in Exhibit 14.2, and shall be free from any
preemptive rights, Liens, charges or encumbrances whatsoever;
(e) the execution and delivery of each Transaction Document to which
it is a party, including this Agreement, and the performance of the obligations
set forth herein and therein, have been duly authorized by all necessary action
on its part and constitutes valid and legally binding obligations of the
Company, enforceable in accordance with their terms;
(f) the execution and delivery of any Transaction Document to which it
is a party, including this Agreement, and the performance of its obligations
hereunder and thereunder shall not conflict with or result in a breach of any
of the terms, conditions or provisions of, or constitute a default or require
any consent under (i) any provision of its Estatuto Social; (ii) any provision
of any applicable law, regulation, rule, decree, judgment or order to which it
is subject; or (iii) any indenture, mortgage, agreement or other instrument or
arrangement to which the Company is a party or by which it is bound;
(g) all dealings between any company of the Algar Group, including the
Company and any of the Sponsor's Subsidiaries and Affiliates, on the one hand,
and any company of the Company Group, on the other hand, have been established
and shall remain on normal arm's-length terms as if between unrelated parties;
all such transactions which occurred during 1996 are summarized in Schedule
3.1(g);
(h) neither the Company nor any of its property enjoys any right of
immunity from set-off, suit or execution in respect of its assets or its
obligations under any Transaction Document;
(i) all governmental, corporate, shareholders' and creditors'
authorizations, consents, approvals, waivers and licenses required for the
execution and delivery of this Agreement and the
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performance of its obligations hereunder have been duly obtained or granted and
are in full force and effect;
(j) it has made the notifications to the Brazilian competent
Authority, which are required to be made pursuant to applicable law (and has
caused its Subsidiaries engaged in the Telecommunications and Information
Technology Sector to also notify the Brazilian competent Authority) of any and
all changes in their respective shareholdings as a result of each corporate
restructuring which has been undertaken by the Company and its Subsidiaries
since the date of the organization of the Company and each of its Subsidiaries
to date;
(k) except as set forth in Schedule 3.1(k), it has complied with and
is in compliance in all material respects with all applicable laws,
regulations, ordinances, rules, orders, judgments, decrees and awards of any
Authority in connection with its assets, properties and business. It has not
received any notice of any failure to comply with, nor are there any
circumstances which indicate that it is in violation of any such laws,
regulations, ordinances, orders, judgments or decrees;
(l) it has not, nor has any of its directors, officers, managers,
employees, agents or representatives directly or indirectly, offered, paid or
promised to pay, or authorized the payment of any money or other thing of value
(including any fee, gift, sample, travel expense, or entertainment with a value
in excess of US$250 or the equivalent thereof in any currency) to any person
who is an official, officer, agent, employee or representative of any
government or instrumentality thereof or of any government-owned or
non-government owned existing or prospective customer, to any political party
or official thereof, to any candidate for political or political party office,
or to any other person or Authority while knowing or having reason to believe
that all or any portion of such money or thing of value would be offered, given
or promised, directly or indirectly, to any such official, officer, agent,
employee, representative, political party, political party official or
candidate, to obtain or retain business. All payments made by the Company to
third parties are made by check mailed or otherwise delivered to the principal
place of business of a party; or by wire transfer to a bank located in the same
jurisdiction as such place of business of a party, in all cases in the name of
such third party;
(m) each transaction of the Company has been properly and accurately
recorded on the books and records of the Company, and each document (including
any contract, invoice or receipt) on which entries in the Company's books and
records are based is complete and accurate in all respects. The Company has
maintained a system of internal accounting controls adequate to insure that
each maintains no off-the-books accounts and the assets of the Company are used
only in accordance with the directives of the Company's management;
(n) the Company has at all times during the previous five-year period
complied with the export control laws of the United States with respect to
products, services and technology obtained from the United States, and with
those of any other jurisdictions, to the extent such U.S. and other
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laws were or are applicable. Except as set forth in Schedule 3.1(n) no product
sold or service performed by the Company in the previous five-year period has
been sold or performed, directly or indirectly, to or for the benefit of, nor
has the Company had any business dealings whatsoever with, any person of or in
Cuba, Iran, Iraq, Libya, Serbia, Montenegro or Serbian-controlled portions of
Croatia or Bosnia, or North Korea, or any person owned or controlled by any of
the foregoing (including without limitation "specially designated nationals").
Except as set forth on Schedule 3.1(n), no product sold or service performed by
the Company during the previous five-year period has contained more than ten
percent (10%) U.S. content by value or was manufactured or provided using any
U.S. origin technical data;
(o) except as set forth on Schedule 3.1(o), during the previous
five-year period, no product has been sold or service performed by the Company
to or for the benefit of customers in Bahrain, Jordan, Kuwait, Lebanon, Oman,
Qatar, Saudi Arabia, Sudan, Syria, United Arab Emirates, or Yemen; and
(p) the representations referred to in Subsections (a) through (o)
above are also made on behalf of each Subsidiary and Affiliate of the Company
and therefore applicable to each of such Subsidiaries and Affiliates "mutatis
mutandis".
Section 3.2 Representations and Warranties of the Sponsor. The Sponsor
hereby represents and warrants to Xxxxxxxx that:
(a) it is a corporation duly incorporated and validly existing under
the laws of Brazil and has the corporate power to own its assets, conduct its
business as presently conducted and to enter into this Agreement and any
agreements in implementation hereof;
(b) it has full power and authority to undertake the obligations
hereunder, to execute and deliver this Agreement, to perform its obligations
and observe the terms and provisions mentioned herein;
(c) the execution and delivery of this Agreement and the performance
of the obligations set forth herein have been duly authorized by all necessary
action on its part and constitute valid and legally binding obligations of the
Sponsor, enforceable in accordance with its terms;
(d) the execution and delivery of this Agreement and the performance
of its obligations hereunder shall not conflict with or result in a breach of
any of the terms, conditions or provisions of, or constitute a default or
require a consent under (i) any provision of its Estatuto Social; (ii) any
provision of any applicable law, regulation, rule, decree, judgment or order to
which it is subject; (iii) any provision of any indenture, mortgage, agreement
or other instrument or arrangement to which it is a party, or which is binding
upon it or any of its assets;
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(e) all governmental, corporate, shareholders', and creditors'
authorizations, consents, approvals, waivers and licenses required for the
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly obtained or granted and are in full force and effect;
(f) except as set forth in Schedule 3.2(f), neither the Sponsor nor
any Subsidiary or Affiliate of the Sponsor, except the Company, nor any
statutory director ("conselheiro") or officer ("diretor") of any of the
Sponsor, the Company or CTBC, has acquired any shares in CTBC or any options,
warrants or other rights in respect of such shares, from subscribers of CTBC or
otherwise. Schedule 3.2(f) sets forth all of the purchases, options or rights,
whether written or oral, to acquire any shares in CTBC, held, owned or
controlled by the Sponsor, any company of the Algar Group or their respective
Subsidiaries or Affiliates;
(g) when delivered at the Closing, the report on CTBC shares described
in Section 5.1(o) shall be true and correct in all respects; and
(h) it is the lawful owner, free and clear of all Liens, of one
hundred ninety nine million, nine hundred ninety nine thousand, nine hundred
and ninety five (199,999,995) common voting Shares and zero (0) preferred
non-voting Shares representing approximately ninety three point ninety nine
percent (93.99%) of the total number of issued and outstanding share capital of
the Company on the date of this Agreement.
Section 3.3 Representations and Warranties of the Company and the
Sponsor. Without limiting the contents of the representations and warranties
contained in Sections 3.1 and 3.2 of this Agreement, the Company and the
Sponsor, jointly and severally, further represent and warrant to Xxxxxxxx that:
(a) attached as Schedule 3.3(a) are the lists of the present
shareholders of each of the Company and its Subsidiaries, including CTBC. Each
of the Sponsor, the Company and the Subsidiaries and Affiliates of the Sponsor
and the Company, and the shareholders of such entities, have no other direct
and/or indirect equity or quasi-equity interest in any direct and/or indirect
Subsidiary of the Company, including CTBC, except as set forth on Schedule
3.3(a) hereto;
(b) under prevailing legislation, the subscribers of CTBC have the
right to receive shares in exchange for the subscribers' fees already paid to
CTBC for the right to use the respective telephone line. The shares, to be
subscribed for by the new subscribers, can be common voting shares and/or
preferred non voting shares, with due observance of the limits set forth in the
Brazilian Corporate Law (Xxx xxx Sociedades Anonimas). Except for these shares
and capital increases, there exists no other options, warrants or any other
rights which might result in the effective reduction of the percentage equity
interest of the Company in any of its Subsidiaries and Affiliates;
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(c) a copy of the audited consolidated financial statements of Lightel
Servicos and its Subsidiaries as of December 31, 1995 and the unaudited
consolidated financial statements of the Company and its Subsidiaries as of
September 30, 1996, are attached hereto as Exhibit 3.3(c). Such documents
fairly completely and accurately present the financial position of Lightel
Servicos and the Company and their respective Subsidiaries at the relative
dates and for the respective periods covered, and have been prepared in
conformity with accounting principles generally accepted in Brazil and applied
on a consistent basis throughout the periods involved. Except as set forth in
Schedule 3.3(c), Lightel Servicos owns no other assets, equity or business;
(d) since the date of the financial statements drawn up on September
30, 1996, the Company and each of its Subsidiaries and Affiliates have not
suffered any material adverse change in their business prospects or financial
condition or incurred any substantial or unusual loss or liability. For the
purposes hereof the term "material" means any transaction (or a series of
related transactions) valued at or an event (or series of related events)
resulting in a loss or liability or change in financial position (or which can
be reasonably be expected to result in a loss or liability or change in
financial position) equal to or exceeding Five Million U.S. Dollars
(U.S.$5,000,000) or its Dollar Equivalent in Reais. Since such date, the
Company and each of its Subsidiaries and Affiliates have not undertaken or
agreed to undertake any substantial obligation outside the ordinary course of
business.
(e) the books and records of the Company and each of its Subsidiaries
and Affiliates have been prepared and maintained in accordance with accounting
principles generally accepted in Brazil and consistently applied. The books of
account of the Company and its Subsidiaries and Affiliates comply with the
requirements of Brazilian law and are not affected by any extraordinary or
non-recurring item;
(f) since the date of the formation of the Company and of each of its
Subsidiaries and Affiliates, there have been no liabilities, asserted
liabilities or obligations of any nature affecting the Company or such
Subsidiary or Affiliate, respectively, whether absolute, accrued, contingent or
otherwise, other than those disclosed or reflected: (i) on each of the audited
financial statements of the Company or such Subsidiary or Affiliate; or (ii) if
arising after the date of the most recent audited financial statements of such
entity, in the most recent unaudited financial statements of such entity; or
(iii) if arising after the date of the most recent unaudited financial
statements of such entity, in the books and records of such entity;
(g) since the date of its formation, the Company has ascertained and
paid all taxes and quasi-tax contributions measured on its profits or levied by
virtue of corporate restructurings and has further timely and punctually filed
any tax returns required by the federal, state and municipal laws in Brazil;
(h) all tax returns and reports of the Company and each of its
Subsidiaries and Affiliates
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required by law to be filed have been duly filed and all tax assessments, fees
and other governmental charges upon the Company and each of its Subsidiaries
and Affiliates, or their properties, or their income or assets, which are due
and payable, have been, paid, other than those presently payable without
penalty or interest. If such taxes are not yet due, adequate provisions have
been made in the accounting records of the Company and each of its Subsidiaries
and Affiliates for the payment of such taxes;
(i) except as set forth in Schedule 3.3(i), the Company and each of
its Subsidiaries and Affiliates are not engaged in nor, to the best of their
knowledge, threatened by, any litigation, arbitration or administrative
proceeding the outcome of which might materially and adversely affect their
business prospects or financial position. To the best of their knowledge and
belief, the Company and each of its Subsidiaries and Affiliates are not in
violation of any statute or regulation of any governmental authority and no
judgement or order has been issued which has or is likely to have any
materially adverse effect on the Company's and each Subsidiary's and
Affiliate's business prospects or financial position;
(j) the Company and each of its Subsidiaries and Affiliates have good
and unencumbered title to all of the properties at which their business are
carried on or are proposed to be carried on for the purposes of the Project;
(k) the Company and each of its Subsidiaries and Affiliates have the
right to all concessions, permissions, authorizations, trademarks, trade names,
patents and license agreements necessary for the conduct of their business as
now conducted and as proposed to be conducted, without any known conflict with
the rights of others;
(l) no person, firm or company has (other than as a shareholder and,
according to law, as an employee) any right to participate in the profits of
the Company and any Subsidiary or Affiliate. The Company and each of its
Subsidiaries and Affiliates are not managed by any third party;
(m) since the date of its formation, the Company has not engaged in
any transaction or operation inconsistent with its status of a holding company;
(n) except as set forth in Schedule 3.3(n), neither the Company nor
any of its Subsidiaries or Affiliates is a party to any labor suit brought
against it by any of its former employees claiming in court any payments
associated with the labor relationship with the Company or any Subsidiary or
Affiliate, nor is the Company or any Subsidiary or Affiliate a party to any
legal action instituted by any third party;
(o) except as set forth in Schedule 3.3(o), neither the Company nor
any of its Subsidiaries or Affiliates is a party to, or committed to enter
into, any material contract (i.e., contract other than
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in the ordinary course of business), which would or might affect the judgment
of a prospective investor;
(p) except as set forth in Schedule 3.3(p) neither the Company nor any
of its Subsidiaries or Affiliates have any outstanding mortgage, charge or
other Lien on any of their respective assets, and no contract or arrangement,
conditional or unconditional, exists for the creation by any of such entities
of any mortgage, charge or other Lien;
(q) the Sponsor, the Company and CTBC are in compliance in all
respects with, and no breach has occurred with respect to, their respective
obligations under the mortgages, charges, or other Liens and contracts or
arrangements, conditional or unconditional, set forth in Schedule 3.3(p) and
under the following agreements, entered into with the International Finance
Corporation, all of which are dated July 18, 1996: (i) Common Terms Agreement;
(ii) Subscription and Shareholders Agreement; (iii) Loan Agreement; (iv) Put
Option Agreement; and (v) Guarantee Agreement; and any other agreement entered
into with the International Finance Corporation by such entities;
(r) except as set forth in Schedule 3.3(r), there are no contracts or
other arrangements, written or oral, regarding the contribution or transfer of
CTBC shares to Lightel;
(s) the Sponsor agrees to indemnify, defend and hold Xxxxxxxx and its
Affiliates harmless from any damages, losses, lost profits, liabilities and
contingencies of any nature whatsoever derived from (i) any corporate
restructuring that either the Company or any of its Subsidiaries (which are
engaged in the Telecommunications and Information Technology Sector) might have
undertaken to date; (ii) the inaccuracy of any representations and warranties
contained in this Agreement; (iii) the breach of any covenant or agreement of
the Sponsor or the Company under this Agreement; and (iv) all undisclosed
liabilities of the Company, its Subsidiaries or Affiliates arising prior to the
Closing.
Section 3.4 Exercise of Sponsor's Voting Rights. The Sponsor agrees to
exercise its voting rights and/or any other rights granted to it by law or
otherwise, so as to permit the Company the fulfillment of all of its
obligations hereunder and to achieve the prompt and effective implementation of
this Agreement;
Section 3.5 Warranty. Each of the Company and the Sponsor acknowledges
that it has made the representations and warranties referred to in Sections 3.1
through 3.4 with the intention of persuading Xxxxxxxx to enter into this
Agreement and that Xxxxxxxx has entered into this Agreement on the basis of,
and in full reliance on, each of such representations and warranties. Each of
the Company and the Sponsor warrants to Xxxxxxxx that each of such
representations and warranties is true and correct in all material respects as
of the date of this Agreement and that none of them omits any matter the
omission of which makes any of such representations or warranties misleading.
For the purposes hereof the phrase "in all material respects" means the absence
of any event, condition or circumstance which might jeopardize the transactions
contemplated in this
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Agreement, the Xxxxxxxx Subscription or the ownership by Xxxxxxxx of the
Xxxxxxxx Shares, or the knowledge of which would cause a reasonable investor to
refrain from making an investment such as the Xxxxxxxx Subscription, on the
existing terms set forth herein.
Section 3.6 Rights and Remedies not Limited. Xxxxxxxx' rights and
remedies in relation to any misrepresentation or breach of warranty on the part
of the Company or the Sponsor are not prejudiced:
(a) by any investigation by or on behalf of Xxxxxxxx into the affairs
of the Company;
(b) by the execution or the performance of this Agreement; or
(c) by any other act or thing which may be done by or on behalf of
Xxxxxxxx in connection with this Agreement and which might, apart from this
Section, prejudice such rights or remedies.
Section 3.7 Representations and Warranties for Xxxxxxxx Subscription.
For the purpose of the single subscription and payment of the Xxxxxxxx Shares,
the Company shall represent and warrant that:
(a) the representations and warranties made or confirmed in Sections
3.1, 3.2, 3.3 and 3.5 continue to be true;
(b) no Event of Suspension and/or Cancellation has happened and is
continuing;
(c) since the date of this Agreement, nothing has occurred which might
materially adversely affect the carrying out of the Project or the Company's
business prospects or financial condition or the business prospects or
financial condition of each of its Subsidiaries and Affiliates, or make it
improbable that the Company or any of its Subsidiaries or Affiliates shall be
able to fulfill any of its obligations under any agreement to which the
Company, each Subsidiary or Affiliate is a party, including this Agreement; nor
has the Company or any Subsidiary or Affiliate incurred any substantial or
unusual loss or liability. For the purposes hereof the phrase "materially
adversely affect" means any event, condition or circumstance which might
jeopardize the transactions contemplated in this Agreement, the Xxxxxxxx
Subscription or the ownership by Xxxxxxxx of the Xxxxxxxx Shares, or the
knowledge of which would cause a reasonable investor to refrain from making an
investment such as the Xxxxxxxx Subscription, on the existing terms set forth
herein; and
(d) the proceeds of the subscription and payment are, at the date of
the relevant request, needed by the Company for the purposes of the Project,
the details of which are set forth in Schedule 2.1 hereto, or shall be needed
for that purpose within three (3) months of such date.
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Section 3.8 Representations and Warranties of Xxxxxxxx. Xxxxxxxx
hereby represents and warrants to the Sponsor and the Company that:
(a) it is a limited company duly incorporated and validly existing
under the laws of the Cayman Islands, British West Indies, and has the
corporate power to own its assets, conduct its business as presently conducted
and to enter into this Agreement and any agreements in implementation hereof;
(b) it has full power and authority to undertake the obligations
hereunder, to execute and deliver this Agreement, to perform its obligations
and observe the terms and provisions mentioned herein;
(c) the execution and delivery of this Agreement and the performance
of the obligations set forth herein have been duly authorized by all necessary
action on its part and constitute valid and legally binding obligations of
Xxxxxxxx, enforceable in accordance with its terms;
(d) the execution and delivery of this Agreement and the performance
of its obligations hereunder shall not conflict with or result in a breach of
any of the terms, conditions or provisions of, or constitute a default or
require a consent under (i) any provision of its Memorandum and Articles of
Association; (ii) any provision of any applicable law, regulation, rule,
decree, judgment or order to which it is subject; (iii) any provision of any
indenture, mortgage, agreement or other instrument or arrangement to which it
is a party, or which is binding upon it or any of its assets; and
(e) all governmental, corporate, shareholders', and creditors'
authorizations, consents, approvals, waivers and licenses required for the
execution and delivery of this Agreement and the performance of its obligations
hereunder have been duly obtained or granted and are in full force and effect.
ARTICLE 4
XXXXXXXX SUBSCRIPTION
Section 4.1 Subscription by Xxxxxxxx.
(a) On the terms and subject to the conditions of this Agreement,
Xxxxxxxx shall have the right to subscribe for the Xxxxxxxx Preferred Shares
and the Xxxxxxxx Common Shares and pay therefor an aggregate price not to
exceed nineteen million, eight hundred forty-three thousand, five hundred
ninety-one dollars and forty-four cents ($19,843,591.44). After giving effect
to the Xxxxxxxx Subscription, the Stock Purchase Agreement and the provisions
of Side Letters 1, 2 and 3 set forth in Exhibit 14.2, the Xxxxxxxx Shares shall
represent twenty percent (20%) of the total issued and outstanding Shares of
the Company.
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(b) The Company shall request Xxxxxxxx to subscribe for the totality
of the Xxxxxxxx Shares by delivering to Xxxxxxxx, at least seven (7) Business
Days prior to the proposed date of subscription, a request in the form of
Exhibit 4.1(b).
(c) Xxxxxxxx shall disburse the aggregate of the subscription price of
the Xxxxxxxx Shares in one lump sum to the credit of the Company at the bank
specified in the request for subscription or at such other bank in such place
as Xxxxxxxx and the Company from time to time agree.
(d) Notwithstanding anything contained in this Agreement, Xxxxxxxx
may, at any time and from time to time, in its discretion and without request
by the Company, subscribe and pay, on the terms set out in Subsection (a)
above, for any or all of the Xxxxxxxx Shares; provided that Xxxxxxxx may not
subscribe for Shares representing more than twenty per cent (20%) of the total
issued and outstanding share capital of the Company pursuant to this Section.
(e) Upon the subscription and payment by Xxxxxxxx under this Section,
the Company shall:
(i) issue to Xxxxxxxx the number of Xxxxxxxx Shares so
subscribed free of all Liens and which shall rank, pari passu in all respects
with all other Shares of the same category of Xxxxxxxx Shares and deliver to
Xxxxxxxx two (2) share certificates evidencing valid title to such number of
Xxxxxxxx Preferred Shares and Xxxxxxxx Common Shares, respectively; and
(ii) furnish to Xxxxxxxx evidence that the Xxxxxxxx Shares
have been duly and validly authorized, issued and delivered in compliance with
Brazilian law and that all other legal requirements in connection with the
authorization, issue and delivery have been duly satisfied, including the
making of the proper entries in the shareholders registry book of the Company.
Section 4.2 Actions Prohibited until Xxxxxxxx Shares Issued. Until all
of the Xxxxxxxx Shares have been subscribed or the right of the Company to the
subscription and disbursement under the Xxxxxxxx Subscription has been canceled
as provided in Section 4.3 whichever first occurs:
(a) the Company shall maintain a sufficient number of authorized and
unissued Shares to satisfy in full the exercise of Xxxxxxxx'x rights under the
Xxxxxxxx Subscription; and
(b) the Company shall not, unless Xxxxxxxx otherwise agrees:
(i) issue any Shares of any class, except in accordance with
the Financial Plan;
(ii) increase its subscribed, paid in and authorized capital
except in accordance with the provisions of this Agreement;
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(iii) change the rights attached to, any of its Shares of any
class; or
(iv) take any other action by amendment of its Estatuto Social
or through reorganization, consolidation, merger or sale of assets, or
otherwise which might result in the equity interest in the Company represented
by the Xxxxxxxx Shares being equivalent to less than twenty percent (20%) of
the total issued and outstanding Shares of the Company.
Section 4.3 Suspension and Cancellation of Xxxxxxxx Subscription. (a)
Xxxxxxxx may, by notice to the Company, suspend or cancel the right of the
Company to the Xxxxxxxx Subscription:
if:
(i) by February 28, 1997 any of the conditions of subscription
and payment under the Xxxxxxxx Subscription as set forth in Section 5.1 has not
been met; or
(ii) the Company has not requested the subscription and
disbursement under the Xxxxxxxx Subscription by such date;
(iii) if any Event of Suspension and/or Cancellation has
occurred and is continuing, or if the Event of Suspension and/or Cancellations
specified in Section 6.1 (m) is, in the reasonable opinion of Xxxxxxxx,
imminent; or
(iv) if, at any time, in the reasonable opinion of Xxxxxxxx,
there exists any situation which indicates that performance by the Company of
any of its obligations under this Agreement cannot be expected.
(b) The exercise by Xxxxxxxx of its right of suspension does not
preclude Xxxxxxxx from exercising its right of cancellation, either for the
same or another reason. A suspension does not limit any other provision of this
Agreement.
Section 4.4 Obligations of the Company after the Making of the
Xxxxxxxx Subscription.
(a) Within ten (10) Business Days following the subscription and
payment for the Xxxxxxxx Shares, the Company agrees to assist Xxxxxxxx in
applying with the Banco Central for the issuance of the Certificado de Registro
to evidence the Xxxxxxxx Shares as a foreign investment of Xxxxxxxx so as to
allow Xxxxxxxx the receipt of dividends, proceeds of sale of the Xxxxxxxx
Shares and any other Shares of the Company received by Xxxxxxxx by way of stock
dividends, share splits or replacement shares.
(b) The Company agrees to provide the Banco Central with any
information and/or document that the Banco Central
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may request and to comply with any requirement the Banco Central may make so as
to issue the Certificado de Registro.
(c) The Company shall be liable for the payment of any penalty or fine
that might be imposed by the Banco Central as a result of an event attributable
to the Company in case of its failure to comply with the terms set forth in the
applicable legislation for the application for registration of foreign
investments in Brazil and the fulfillment of any requirement made by the Banco
Central for such purpose or any other purpose.
(d) The Company shall make its best efforts to assist Xxxxxxxx to
cause the Banco Central to issue the Certificado de Registro evidencing the
Xxxxxxxx Shares within sixty (60) days following the Closing. Within two (2)
Business Days following the receipt of such Certificado de Registro by the
Company, the Company agrees to send the original copy thereof to Xxxxxxxx.
ARTICLE 5
CONDITIONS OF XXXXXXXX SUBSCRIPTION AND PAYMENT
Section 5.1 Conditions of the Xxxxxxxx Subscription. The obligation of
Xxxxxxxx to make subscription and disbursement under the Xxxxxxxx Subscription
is subject to the fulfillment, in a manner satisfactory to Xxxxxxxx, prior to
or concurrently with the making of such subscription and disbursement, of the
following conditions:
(a) the Sponsor, the Company, its Subsidiaries and Affiliates have
performed all of their respective obligations due to be performed under the
Transaction Documents, including this Agreement, in each case due to be
performed prior to the disbursement;
(b) arrangements have been made by the Company and by each of its
Subsidiaries and Affiliates with respect to the installation and operation of
an accounting and cost control system and a management information system
satisfactory to Xxxxxxxx and for the confirmation of Xxxxxx Xxxxxxxx as
Auditors for the Company and for each of its Subsidiaries and Affiliates;
(c) the Company, each of its Subsidiaries and Affiliates have insured
their respective properties and business with adequate coverage covering risks
normally covered by companies engaged in the relevant Telecommunications and
Information Technology Sector pursuant to the minimum insurance requirements
set forth in Schedule 5.1(c) hereto and Xxxxxxxx has been provided with copies
of all insurance policies together with a certificate of the insurer confirming
that such policies are in effect;
(d) all the Transactions Documents have been entered into by all
parties to them, have become (or, as the case may be, remain) unconditional and
fully effective in accordance with their
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respective terms; and, if Xxxxxxxx requires, Xxxxxxxx has received a copy of
each Transaction Document to which it is not a party, certified as a true and
complete copy by the Company;
(e) the Board of Directors of the Company shall have: (i) convened an
Extraordinary Shareholders Meeting of the Company to be held on the Closing
Date, at which the Sponsor shall vote to appoint the Xxxxxxxx Director to the
Board of Directors of the Company; and (ii) adopted a Board resolution stating
the policy of the Company regarding CTBC shares in the terms described in
Section 10.11;
(f) the Company has obtained, or made adequate arrangements for
obtaining, all Authorizations and other necessary approvals or consents for:
(i) the Xxxxxxxx Subscription;
(ii) the carrying on of the business of the Company as it is
presently carried on and is contemplated to be carried on;
(iii) the carrying out of the Project and the implementation
of the Financial Plan; and
(iv) the due execution and delivery of, and performance under,
the Transaction Documents, and any documents necessary or desirable in their
implementation and delivery of the Xxxxxxxx Shares;
(g) and has provided Xxxxxxxx with copies of those Authorizations,
certified as true and complete copies by the Company, if Xxxxxxxx so requires;
(h) Xxxxxxxx has received a legal opinion substantially in the form of
Exhibit 5.1(h) hereto from the Sponsor's and the Company's in-house general
counsel, with respect to:
(i) the organization, existence, operations and corporate
restructurings of each of the Company, its Subsidiaries and Affiliates, and the
formation of their respective authorized, subscribed and paid-in share capital;
(ii) the matters referred to in Subsections (d), (e) and (f)
above;
(iii) the title of the Company, each of its Subsidiaries and
Affiliates to, or other interest of the Company, each of its Subsidiaries and
Affiliates in their respective immovable and moveable assets;
(iv) the authorization, execution, validity and enforceability
of this Agreement, and any documents in implementation of this Agreement;
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(v) the validity, effectiveness and enforceability of the
Concessions and the Portarias;
(vi) the terms and conditions for the payment of the
compensation due to CTBC in the event the Concession Agreement is terminated
for any reason whatsoever;
(vii) the representations and warranties of the Sponsor and
the Company contained in this Agreement are true and accurate in all respects
as of the Closing Date and the Sponsor and the Company are in full compliance
in all respects with the covenants contained in this Agreement as of the
Closing Date; and
(viii) such other matters relating to the transactions
contemplated by this Agreement, and any other Transaction Documents as Xxxxxxxx
reasonably requests;
(i) Xxxxxxxx has received (if Xxxxxxxx so requires) reimbursement of
fees and expenses of Xxxxxxxx' counsel and other expenses as provided in
Section 14.9 unless paid beforehand directly to such counsel upon the request
of Xxxxxxxx;
(j) Xxxxxxxx has received the Certificate of Incumbency and Authority;
(k) the Company and each of its Subsidiaries and Affiliates shall be
in compliance with national and local environmental, safety and health laws and
standards and the relevant World Bank Guidelines;
(l) since the date of the latest financial statements attached hereto,
the Company has not, nor has any of its Subsidiaries and Affiliates, incurred
any loss or liability;
(m) after giving effect to the Xxxxxxxx Subscription, the Company
shall not be in violation of:
(i) its Estatuto Social;
(ii) any provision contained in any document to which the
Company is a party (including this Agreement) or by which the Company is bound;
or
(iii) any applicable Brazilian law, rule or regulation;
(n) immediately after the Xxxxxxxx Subscription, Xxxxxxxx shall not
have subscribed or paid for a higher proportion of the Xxxxxxxx Shares than the
proportion which all of the remaining
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Shareholders of the Company have by then subscribed or paid for of the total
number of Shares to be subscribed by them in accordance with the Financial
Plan;
(o) the Sponsor shall have delivered to Xxxxxxxx a true and correct
report of all shares of CTBC acquired by the Sponsor, the Company or any their
respective Subsidiaries or Affiliates, from a non-Affiliate from the date
hereof until the Closing Date, indicating the number and class of shares
acquired, the identity of the purchaser and of any subsequent transferees or
assignees of such shares, the date of the purchases and subsequent transfers or
assignments of such shares, if any, and the effective net price paid for such
shares upon initial purchase and any subsequent transfers or assignments;
(p) no Event of Suspension and/or Cancellation shall have occurred and
be continuing;
(q) the Sponsor shall have delivered to Xxxxxxxx an update of Schedule
3.1(g), to reflect any additional transactions which have occurred between the
date hereof and the Closing Date; and
(r) the Stock Purchase Agreement shall have been executed and
delivered by the Sponsor, the Company and ABC Industrial e Comercio S.A. - ABC
INCO, and the Shares to be purchased by Xxxxxxxx thereunder shall be available
for purchase by Xxxxxxxx thereunder at the Closing free from any preemptive
rights, Liens, charges or encumbrances whatsoever.
Section 5.2 Company Certification. The Company shall deliver to
Xxxxxxxx:
(a) as part of the request for the subscription and disbursement under
the Xxxxxxxx Subscription a certification, substantially in the form of Exhibit
4.1(b) signed by the Chairman with respect to the matters referred to in
Section 3.7 and the conditions specified in Section 5.1, expressed to be
effective as of the date of the subscription and disbursement under the
Xxxxxxxx Subscription; and
(b) such evidence as Xxxxxxxx reasonably requests of the proposed
utilization of the proceeds of the subscription and disbursement under the
Xxxxxxxx Subscription.
Section 5.3 Conditions for Xxxxxxxx Benefit. The conditions in
Sections 5.1 and 5.2 are for the benefit of Xxxxxxxx and may be waived only by
Xxxxxxxx at its sole discretion.
Section 5.4 Saving of Rights. Unless Xxxxxxxx otherwise notifies the
Company, and without limiting the generality of Section 14.12, the right of
Xxxxxxxx to require compliance with any condition under this Agreement which
Xxxxxxxx waives in respect of the subscription and disbursement under the
Xxxxxxxx Subscription is preserved for the purpose of the future exercise of
any other right of Xxxxxxxx hereunder.
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ARTICLE 6
EVENTS OF SUSPENSION AND/OR CANCELLATION OF THE XXXXXXXX SUBSCRIPTION
Section 6.1 Events of Suspension and/or Cancellation. Each of the
following events constitutes an Event of Suspension and/or Cancellation:
(a) if the Company, any Subsidiary or Affiliate fails to carry out the
Project and conduct its business with due diligence and efficiency in
accordance with sound engineering, financial and business practices; if the
Company fails to carry out the Project in accordance with the Project
description which is contained in Schedule 2.1 (subject to any modifications to
which Xxxxxxxx may agree); or fails to cause the funding specified in the
Financial Plan to be applied exclusively to the Project;
(b) if the Company, any of its Subsidiaries or Affiliates fails to
maintain at all times a firm of independent public accountants of international
standing and sound reputation as auditors of each of such companies;
(c) if the Company, any Subsidiary or Affiliate fails to design,
construct, operate and maintain all plant and equipment in compliance with the
applicable environmental, occupational health and safety requirements of the
Government of Brazil and the local authorities, and applicable World Bank
Guidelines;
(d) except to the extent required by Brazilian laws, if the Company
declares or pays any dividend or makes directly or indirectly any distribution
on its share capital, or purchases, redeems or otherwise acquires any Shares of
the Company or any option over the same prior to Closing or the cancellation by
Xxxxxxxx of the Xxxxxxxx Subscription, as the case may be;
(e) if either the Company or any Subsidiary or Affiliate enters into
any transaction with any person other than in the ordinary course of business,
on ordinary commercial terms and on the basis of arm's-length arrangements;
(f) if either the Company or any Subsidiary or Affiliate enters into
any partnership (except for the purpose of carrying out the Project),
profit-sharing or royalty agreement or other similar arrangement whereby the
Company's or any Subsidiary's or Affiliate's income or profits are, or might
be, shared with any other person; or if the Company or any Subsidiary or
Affiliate enters into any management contract or similar arrangement whereby
the business or operations of the relevant company are managed by any other
person;
(g) if the Company forms any Subsidiary or acquires shares of any
company, unless each of such Subsidiary and company is designed to be a company
of the Company Group;
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(h) if the Company changes its Estatuto Social in any manner which
would be inconsistent with the provisions of any Transaction Document; changes
its Fiscal Year; changes the nature of its present and contemplated business or
operations or change the nature or scope of the Project; sells, transfers,
leases or otherwise disposes of all or a substantial part of its assets
(whether in a single transaction or in a series of transactions, related or
otherwise) other than sales, transfers, leases or other forms of disposal in
the ordinary course of business; or undertakes or permits any merger,
consolidation, spin-off or the transformation of the legal structure of any
company of the Company Group into any other structure;
(i) if the Company terminates, amends or grants any waiver in respect
of any provision of any Transaction Document;
(j) if the Sponsor, any Subsidiary or Affiliate of the Company fails
to perform any obligation under any Transaction Document to which it is a
party;
(k) if the Sponsor, the Company or any of their respective
Subsidiaries or Affiliates fails to perform any of its obligations under this
Agreement or any other agreement between the Sponsor, the Company or such
Subsidiary or Affiliate, on the one hand, and Xxxxxxxx, on the other hand;
(l) if any representation or warranty confirmed or made in Article 3
or in connection with the execution and delivery of this Agreement, or in
connection with the request for subscription and disbursement under this
Agreement, shall be found to be incorrect in any material respect. For the
purposes hereof the phrase "in any material respect" means the existence of any
event, condition or circumstance which might jeopardize the transactions
contemplated in this Agreement, the Xxxxxxxx Subscription or the ownership by
Xxxxxxxx of the Xxxxxxxx Shares, or the knowledge of which would cause a
reasonable investor to refrain from making an investment such as the Xxxxxxxx
Subscription, on the existing terms set forth herein.
(m) if any government or governmental Authority shall have condemned,
nationalized, seized, or otherwise expropriated (including in any gradual or
progressive manner), all or any substantial part of the property or other
assets of the Sponsor, the Company, any Subsidiary or Affiliate or of the share
capital of the relevant company or shall have assumed custody or control of
such property or other assets or of the business or operations of the Sponsor,
the Company, any Subsidiary or Affiliate or of the share capital of the
relevant company, or shall have taken any action for the dissolution or
disestablishment of the Sponsor, the Company, any Subsidiary or Affiliate or
any action that would prevent any of such companies or its officers from
carrying on its business or operations or a substantial part thereof;
(n) if a decree or order by a court is entered against the Company,
the Sponsor, any of the Company's Subsidiaries or Affiliates:
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(i) adjudging the Company, the Sponsor, any of the Company's
Subsidiaries or Affiliate, "concordatarias", bankrupt or insolvent;
(ii) approving as properly filed a petition seeking
reorganization, "concordata" arrangement, adjustment or composition of, or in
respect of, the Company, the Sponsor, any of the Company's Subsidiaries or
Affiliates under any applicable law;
(iii) appointing a receiver, liquidator, assignee, trustee,
"comissario," sequestrator (or other similar official) of the Company, the
Sponsor, any of the Company's Subsidiaries or Affiliates or of any substantial
part of the property or other assets owned by any of such persons; or
(iv) ordering the dissolution, winding up or liquidation of
the affairs of the Company, the Sponsor, any of the Company's Subsidiaries, or
any Affiliate;
(v) or any petition is filed seeking any of the above and is
not dismissed within thirty (30) days;
(o) if the Company, the Sponsor, any of the Company's Subsidiaries or
Affiliates:
(i) requests a moratorium or suspension of payment of debts
from any court;
(ii) institutes proceedings or takes any form of corporate
action to be liquidated, adjudicated bankrupt or insolvent;
(iii) consents to the institution of bankruptcy or insolvency
proceedings against it;
(iv) files a petition or answer or consent seeking
reorganization ("concordata") or relief under any applicable law, consents to
the filing of any such petition or to the appointment of a receiver,
liquidator, "comissario" assignee, trustee, sequestrator (or other similar
official) of the Company, the Sponsor, any of the Company's Subsidiaries or
Affiliates, or of substantial part of their respective properties;
(v) makes a general assignment for the benefit of creditors;
or
(vi) admits in writing its inability to pay its debts
generally as they become due or otherwise becomes insolvent;
(p) if an attachment or analogous process is levied or enforced upon
or issued against any of the assets of the Company, the Sponsor, any of the
Company's Subsidiaries or Affiliates, is not discharged within thirty (30)
days;
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(q) if any other event occurs which under any applicable law would
have an effect analogous to any of those events listed in Subsections (n), (o),
and (p) above;
(r) if any provision of any Transaction Document is revoked,
terminated or ceases to be in full force and effect or the performance of the
obligations of any party to such agreements becomes unlawful or any such
document is declared to be void or is repudiated or its validity or
enforceability at any time is contested by any person and the provision is not
restored or replaced by a provision acceptable to Xxxxxxxx, or such repudiation
or challenge withdrawn within thirty (30) days of Xxxxxxxx' notice to the
Company requiring that restoration, replacement or withdrawal;
(s) if this Agreement, any Concession, the Concession Agreement, or
any Portaria:
(i) is breached by the relevant party to it and such breach
may have an adverse effect on the ability of the Company to perform and observe
its obligations under any Transaction Document; or
(ii) is revoked, terminated or ceases to be in full force and
effect without the prior consent of Xxxxxxxx, or performance of the obligations
under this Agreement, any Concession, Concession Agreement or under any of the
Portarias becomes unlawful; or any of such agreements, concessions or Portarias
is declared to be void or is repudiated or its validity or enforceability at
any time is contested by any party to it.
(t) if a default shall have occurred with respect to any indebtedness
of the Company or under any agreement pursuant to which there is outstanding
any such indebtedness of the Company, and such default shall have continued for
more than any applicable period of grace;
(u) if any Authorization necessary for the carrying out of the Project
and the Company's business and operations generally, as well as the business
and operations of each of its Subsidiaries or Affiliates or for the performance
by the Company, each Subsidiary or Affiliate of its obligations under each
Transaction Document is not obtained when required or otherwise at any time
ceases to be in full force and effect, including in respect of the remittance
to Xxxxxxxx or its assigns in freely convertible currency any amounts of
dividends on, or proceeds of sale of, the Xxxxxxxx Shares and the relevant
Authorization is not restored or reinstated within thirty (30) days of notice
by Xxxxxxxx to the Company requiring that restoration or reinstatement;
(v) if any provision of this Agreement is or becomes invalid, illegal
or unenforceable;
(w) if any of the Sponsor, the Company or CTBC are not in compliance
in all respects with their obligations under mortgages, charges or other liens
and contracts or arrangements, conditional or unconditional, set forth in
Schedule 3.3(p) and the agreements with the International Finance Corporation
mentioned in Section 3.3(q);
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(x) if any occurrences, events, circumstances or conditions which,
individually or in the aggregate, constitute a material adverse change, shall
have occurred or arisen after the date hereof, including any occurrences,
events, circumstances or conditions which, notwithstanding the Sponsor's or the
Company's disclosure to Xxxxxxxx prior to the Closing Date, have or with the
passage of time or the giving of notice or both, would have a material adverse
effect on William's rights under this Agreement or a material adverse effect on
either the Company taken as a whole or on CTBC; or
(y) if after the date hereof, the Sponsor or any of its Subsidiaries
or Affiliates, excluding the Company, shall have acquired by any means,
directly or indirectly, any shares of CTBC other than those expressly disclosed
in this Agreement to be held, directly or indirectly, legally or beneficially,
by such persons and entities.
ARTICLE 7
TAG ALONG RIGHTS AND PREEMPTIVE RIGHTS
Section 7.1 Sale of Sponsor's Shares. In the event that at any time
after the Closing the Sponsor proposes to sell to a Third Party or receives an
offer from a Third Party to purchase a Sponsor Disposition Percentage, the
Sponsor agrees to deliver to Xxxxxxxx the Tag Along Notice.
Section 7.2 Procedure.
(a) Within thirty (30) days following the receipt by Xxxxxxxx of the
Tag Along Notice, Xxxxxxxx shall send a Xxxxxxxx Notice to the Sponsor,
informing it whether Xxxxxxxx wishes or not to also sell the Xxxxxxxx Tag Along
Shares to such Third Party.
(b) In the event that Xxxxxxxx decides not to sell the Xxxxxxxx Tag
Along Shares to such Third Party, or if Xxxxxxxx fails to give the Xxxxxxxx
Notice within the period mentioned in Subsection (a) above, the Sponsor shall
(subject to the "Estatuto Social" of the Company) be free to dispose of the
relevant Sponsor Disposition Percentage to such Third Party.
Section 7.3 Obligation of the Sponsor. In order to comply with the
provisions of Section 7.1, the Sponsor agrees that no disposal of any Sponsor
Disposition Percentage may be made and no offer received by it from a Third
Party to purchase any of such Sponsor Disposition Percentage may be accepted,
unless Xxxxxxxx fails to give within the period established in Section 7.2 (a)
the Xxxxxxxx Notice or Xxxxxxxx delivers to the Sponsor a Xxxxxxxx Notice
advising it of its decision not to sell the Xxxxxxxx Tag Along Shares to such
Third Party.
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Section 7.4 Price of the Xxxxxxxx Tag Along Shares. The parties agree
that in the event Xxxxxxxx decides to sell the Xxxxxxxx Tag Along Shares to
such Third Party the price payable therefor shall be the price in Dollars (the
"Xxxxxxxx Offered Price") determined as follows:
(a) the Offered Price shall be divided by the number of shares
corresponding to the relevant Sponsor Disposition Percentage, so as to
ascertain the price per share implied therein (the "Price Per Share");
(b) the Price Per Share (if denominated in Reais) shall be converted
into its Dollar Equivalent by using the Exchange Rate prevailing on the
Business Day immediately preceding the date the Sponsor sends to Xxxxxxxx the
Tag Along Notice; and
(c) The Price Per Share shall be then multiplied by the number of
Xxxxxxxx Tag Along Shares and the result shall be the Xxxxxxxx Offered Price.
Section 7.5 Savings of Rights. The decision by Xxxxxxxx not to
exercise its rights in respect of any one Tag Along Notice under this Article 7
shall not impair or affect the exercise of such rights in respect of any future
Tag Along Notice.
Section 7.6 Tag Along Rights Interpretation. Nothing contained in this
Article 7 should be interpreted as obligating Xxxxxxxx to sell any Xxxxxxxx Tag
Along Shares to any Third Party.
Section 7.7 No Obligation. The Sponsor expressly acknowledges that
should Xxxxxxxx wish to sell the Xxxxxxxx Total Equity, in whole or in part, or
should Xxxxxxxx receive an offer from a person to purchase the relevant portion
of the Xxxxxxxx Total Equity, Xxxxxxxx has no obligation whatsoever to require
such person to acquire a pro-rata number of shares then held by the Sponsor in
the Company.
Section 7.8 Pre-emptive Rights. After the Closing, Xxxxxxxx shall be
assured the right to, at its discretion, (i) subscribe for Shares in any
increase of the Company's subscribed capital pro-rata to its then equity
participation in the Company's share capital and (ii) effect the payment for
such new Shares under the same terms and conditions as the other Shareholders.
Section 7.9 Right of First Notice. In the event that Xxxxxxxx intends
to sell all or a portion of the Xxxxxxxx Shares, then Xxxxxxxx shall first
notify the Sponsor of such intention by providing the Sponsor with all relevant
information for the Sponsor to make a competitive offer thirty (30) days prior
to offering such Xxxxxxxx Shares for sale and Sponsor shall have ten (10) days
from the date of such notice to submit to Xxxxxxxx a competitive offer for the
purchase by Sponsor of such Xxxxxxxx shares. If the Sponsor submits to Xxxxxxxx
an offer that is equal to or better in all respects than every other offer
received by Xxxxxxxx, then Xxxxxxxx shall accept the Sponsor's offer over such
other offer(s); provided, however, that Xxxxxxxx shall not be required to
accept the Sponsor's offer if Xxxxxxxx does not receive any other offer or
decides to retain the Xxxxxxxx Shares.
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ARTICLE 8
BOARD OF DIRECTORS
Section 8.1 Xxxxxxxx' Director.
(a) At any time on or after the Closing, and until the earlier of five
(5) years from the date hereof or the termination of this Agreement, Xxxxxxxx
shall be entitled to appoint in consultation with the Company one individual
(the "Xxxxxxxx Director"), who shall be a full voting member of the Board of
Directors of the Company, and one individual to be an alternate to the Xxxxxxxx
Director, to vote when the Xxxxxxxx Director is not available to attend.
Xxxxxxxx shall be entitled to substitute, remove and/or dismiss the Xxxxxxxx'
Director and his/her alternate so appointed at any time. Xxxxxxxx shall also be
entitled to have an observer (a Xxxxxxxx employee) attend all Meetings of the
Board of Directors of the Company, who shall not have any voting rights.
(b) Xxxxxxxx agrees to make best efforts to appoint as the Xxxxxxxx
Director an individual who is able to discuss business in Portuguese provided
that, in the event Xxxxxxxx does not appoint a Xxxxxxxx Director (or
alternative Xxxxxxxx Director) who is able to discuss business in Portuguese
then in that event the Company shall furnish an interpreter at the Company's
expense or conduct the meetings in the English language.
Section 8.2 Expenses. The Company agrees to pay or reimburse Xxxxxxxx
for the reasonable expenses that the Xxxxxxxx Director and his/her alternate
may incur to attend the meetings of the Board of Directors.
ARTICLE 9
PUBLIC OFFERING
Section 9.1 Piggy-Back Rights.
(a) If at any time after Closing the Company proposes to make a public
offering of its Shares, the Company shall give written notice to Xxxxxxxx of
such proposed public offering as soon as practicable but in no event less than
ninety (90) days prior to the first of any proposed filing with applicable
regulatory Authorities in connection with such proposed public offering (a
"Piggy-Back Registration"). Xxxxxxxx shall have the right to sell in such
proposed public offering, and register with applicable regulatory Authorities,
the Xxxxxxxx Piggy-
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Back Shares by sending the Company the Xxxxxxxx Piggy-Back Notice. The Company
shall cause the managing underwriter or underwriters of the proposed public
offering to include in such public offering the Xxxxxxxx Piggy-Back Shares
requested to be included by Xxxxxxxx in the Xxxxxxxx Piggy-Back Notice on the
same terms and conditions as the Company's Shares. Ten (10) Business Days prior
to the date the public offering becomes effective Xxxxxxxx may withdraw its
request for inclusion of the Xxxxxxxx Piggy-Back Shares in the proposed public
offering by giving written notice to the Company of its request to withdraw.
The Company may withdraw a Piggy-Back Registration at any time prior to the
time it becomes effective under applicable law.
(b) The Company shall use its best efforts to cause all Shares
included in the Piggy-Back Registration to be listed on the Rio de Janeiro
Stock Exchange; on the Sao Paulo Stock Exchange; or on any other major
Brazilian and/or international Stock Exchange.
Section 9.2 Restriction on Sale by the Company. The Company agrees not
to effect any sale or distribution of any securities similar to Shares, or any
securities convertible into or exchangeable or exercisable for Shares, during
the 14-day period prior to, and during the 90-day period beginning on, the
later of (a) the effective date of any registration statement (except as part
of such registration statement) and (b) the commencement of a public
distribution of Shares.
ARTICLE 10
OBLIGATIONS OF THE SPONSOR
Section 10.1 Obligation Not to Compete
(a) The Sponsor covenants and agrees not to compete directly or
indirectly, and shall cause its Subsidiaries and Affiliates and the directors
and officers of the Sponsor and such Subsidiaries and Affiliates, not to
compete directly or indirectly, with the business of the Company, and covenants
and agrees that, except as provided in Section 10.2(a), the Company shall be
the sole vehicle for all investments of the Algar Group and its shareholders in
the Telecommunications and Information Technology Sector and therefore agrees
to and shall cause its Subsidiaries and Affiliates, and the directors and
officers of the Sponsor and such Subsidiaries and Affiliates, to channel
through the Company all present and contemplated business, Business
Opportunities, commercial activities and operations of the Algar Group in the
Telecommunications and Information Technology Sector; and in furtherance of its
covenant under this Section 10.1(a), and not in limitation thereof, the Sponsor
covenants and agrees to Xxxxxxxx that it shall not, and shall cause its
Subsidiaries and Affiliates not to, directly and/or indirectly, (i) form any
other company; or (ii) otherwise subscribe for and/or purchase any share of any
company; or (iii) acquire any quasi-equity interest, or otherwise participate
in any company which is actually engaged or proposes to be engaged in the
Telecommunications and Information Technology Sector, unless any new company
referred to in (i) above is designed to be a Subsidiary of the Company or of
any company of the Company Group.
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(b) Moreover, and without limitation of Section 10.1(a), for the
purposes of this Section, the Sponsor or any of its Subsidiaries or Affiliates
shall be considered as competing with the business of the Company if:
(i) the Sponsor or such Subsidiary or Affiliate is retained
by any company engaged in the Telecommunications and Information Technology
Sector as a provider of managerial, technical and/or consulting services (in
this latter case including, but not limited to, specialized services), whether
evidenced in written agreements or otherwise, on a full or part time basis; or
(ii) the Sponsor or such Subsidiary or Affiliate agrees to be
a party to any enterprise, venture or special purpose company carrying on or
proposing to carry on specific telecommunications project in any capacity,
including, but not limited to, in the capacity of beneficial owner of such
enterprise, venture or special purpose company; or
(iii) the Sponsor or any of its Subsidiaries or Affiliates,
other than the Company or a company of the Company Group, contracts with the
Company or a company of the Company Group, to provide any product or service on
other than arm's length terms (except as otherwise provided in this Agreement),
or on terms and conditions less favorable to the Company or such company of the
Company Group than those offered or available from third parties in the
relevant market for such product or service; or
(iv) the Sponsor or any of its Subsidiaries or Affiliates,
except for the Company, acquires by any means, directly or indirectly, shares
of CTBC in excess of the amount set forth in Section 10.2(b).
(c) For purposes of the provisions contained in this Section 10.1, the
Sponsor agrees that the obligation not to compete with the Company as set forth
herein includes any company of the Algar Group.
Section 10.2 Permitted Equity Interests. The parties agree that the
Sponsor shall not be deemed to be competing with the Company as a result of:
(a) the activities conducted by ABC XTAL Microeletronica, Algar Bull,
ABC Cristais, Americatel, ABC EMEP, Sabe and Xtal S.A.; and
(b) subject to Section 10.3(a)(iii), the aggregate equity interest
held by the Sponsor in CTBC which is represented by and shall not exceed thirty
six million two hundred eighty-eight thousand four hundred fifty (36,288,450)
shares equivalent to fourteen point three five (14.35%) of the total issued and
outstanding shares of CTBC, consisting of eighteen million four hundred seventy
two thousand one hundred ninety four (18,472,194) common shares and seventeen
million eight hundred sixteen thousand two hundred fifty six (17,816,256)
preferred shares, but only to the extent
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the Sponsor is required to hold these shares to meet the relevant requirements
of the Concession Agreement and provided, that any equity interest held by the
Sponsor or its Affiliates in CTBC in excess of the amount so required to be
held shall be considered a breach of the Sponsor's covenants under this Article
10.
Section 10.3 Covenant on Transfer of Equity Interests.
(a) Notwithstanding the provisions of Section 10.2 above, in order to
comply with the obligation undertaken pursuant to Section 10.1, the Sponsor
agrees to:
(i) cause the Company, directly and/or indirectly, to
subscribe for or otherwise acquire the totality of shares of the share capital
of the companies of Algar Group engaged in the Telecommunications and
Information Technology Sector and which are not part of Company Group, in a
manner which shall be satisfactory to Xxxxxxxx in both form and substance
including value and as soon as it is legally allowed or not prohibited after
the date of this Agreement, but in any event within fifteen (15) months
following the date of this Agreement;
(ii) subject to Section 10.3(a)(iii), transfer, or, as the
case may be, cause to be transferred to the Company or to any company of the
Company Group (A) the aggregate of its equity interest in CTBC (at the
Sponsor's or Affiliate's actual purchase price for such interest of CTBC paid
to the subscriber to whom CTBC issued such shares) except for the Shares the
Sponsor is required to hold to meet the relevant requirements of the Concession
Agreement, if any, as described in Section 10.2(b), within ninety (90) days
from the date hereof; and (B) all the business and operations of Algar Bull and
Americatel, in a manner which shall be satisfactory to Xxxxxxxx in both form
and substance including value and as soon as it is legally allowed or not
prohibited after the date of this Agreement, but in any event within fifteen
(15) months following the date of this Agreement; provided, however, that in
both cases (A) and (B) of this Section 10.3(a)(ii), such transfer shall not
result in the equity interest in the Company represented by the Xxxxxxxx Shares
being equivalent to less than twenty percent (20%) of the total issued and
outstanding Shares of the Company, unless (i) Xxxxxxxx shall have received
thirty (30) days prior written notice of such proposed transaction contemplated
herein sufficient to allow Xxxxxxxx to properly evaluate the effects of such
transaction on the Company in order for Xxxxxxxx to determine whether or not to
exercise its preemptive rights provided hereunder; (ii) such proposed
transaction complies with Brazilian law with respect to minority shareholders;
and (iii) within thirty (30) days of receipt of such notice, Xxxxxxxx fails to
notify or notifies Company that Xxxxxxxx does not intend to elect to exercise
its preemptive rights hereunder to prevent such dilution of its equity interest
in the Company;
(iii) at the Closing, transfer, or, as the case may be, cause
to be transferred to the Company, or transfer to Xxxxxxxx, those shares of CTBC
described in Exhibit 14.2, in accordance with the provisions of said Exhibit.
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(iv) cause Lightel Servicos de Tecnologia da Informacao S.A.
("Lightel Servicos") to transfer the aggregate of its quotas in TV Video Cabo
to the Company, without issuance of Shares or payment of any other
consideration to Lightel Servicos in respect thereof as soon as it is legally
allowed or not prohibited after the date of this Agreement; and
(v) as from the date hereof, refrain from acquiring and cause
its Subsidiaries and Affiliates except the Company, as well as the statutory
directors ("conselheiros") and officers ("diretores") of the Sponsor, the
Company and CTBC, from acquiring additional shares of CTBC, whether from the
subscribers of CTBC or otherwise. Likewise, each of the Sponsor, the Company
and CTBC shall promptly following the Closing implement a policy to discourage
employees of each such company from acquiring such shares of CTBC and providing
for Company to acquire all such shares of CTBC held by any employees of each
such company and also encourage the employees of the Sponsor and Subsidiaries
to purchase shares of the Company should it become public to the extent
permitted by applicable law.
(b) For the purposes referred to herein, the Sponsor agrees that each
of the transactions referred to in Subsection (a) shall be in form and
substance satisfactory to Xxxxxxxx.
(c) If sixty (60) days prior to the expiration of the fifteen (15)
month period referred to in Subsections (a)(i) and (a)(ii) above, the Sponsor
is prevented by circumstances out of the control of the Sponsor or any of its
Affiliates from performing or causing to be performed any of the actions
required to be performed under the aforementioned Sections, the Sponsor agrees
to inform Xxxxxxxx of the nature and extent of its inability to perform or
cause to be performed any of such actions and to discuss with Xxxxxxxx in good
faith an alternative course of action (if at all) to comply with the
obligations under Subsection (a) above. Notwithstanding the foregoing, nothing
in this Subsection (c) shall relieve the Sponsor of its obligations established
in this Section 10.3.
Section 10.4 Activities of the Company. The Sponsor, in the capacity
of leading company of the Algar Group, hereby agrees and represents that the
activities and businesses of the companies of the Company Group shall be
restricted to the Telecommunications and Information Technology Sector.
Section 10.5 Share Retention. During the term of this Agreement the
Sponsor shall not:
(a) transfer, assign, sell, pledge, or in any manner dispose of or
encumber or permit to exist any Lien or encumbrance on any Share it now owns or
comes to own in the Company, directly and/or indirectly, at any time after the
signing of this Agreement (whether as a result of subscription, share split,
stock dividend or howsoever otherwise), in the event that any of the above
transactions reduce the equity participation of the Sponsor to less than
fifty-one per cent (51%) of the Company's total voting capital; and
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(b) under the relevant provisions of the "Estatuto Social" of the
Company, approve or vote in favor of any approval of any transfer of Shares
proposed to be made in violation of the provisions of this Section.
Section 10.6 Actions Prohibited. During the term of this Agreement,
unless Xxxxxxxx otherwise agrees in writing, the Company shall not, and the
Sponsor shall cause (i) the Company not to, recognize any purported sale,
transfer, assignment, disposal, pledge or any kind of encumbrance of the Shares
held by the Sponsor in the Company's capital in violation of Section 10.5; and
(ii) the Sponsor's Affiliates, including the Company, not to take any action
which would result in the equity interest in the Company represented by the
Xxxxxxxx Shares being equivalent to less than twenty percent (20%) of the total
issued and outstanding Shares of the Company, unless (i) Xxxxxxxx shall have
received thirty (30) days prior written notice of such proposed transaction
contemplated herein sufficient to allow Xxxxxxxx to properly evaluate the
effects of such transaction on the Company in order for Xxxxxxxx to determine
whether or not to exercise its preemptive rights provided hereunder; (ii) such
proposed transaction complies with Brazilian law with respect to minority
shareholders; and (iii) within thirty (30) days of receipt of such notice,
Xxxxxxxx fails to notify or notifies Company that Xxxxxxxx does not intend to
elect to exercise its preemptive rights hereunder to prevent such dilution of
its twenty percent (20%) equity interest in the Company. The Company agrees to
promptly give written notice to Xxxxxxxx of any request received to record any
of the transactions referred to in Section 10.5 in violation of the provisions
set forth therein and the Company shall, to the extent permitted by law, refuse
to make any such registration in violation of the said provisions.
Section 10.7 Share Swap.
(a) In the event that the listed and actually traded Shares are not
the same class and type of the Xxxxxxxx Shares; or if the shares of one or more
companies of the Company Group (other than Shares of the Company) are listed
and actually traded prior to the listing and trading of the Shares, with due
observance of the provisions set forth in Subsections (b) and (c) below, the
Company hereby grants Xxxxxxxx the right, at any time after Closing, at
Xxxxxxxx'x sole discretion, to swap, in whole or in part, the Xxxxxxxx Total
Equity into (i) the same type and class of Shares of the Company which have
been listed and continuously and actively traded on the Sao Paulo Stock
Exchange, Rio de Janeiro Stock Exchange or on any other major Brazilian and/or
international Stock Exchanges; or (ii) a pro rata number of shares of one or
more companies of the Company Group, whose shares have been listed and actually
traded; provided, however, that no such swap shall result in the equity
interest in the Company represented by the Xxxxxxxx Shares being less than the
percentage of the total issued and outstanding Shares of the Company held by
Xxxxxxxx immediately prior to such swap.
(b) Xxxxxxxx shall notify the Company of its intention to exercise its
rights under Subsection (a) above, by sending the Company the Xxxxxxxx Swap
Notice.
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(c) In the event that the IPO does not occur within sixty (60) days
following the date of the issuance of the Xxxxxxxx Swap Notice, the right
assured to Xxxxxxxx pursuant to Subsection (a) above shall be enforceable and
the Xxxxxxxx Swap Notice shall be deemed fully effective after the expiration
of such 60-day period, entitling Xxxxxxxx to effect the swap of the Xxxxxxxx
Shares under the terms and conditions set forth herein.
(d) For purposes of Section 10.7 (a) the Company shall be valued at
its Book Value on the date of the issuance of the Xxxxxxxx Swap Notice.
Section 10.8 IPO. The Sponsor agrees to inform Xxxxxxxx of any
proposed IPO of the Shares approximately one hundred and twenty (120) days
prior to the planned IPO Date.
Section 10.9 Management Fees. The current arrangement regarding the
five percent (5%) management fee that is paid from the Company's Subsidiaries
and Affiliates (in particular, CTBC) to the Sponsor shall be modified so that,
for calendar year 1997, such management fee shall be paid by CTBC or such other
Subsidiary or Affiliate to the Company instead of the Sponsor, and the Company
shall pay to the Sponsor its actual costs without markup or fair market value,
whichever is less, for providing such services, but the cost of such services
shall not exceed twelve million two hundred fifty thousand Dollars
($12,250,000) (5% of $245,000,000). For 1998 and the following years, the
Company's cost for any services from the Sponsor shall be equal to the
Sponsor's actual cost or fair market arm's length value, whichever is less.
Section 10.10 Intercompany Leases. All real estate leases between the
Sponsor or any its Subsidiaries and Affiliates, on the one hand, and the
Company, CTBC or any of the other Subsidiaries of the Company, on the other
hand, shall be renewed at the end of their present terms for four (4)
additional five (5) year terms, with the rental payments payable during the
first such renewal term being no greater than the current rates, adjusted for
inflation from the base year for each such lease or from a base year of 1996,
whichever is more favorable for the Company, as based on the IGP-M ("Indice
Geral de Precos xx Xxxxxxx" of the "Fundacao Xxxxxxx Xxxxxx" or any other index
that may replace the IGP-M), and the rentals for subsequent renewal terms being
based on prevailing fair market arm's length rates for similar real properties.
Section 10.11 Affirmative Covenants; Negative Covenant. Unless
Xxxxxxxx otherwise agrees, the Sponsor shall cause the Company and each of the
Company's Subsidiaries and Affiliates to comply with the affirmative covenants
set forth in Section 12.3 and the negative covenant set forth in Section 12.4.
In addition, the Sponsor shall adopt a Board resolution stating that it is the
policy of the Sponsor and of the Algar Group generally that all shares of CTBC
available for purchase from subscribers of CTBC or otherwise shall be acquired
by the Company and by not the Sponsor or any of its Affiliates, and that the
Company shall not pay more for such shares, than the actual amount paid by the
Sponsor or any Affiliate for such shares.
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ARTICLE 11
SPECIAL PROVISIONS CONCERNING XXXXXXXX AS A SHAREHOLDER
Section 11.1 New Investors.
(a) Xxxxxxxx and the Sponsor acknowledge that Investors may be
admitted as Shareholders of the Company so as to xxxxxx the Company's business
in the Telecommunications and Information Technology Sector. For such purposes,
the parties anticipate that new Investors shall be admitted as Shareholders of
the Company by subscribing for new Shares to be issued as a result of future
capital increases of the Company with due observance of the provisions of this
Article 11.
(b) Xxxxxxxx and the Sponsor agree that in the event any potential
Investor is proposing to invest in the Company, Xxxxxxxx may exercise its
pre-emptive rights to the subscription of new Shares.
(c) The Sponsor and Xxxxxxxx further agree that any potential Investor
may only be admitted as a Shareholder of the Company if (i) the Closing shall
have occurred, and (ii) the equity participation of the Sponsor in the Company
shall not be less than fifty-one per cent (51%) of the Company's total issued
and outstanding voting share capital.
(d) Competition by Xxxxxxxx. In each instance in which Xxxxxxxx owns a
majority interest and operates a company in Brazil, in the Telecommunication
and Information Technology Sector, Xxxxxxxx covenants and agrees not to compete
directly or indirectly, and shall cause its Xxxxxxxx Subsidiaries and
Affiliates and the directors and officers of Xxxxxxxx and Xxxxxxxx Subsidiaries
and Affiliates, not to compete directly or indirectly, with the business of the
Company, but only so long as Xxxxxxxx owns more than ten percent (10%) of the
Shares of the Company.
Section 11.2 No Better Subscription Terms. As controlling Shareholder
of the Company, the Sponsor hereby represents and warrants to Xxxxxxxx that for
a period of one (1) year after Closing, no Third Party and/or Investor shall be
offered better terms and conditions for the subscription of Shares of the
Company or shareholder rights than the terms and conditions offered to Xxxxxxxx
for the subscription of the Xxxxxxxx Shares under this Agreement and the
shareholder rights of Xxxxxxxx set forth in this Subscription and Shareholders
Agreement, unless Xxxxxxxx gives its prior written consent. In the event that
Xxxxxxxx elects to consent to the granting of such better terms, conditions or
rights to the Third Party and/or Investor, prior to undertaking any binding
commitment with such Third Party and/or Investor, the Sponsor and the Company
shall execute an amendment of this Agreement extending to Xxxxxxxx such better
terms, conditions or rights.
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Section 11.3 Company Shares Seized Judicially.
(a) If any Shares owned by the Sponsor or Xxxxxxxx are seized
judicially for whatever reason and the affected Shareholder (the "Affected
Shareholder") fails to replace the Shares with a guarantee or another asset
before auction (which may occur after (i) entering of a final decision or (ii)
through a temporary injunction), the affected Shares shall be deemed to have
been offered to the other shareholder (as between the Sponsor and Xxxxxxxx;
hereafter the "Other Shareholder") on a pro rata basis with regard to such
Other Shareholder's equity interest in the Company. The Other Shareholder who
wishes to accept the offer to purchase such Shares shall first place cash or
other security at the disposal of the court or tribunal. For this purpose, the
Affected Shareholder undertakes to use its best efforts to cause a sale to be
effected to the Other Shareholder accepting the offer.
(b) The Sponsor and Xxxxxxxx shall jointly appoint an
independent auditor from among one of the six largest internationally
recognized public accounting firms to appraise the Market Value of the Shares.
(c) If the amount paid or deposited with the court or
tribunal (less any amount to cover court costs and attorneys' fees) for the
affected Shares in Reais is greater than the Market Value of the Shares, as
determined pursuant to the appraisal, the Affected Shareholder shall pay to the
Other Shareholder posting such security the balance, indexed pursuant to the
currency index used by the Company in preparing its Financial Statements. If
applicable, and in accordance with Brazilian law regulating indexing, the
indexing period shall commence on the date the payment or deposit is made with
the court and shall end on the date of reimbursement to the Other Shareholder.
(d) If the amount paid or deposited with the court (minus
court costs and attorneys' fees) represents less than the Market Value of the
Company Shares, the Other Shareholder who accepted the offer shall pay the
balance to the Affected Shareholder, indexed pursuant to the currency index
used by the Company in preparing its Financial Statements and in accordance
with Brazilian law regulating indexing. This payment to the Affected
Shareholder shall be made within thirty (30) calendar days after receipt by the
Sponsor and Xxxxxxxx of the appraisal.
Section 11.4 Spin-off of Company Subsidiaries. The Company shall not
Spin-Off, directly or indirectly, any of its Subsidiaries or transfer such
Subsidiary's shares or all or a substantial portion of such Subsidiary's assets
to any other company or person outside the Company, without the prior written
consent of Xxxxxxxx, which shall not be unreasonably withheld. Xxxxxxxx shall
be entitled to: (i) thirty (30) days advance written notice of any proposed
Spin-Off; (ii) as provided by Brazilian law, an equity interest in such other
company or person not less than the equity interest then held by Xxxxxxxx in
the Company; (iii) representation on the board of directors of such other
company not less than the representation then held by Xxxxxxxx on the Board of
Directors of the Company; and (iv) all such other rights and interests in such
other company of the same nature and to the same
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extent as Xxxxxxxx then has in the Company under the Estatuto Social of the
Company, under this Agreement, the laws of Brazil or otherwise.
ARTICLE 12
OBLIGATIONS OF THE COMPANY
Section 12.1 Termination of the Concession. If during the term of this
Agreement the Concession Agreement is terminated for whatever reason, the
proceeds derived from the termination of said agreement ("Termination
Proceeds") payable to the Company by CTBC in accordance with the Concession
Agreement and the applicable laws shall be immediately distributed by the
Company to its Shareholders as cash dividends.
Section 12.2 Vote on Cash Dividend Distribution. In the capacity of
controlling Shareholder of the Company, the Sponsor hereby agrees to vote its
shares in favor of the cash dividends distribution referred to in Section 12.1
and to cause the Company to hold the relevant shareholders meeting within
thirty (30) days following the actual receipt of the Termination Proceeds by
the Company.
Section 12.3 Affirmative Covenants. Unless Xxxxxxxx otherwise agrees,
the Company shall, and shall cause each of its Subsidiaries and Affiliates to:
(a) carry out the Project and conduct its business with due diligence
and efficiency and in accordance with sound engineering, financial and business
practices and maintain adequate insurance coverage of its business and assets
pursuant to the minimum insurance requirements set forth in Schedule 5.1(c)
hereto and Subsection (y) below;
(b) carry out the Project in accordance with the Project description
in Schedule 2.1.
(c) cause the financing specified in the Financial Plan to be applied
exclusively to the Project;
(d) promptly install and maintain the accounting and cost control
system and management information system referred to in Section 5.1(b) of this
Agreement, and maintain books of account and other records adequate to reflect
truly and fairly its financial condition and the results of its operations
(including the progress of the Project) in conformity with accounting
principles which are generally accepted in Brazil, consistently applied;
(e) maintain a Debt to Shareholders Equity Ratio not greater than
50/50;
(f) as soon as available, but in any event within sixty (60) days
after the end of each
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quarter of each Fiscal Year, deliver to Xxxxxxxx, in English at the Company's
expense:
(i) two (2) copies of the Company's complete Financial
Statements and the complete Financial Statements of each of its Subsidiaries
for such quarter prepared in conformity with accounting principles which are
generally accepted in Brazil, consistently applied and, if requested by
Xxxxxxxx, certified by an officer of the relevant company;
(ii) a report on any factors materially affecting or which
might materially affect the Company's business and operations or the business
and operations of any of its Subsidiaries or its financial condition;
(iii) during implementation of the Project, a report, in a
form satisfactory to Xxxxxxxx, on the implementation and progress of the
Project, including any factors materially affecting or which might materially
affect the Project or the implementation of the Financial Plan;
(iv) as requested by Xxxxxxxx, a semi-annual statement by the
Company of all material transactions between the Company, any Subsidiary or
Affiliate and any company of the Algar Group, and a certification by the chief
financial officer of the Company and its Auditors that those transactions were
and remain on the basis of arms'-length arrangements. For the purposes hereof,
the term "material" shall mean any transaction (or a series of related
transactions) valued at or resulting in a liability equal to or exceeding One
Hundred Thousand U.S. Dollars (U.S.$100,000) or its Dollar Equivalent in Reais.
For the purposes of such Auditor's certifications, the Auditors shall adhere to
the reporting standards established (A) by the securities laws and regulations
and stock exchange rules then in effect in Brazil, including without
limitation, the rules and regulations promulgated by the Comisao de Valores
Mobiliarios (CVM) and (B) by December 31, 1997, by the securities laws and
regulations and stock exchange rules then in effect in the United States of
America, including without limitation, the rules and regulations promulgated
under the Securities Acts of 1933 and 1934 and by the U.S. Securities and
Exchange Commission; and
(v) a statement of all shares, if any, of CTBC acquired
during such quarter by the Sponsor or any of its Subsidiaries or Affiliates;
(g) as soon as available but in any event within one hundred and
twenty (120) days after the end of each Fiscal Year, deliver to Xxxxxxxx, in
English at the Company's expense:
(i) two (2) copies of the complete Financial Statements of
the Company and each of its Subsidiaries for such Fiscal Year (which are in
agreement with its books of account and prepared in accordance with accounting
principles which are generally accepted in Brazil, consistently applied),
together with an audit report on them;
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(ii) a copy of any management letter or other communication
from the Auditors to the Company or to any of its Subsidiaries commenting, with
respect to such Fiscal Year, on, among other things, the adequacy of the
relevant company's financial control procedures and accounting systems and
management information system;
(iii) a report by the Auditors certifying that, based on the
relevant financial statements, the Company and its Subsidiaries were in
compliance with the financial covenant contained in Subsection (e) above as of
the end of the relevant Fiscal Year or, as the case may be, detailing any
non-compliance;
(iv) a review of the operations of both the Company and its
Subsidiaries during such Fiscal Year, in a form satisfactory to Xxxxxxxx,
containing the information listed in Schedule 12.3(g)(iv); and
(v) a statement by the Company of all transactions between
the Company, any Subsidiary or Affiliate and any company of the Algar Group
during such Fiscal Year and a certification by the chief financial officer of
the Company and its Auditors that those transactions were and remain on the
basis of arms'-length arrangements; for the purposes of such Auditor's
certifications, the Auditors shall adhere to the reporting standards
established (A) by the securities laws and regulations and stock exchange rules
then in effect in Brazil, including without limitation, the rules and
regulations promulgated by the Comisao de Valores Mobiliarios (CVM) and (B) by
December 31, 1997, by the securities laws and regulations and stock exchange
rules then in effect in the United States of America, including without
limitation, the rules and regulations promulgated under the Securities Acts of
1933 and 1934 and by the U.S. Securities and Exchange Commission; and
(h) the Company shall request and make best efforts to obtain from its
Affiliates as soon as possible the information and documentation referred to in
Subsection (f) (i) and (ii) and Subsection (g) (i) through (iv) above and shall
provide Xxxxxxxx with the relevant information and documentation as soon as
they are available;
(i) deliver to Xxxxxxxx promptly following receipt a copy of any
management letter or other communication sent by the Auditors or any
accountants retained by the Company and the Subsidiaries to the relevant
company or to its management in relation to the financial, accounting and other
systems, management or accounts of the relevant company if not provided
pursuant to Subsection (g) (ii) above, in English at the Company's expense;
(j) promptly notify Xxxxxxxx by facsimile not less than ten (10) days
before any meeting of the Board of Directors and shareholders' meetings of the
Company including the agenda of such meetings;
(k) promptly deliver to Xxxxxxxx two (2) copies, in English at the
Company's expense of:
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(i) all notices, reports and other communications of the
Company to its shareholders; and
(ii) the minutes of all board of directors' and shareholders'
meetings;
(l) promptly provide to Xxxxxxxx such information as Xxxxxxxx from
time to time shall reasonably request about the Company and any company of the
Company Group;
(m) permit representatives of Xxxxxxxx to visit any of the premises
where the businesses of the Company and its Subsidiaries are conducted and to
have access to the books of account and records of the relevant company to the
extent necessary to permit Xxxxxxxx an evaluation of the performance of the
relevant company; provided that Xxxxxxxx notifies the Company in writing of the
purpose of any of such visit at least fifteen (15) calendar days prior to the
date of the proposed visit;
(n) promptly notify Xxxxxxxx of any proposed change in the nature or
scope of the Project or the business or operations of the Company and of any
event or condition which might materially and adversely affect the carrying out
of the Project or the carrying on of the Company's business or operations or
the operations and business of any of its Subsidiaries or Affiliates;
(o) promptly notify Xxxxxxxx by facsimile as soon as it becomes aware
of any litigation or administrative proceedings before any Authority or
arbitral body which materially and adversely affects or may have a material and
adverse effect on the Company, any Subsidiary or Affiliate, its assets or the
Project or on the ability of the relevant company to perform and observe its
obligations under any Transaction Document, including this Agreement;
(p) design, construct, operate and maintain all of its plant and
equipment in compliance with the applicable laws and regulations, as well as
the applicable environmental, occupational health and safety requirements of
the Government of Brazil, the local authorities and applicable World Bank
Guidelines;
(q) within forty-five (45) calendar days after the end of each Fiscal
Year, deliver to Xxxxxxxx an annual monitoring report, in the form specified by
the International Finance Corporation, confirming compliance with the
applicable national and local requirements and standards, as well as the
compliance with the World Bank Guidelines referred to in Subsection (p) above
or, as the case may be, detailing any non compliance together with the action
being taken to ensure compliance;
(r) if Xxxxxx Xxxxxxxx ceases to be the Auditors of the Company for
any reason, appoint
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and maintain as the auditors of the Company another firm of independent public
accountants of international standing and sound reputation;
(s) obtain and maintain in force (or where appropriate, promptly
renew) all Authorizations necessary for carrying out the Project and the
Company's business and operations generally;
(t) perform and observe all the conditions and restrictions contained
in, or imposed on the Company by, any such Authorizations;
(u) provide Xxxxxxxx within thirty (30) days prior to the start of
each Fiscal Year with a plan detailing the Company Group's investment program
in the Telecommunications and Information Technology Sector and funding of such
program for the relevant Fiscal Year;
(v) file all relevant tax returns and pay all taxes promptly upon the
same becoming due except to the extent that the taxes are being contested in
good faith and by appropriate means and an adequate reserve has been set aside
with respect thereto;
(w) cause its Subsidiaries and Affiliates to negotiate in good faith
access and interconnect agreements with any other telecommunications operators
in Brazil as may be required by the relevant Authorities;
(x) contest where practicable all acts or proceedings by any
governmental Authorities that might reasonably be expected to adversely affect
any Concession, Portaria, license or consent necessary for the conduct of the
operations of any company of the Company Group or the performance of the
obligations of the relevant company in respect of the transactions contemplated
hereby;
(y) insure its assets and properties against general third party,
including product liability covering all of its activities, with a minimum loss
limit of one million Dollars ($1,000,000) Equivalent, naming Xxxxxxxx as
"additional insured" under the liability policy and provide Xxxxxxxx with a
statement of the Company's overall insurance strategy for the protection of its
assets and operations;
(z) comply with and cause its subsidiaries and Affiliates to comply
with all of the provisions of the mortgages, charges and other liens or
contracts and arrangements set forth in Schedule 3.3(p) and all of the
agreements entered into with the International Finance Corporation mentioned in
Section 3.3(q);
(aa) all: (i) dealings between the Sponsor or any of its Subsidiaries
or Affiliates, on the one hand, and the Company or any company of the Company
Group, on the other hand; and (ii)
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investments in any company of the Company Group, made directly or indirectly by
shareholders, directors, officers and other top-level management personnel of
any company of the Algar Group, shall be: (A) established and remain on normal
arm's-length terms as if between unrelated parties and in accordance with the
provisions of Brazilian corporate law regarding fiduciary duties of
administrators in respect of Business Opportunities, and regarding the
protection of minority shareholders' rights; and (B) disclosed to Xxxxxxxx in
writing on a timely basis and in accordance with the reporting standards
established by the securities laws and regulations and stock exchange rules
then in effect in Brazil and the United States of America;
(ab) prior to or at the Closing adopt a Board resolution substantially
identical to the resolution described in Section 10.11; and
(ac) the Company shall take and it shall cause its Subsidiaries and
Affiliates to take any action that Xxxxxxxx may reasonably request to give
effect to the provisions contained in this Agreement, providing Xxxxxxxx with
evidence thereof;
Section 12.4 Negative Covenant. Unless Xxxxxxxx agrees, the Company
shall not and shall cause each of its Subsidiaries not to: (a) sell, transfer,
lease or otherwise dispose of all or a substantial part of its assets (whether
in a single transaction or in a series of transactions, related or otherwise)
other than sales, transfers, leases or other forms of disposal in the ordinary
course of business; (b) create or permit to exist any Lien on any of, its
property, revenues or other assets, present or future, except for security
created to secure all or any part of indebtedness incurred or assumed by the
Company or by any of its Subsidiaries to pay all or any part of the purchase
price of any property or assets acquired by the Company or by any of its
Subsidiaries after the date of this Agreement, provided that any such security
shall be confined solely to the property or asset so acquired; or (c) propose
or vote in favor of any shareholder or Board resolution of the Company to
increase the capital of the Company, if such resolution is in conflict with the
anti-dilution rights of Xxxxxxxx under Brazilian law, the Estatuto Social of
the Company, or the provisions of this Agreement, including without limitation,
Sections 3.1(d), 4.1, 4.2(b)(iv), 7.8, 10.3(a)(ii), 10.6 and 10.7 hereof.
ARTICLE 13
XXXXXXXX PUT OPTION
Section 13.1 Xxxxxxxx shall have the option, exercisable in its
discretion, at any time during the Exercise Period, by delivering to the
Sponsor a Notice of Exercise, with a copy to the Company, to sell to the
Sponsor all, but not less than all, of the Option Shares then held by Xxxxxxxx
at the greater of the Exercise Price or the Floor Price, and otherwise upon the
terms and conditions of this Agreement, and the Sponsor hereby agrees to
purchase and pay for such Option Shares in accordance herewith.
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Section 13.2 After receiving the Notice of Exercise, the Sponsor shall
on the Settlement Date and at the Settlement Place, pay to Xxxxxxxx in full, in
Dollars, in immediately available funds, to the bank account in the City of New
York, New York, United States of America, designated by Xxxxxxxx, the Exercise
Price.
Section 13.3 Xxxxxxxx shall, on the Settlement Date at the Settlement
Place, against payment in full of the Exercise Price for the Option Shares,
execute in the relevant corporate books of the Company deeds of transfer for
the Option Shares purchased by the Sponsor and shall, as appropriate, endorse
in the name of the Sponsor or deliver to the Company for cancellation the share
certificates (or the provisional share certificates) issued by the Company
representing such Option Shares, free and clear of all Liens, together with all
documents required to transfer title to such Option Shares to the Sponsor.
Section 13.4 Without prejudice to any remedies available to Xxxxxxxx
under this Agreement or otherwise, in the event that, after Xxxxxxxx shall have
delivered a Notice of Exercise of the Sponsor, the Sponsor shall fail to
purchase and pay for all or any of the Option Shares specified in the Notice of
Exercise as herein provided, Xxxxxxxx shall be free to sell, transfer or
otherwise dispose of any such unpurchased and unpaid Option Shares to a third
party willing to purchase such unpurchased and unpaid Option Shares, without
affecting any rights Xxxxxxxx may have against the Sponsor for the failure to
purchase or pay for the Option Shares specified in the Notice of Exercise,
including the rights set forth in Section 14.3(i) hereof.
Section 13.5 Nothing in this Agreement shall limit the right of
Xxxxxxxx, at any time, to sell, transfer or otherwise dispose of all of its
Option Shares which are not then subject to a Notice of Exercise.
Section 13.6 (a) The Sponsor shall not take any action, including,
without limitation, voting in favor of any resolution of the Shareholders of
the Company, which would permit the Estatuto Social of the Company to be
amended in a way that may impair the exercise of, or that may alter or
prejudice the rights of Xxxxxxxx in relation to the Put Option.
(b) The Sponsor shall procure that any Shareholder of the
Company waives whatever right of first refusal such Shareholder may have in
respect of the transfer of the Option Shares to the Sponsor (whether set out in
the Estatuto Social of the Company or otherwise) insofar as it is necessary so
to do in order to give effect to the provisions of the Put Option.
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ARTICLE 14
MISCELLANEOUS
Section 14.1 Information to Third Party. The Sponsor agrees to inform
any Third Party and Investor of this Agreement and to cause the relevant party
to adhere and be bound by all the terms and conditions set forth herein as a
condition precedent to the actual acquisition and/or subscription of any Share
of the Company.
Section 14.2 Entire Agreement. This Agreement and its Schedules and
Exhibits, and all other documents delivered at the Closing, including Exhibit
14.2 hereto, constitute the entire agreement of the parties hereto on the
subject matter hereof, and can only be amended by a written instrument signed
by all of the parties hereto. The parties have agreed that Xxxxxxxx shall
acquire the Xxxxxxxx Additional Shares pursuant to the provisions of Side
Letters 1, 2 and 3 set forth in Exhibit 14.2 attached hereto.
Section 14.3 Jurisdiction.
(a) At the option of Xxxxxxxx, this Agreement may be enforced in the
courts of the city of New York, State of New York located in the Southern
District of New York, United States of America, or in the central courts of the
city of Sao Paulo, State of Sao Paulo, Brazil. Final judgment issued by any of
such courts shall be conclusive and may be enforced in the other courts
referred to herein, by suit on the judgment, a certified or exemplified copy of
which shall be conclusive evidence of the judgment, or in any other manner
provided by law.
(b) By the execution and delivery of this Agreement, each of the
Company and the Sponsor irrevocably submits to the jurisdiction of any such
court in any action, suit or proceeding arising out of or relating to this
Agreement or any other Transaction Document to which any of such party is a
party and each of such parties designates, appoints and empowers CT Corporation
System, Inc. with an office at 0000 Xxxxxxxx, Xxx Xxxx, XX 00000, Xxxxxx Xxxxxx
of America as its authorized agent to receive for and on its behalf service of
any summons, complaint or other legal process in any such action, suit or
proceeding that Xxxxxxxx elects to bring in the State of New York.
Notwithstanding the foregoing, Xxxxxxxx reserves the right to make personal
service on each of the Company and the Sponsor of any summons, complaint or
other legal process in any action, suit or proceeding.
(c) As long as this Agreement remains in force, each of the Company
and the Sponsor shall maintain a duly appointed agent for the service of
summons, complaint and other legal process in New York, New York, United States
of America, for purposes of any legal action, suit or proceeding Xxxxxxxx may
bring in the courts of the City of New York in respect of this Agreement or any
other Transaction Document to which any of the above parties is a party. The
Company and
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the Sponsor shall keep Xxxxxxxx advised of the identity and location of such
agent.
(d) Each of the Company and the Sponsor also irrevocably consents, if
for any reason the Company's and the Sponsor's authorized agent for service of
process of summons, complaint and other legal process in any such action, suit
or proceeding is not present in New York, New York, to service of such papers
being made out of those courts by mailing copies of the papers by registered
United States air mail, postage prepaid, to the relevant party at its address
specified in the opening of this Agreement. In such a case, Xxxxxxxx shall also
send by telex or facsimile, or have sent by telex or facsimile, a copy of the
papers to the Company or the Sponsor, as the case may be.
(e) Service in the manner provided in Subsection (c) above in any such
action, suit or proceeding shall be deemed personal service, shall be accepted
by the Company or the Sponsor, as the case may be, as such and shall be valid
and binding upon the relevant party for all purposes of any such action, suit
or proceeding.
(f) Each of the Company and the Sponsor irrevocably waives to the
fullest extent permitted by applicable law:
(i) any objection which it may have now or in the future to
the laying of the venue of any such action, suit or proceedings in any court
referred to in this Section;
(ii) any claim that any such action, suit or proceeding has
been brought in an inconvenient forum;
(iii) its right of removal of any matter commenced by
Xxxxxxxx in the courts of the State of New York to any court of the United
States of America; and
(iv) any and all rights to demand a trial be jury in any such
action, suit or proceeding brought against the Company and/or the Sponsor by
Xxxxxxxx.
(g) To the extent that either the Company or the Sponsor may be
entitled in any jurisdiction referred to in Subsection (a) above to claim for
itself or its assets immunity in respect of its obligations under this
Agreement or any other Transaction Document to which any of the above parties
is a party from any suit, execution, attachment (whether provisional or final,
in aid of execution, before judgment or otherwise) or other legal process or to
the extent that in any such jurisdictions such immunity (whether or not
claimed) may be attributed to it or its assets, each of the Company and the
Sponsor irrevocably agrees not to claim and irrevocably waives such immunity to
the fullest extent permitted by the laws of any of such jurisdictions.
(h) To the extent that the Company and/or the Sponsor may, in any
suit, action or proceeding brought in any of the courts referred to in
Subsection (a) above arising out of or in
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connection with this Agreement or any other Transaction Document to which the
Company and/or the Sponsor is a party, be entitled to the benefit of any
provision of law requiring Xxxxxxxx in such suit, action or proceeding to post
security for the costs of any of such parties (cautio judicatum solvi), or to
post a bond or to take similar action, each of the Company and the Sponsor
hereby irrevocably waives such benefit, in each case to the fullest extent now
or in the future permitted under the laws of the State of New York, United
States of America or Brazil.
(i) If Xxxxxxxx brings any legal action, suit or proceeding arising
out of or relating to this Agreement or any other Transaction Document to which
the Company or the Sponsor is a party, in the central courts of the city of Sao
Paulo, State of Sao Paulo, Brazil, as referred to in Subsection (a), any party
hereto shall be entitled to claim in such Brazilian court the specific
performance of the obligations assumed by the other parties hereunder or under
any of the Transaction Documents, or any portion hereof or thereof, pursuant to
the relevant articles of the Brazilian Code of Civil Procedure, including, but
not limited to, Articles 461, 632, 639, as well as pursuant to Article 118 of
Brazilian Law No. 6,404, enacted on December 15, 1976.
(j) The parties hereto hereby acknowledge that the mere payment of
damages by the defaulting party to the non-defaulting parties shall not be
deemed appropriate indemnification for the failure by such defaulting party to
comply with its obligations hereunder or under any of the Transaction
Documents.
Section 14.4 Counterparts. This Agreement may be signed in one or more
counterpart copies all of which, when taken together, shall constitute one
document.
Section 14.5 Assignment. This Agreement shall bind and inure to the
benefit of the parties hereto, their successors and assigns. No party may
assign or transfer any of its rights and obligations hereunder, provided that
Xxxxxxxx may assign, in whole or in part, the Shares it comes to hold in the
Company; and provided, further, that Xxxxxxxx may also assign to any Third
Party which comes to acquire at least fifty per cent (50%) of the Xxxxxxxx
Shares subscribed hereunder the rights mentioned in Articles 7 and 9, but no
other rights.
Section 14.6 Translation and Registration. The Company agrees to
effect an official translation of this Agreement into Portuguese, and subject
to the prior review and approval of such translation by Xxxxxxxx or its
advisors, to register this Agreement with the Cartorio de Registro de Titulos e
Documentos in the relevant jurisdiction and to provide Xxxxxxxx with a copy of
such translation and satisfactory evidence of the registration of this
Agreement with the above mentioned "Cartorio".
Section 14.7 Translation and Registration Costs. The Company agrees to
bear all the costs and expenses and to pay any and all taxes, charges or fees
that may be levied or assessed on the translation and registration of this
Agreement with the "Cartorio" referred to in the preceding Section.
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Section 14.8 Taxes. The Company shall also pay all taxes (including
stamp taxes), duties, fees or other charges payable on or in connection with
the execution, issue and delivery of the Xxxxxxxx Shares and the translation,
registration or notarization of any documents related to this Agreement or to
the Xxxxxxxx Shares, and shall, upon notice from Xxxxxxxx, reimburse Xxxxxxxx
or its assigns for any such taxes, duties, fees or other charges paid by
Xxxxxxxx or its assigns thereon. The Sponsor shall pay all taxes, duties, fees
and other charges incurred in connection with the enforcement, sale, transfer
or delivery of the Option Shares and any documents related thereto so that
Xxxxxxxx receives in its bank account the Exercise Price without deduction for
or on account of any such taxes, duties, fees or other charges. The Company or
the Sponsor, as the case may be, shall reimburse Xxxxxxxx for any such charges
paid by Xxxxxxxx thereon.
Section 14.9 Fees and expenses. The Company shall pay or cause to be
paid to Xxxxxxxx or as Xxxxxxxx may direct:
(a) the fees and expenses of Xxxxxxxx' counsel in Brazil incurred in
connection with: (i) the preparation of Xxxxxxxx' investment in the Company;
(ii) the preparation, review, execution and, where appropriate, registration,
delivery and translation of each Transaction Document, including this
Agreement, the Xxxxxxxx Shares and any other documents related to this
Agreement or the Xxxxxxxx Shares; (iii) the giving of any legal opinion
required by Xxxxxxxx under this Agreement; (iv) any amendment or modification
to, or waiver under, this Agreement; (v) the registration (where appropriate)
and delivery of the evidences of payments by or to Xxxxxxxx in relation to the
Xxxxxxxx Subscription; and (vi) the exercise by Xxxxxxxx of its rights or
powers consequent upon, or arising out of, the occurrence of any Event of
Suspension and/or Cancellation; and
(b) all of Xxxxxxxx' reasonable costs and expenses, including legal
fees, incurred by Xxxxxxxx in relation to the protection or enforcement, or
attempted protection or enforcement, of any rights under this Agreement.
Section 14.10 Notices and Requests. Any notice, request or other
communication to be given or made under this Agreement shall be in writing and
except as otherwise provided in this Agreement it shall be deemed to have been
duly given or made when it shall be delivered by hand, mail (or airmail if sent
to another country), cable, telex or telecopier to the party to which it is
required or permitted to be given or made at the relevant address for
communications of such party which is specified at the opening of this
Agreement or at such other address for communication as any party shall have
designated by notice to the parties giving or making such notice, request or
other communication.
Section 14.11 Evidence of Authority. The Company shall furnish to
Xxxxxxxx the Certificate of Incumbency and Authority, that is, a certificate,
in the form of Exhibit 1.1(v) and in substance
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satisfactory to Xxxxxxxx, evidencing the authority of the person or persons who
will, on behalf of the Company, sign the requests and certifications provided
for in this Agreement, or take any other action or execute any other document
required or permitted to be taken or executed by the Company under this
Agreement, and the authenticated specimen signature of each such person.
Section 14.12 Saving of Rights.
(a) no course of dealing or waiver by Xxxxxxxx in connection with any
condition of Xxxxxxxx Subscription shall impair any right, power or remedy of
Xxxxxxxx with respect to any other condition, or be construed to be a waiver
thereof;
(b) unless otherwise notified to the Company or to the Sponsor by
Xxxxxxxx and without prejudice to the generality of Subsection (a) above, the
right of Xxxxxxxx to require compliance with any condition under this Agreement
which may be waived by Xxxxxxxx in respect of the Xxxxxxxx Subscription or in
connection with any right granted to Xxxxxxxx hereunder is expressly preserved
for the purposes of future exercise of any of the Xxxxxxxx' rights hereunder.
(c) no course of dealing and no delay in exercising, or omission to
exercise, any right, power or remedy accruing to Xxxxxxxx upon any default
under this Agreement or any other agreement, including the other Transaction
Documents, shall impair any such right, power or remedy or be construed to be a
waiver thereof or an acquiescence therein; nor shall the action of Xxxxxxxx in
respect of any such default, or any acquiescence by it therein, affect or
impair any right, power or remedy of Xxxxxxxx in respect of any other default.
(d) waiver of a breach of this Agreement or of any power, right
authority, discretion or remedy arising upon a breach of this Agreement must be
in writing and signed by the party granting the waiver. A breach of this
Agreement is not waived by any failure or delay in exercise, or partial
exercise, of any power, right, authority, discretion or remedy. A power, right,
authority, discretion or remedy created or arising upon a breach of this
Agreement is not waived by any failure or delay in the exercise, or a partial
exercise, of that or any other power, right, authority, discretion or remedy.
Section 14.13 English Language. All documents to be furnished or
communications to be given or made under this Agreement shall be in the English
language or, if in another language, shall be accompanied by a translation into
English certified by a representative of the Company or the Sponsor, as the
case may be, which English translations shall be the governing version between
the parties hereto.
Section 14.14 Filing at the Company's Head Office. The Company hereby
agrees to file one integral copy of this Agreement at its head office for the
purposes mentioned in Article 118 of Law No. 6.404, of December 15, 1976.
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Section 14.15 Term of Validity. This Agreement shall be valid as of
the date of its signing and shall continue to be in full force until the
earlier of (i) ten (10) years after the date of its signing, or (ii) the date
on which Xxxxxxxx ceases to hold at least fifty per cent (50%) of the Xxxxxxxx
Shares subscribed pursuant to this Agreement.
Section 14.16 No Deduction. Any payments to Xxxxxxxx hereunder
associated with or resulting from the implementation of any transaction
contemplated to herein shall be made without deduction on or for the account of
any taxes, fees, duties or other charges.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto, acting through their duly
authorized representatives, have caused this Agreement to be signed in its
names, as of the date first above written.
XXXXXXX X.X. TECNOLOGIA DA INFORMACAO
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
XXXXX X.X. - EMPREEENDIMENTOS E PARTICIPACOES
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
XXXXXXXX INTERNATIONAL TELECOM LIMITED
By: /s/ [ILLEGIBLE]
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Witnesses:
1.
---------------------
Name
ID No.
2.
---------------------
Name
ID Xx.
00
00
XXXXXXXXX XX. 0 TO SUBSCRIPTION AND SHAREHOLDERS AGREEMENT
AMENDMENT NO. 1, dated as of March 30, 1998 ("Amendment") to
SUBSCRIPTION AND SHAREHOLDERS AGREEMENT, dated as of January 21, 1997
("Agreement"), by and among XXXXXXX X.X. TECNOLOGIA DA INFORMACAO, a Brazilian
corporation (the "Company"), XXXXX X.X. - EMPREENDIMENTOS E PARTICIPACOES, a
Brazilian corporation ("Algar"), and XXXXXXXX INTERNATIONAL TELECOM LIMITED, a
Cayman Islands exempt limited company ("Xxxxxxxx").
WHEREAS, Algar and the Company have agreed to fund the acquisition of
an interest in the B-Band Cellular Concession for Area 3 in the States of Rio
de Janeiro and Espirito Santo, Brazil and/or to fund the acquisition of an
interest in the B-Band Cellular Concession for Area 2 in the State of Sao
Paulo;
WHEREAS, the Company wishes to borrow U.S.$100,000,000 (the "Loan")
from Xxxxxxxx to finance all or part of the funding requirements referred to in
the first recital hereto;
WHEREAS, Algar acknowledges the importance to the Company in obtaining
such Loan from Xxxxxxxx, in order to pay the Brazilian government in relation
to the above-mentioned concessions;
WHEREAS, Algar is in agreement with the aforementioned Loan and grant
of rights, and agrees to guarantee the Loan from Xxxxxxxx to the Company and to
assign its preemptive rights to subscribe to any shares issued by the Company
pursuant to Xxxxxxxx' exercise of share subscription rights provided under such
loan agreement and hereunder;
WHEREAS, Algar is committed to supplement Xxxxxxxx share subscription
rights with the share purchase option set out below;
NOW, THEREFORE, Xxxxxxxx, Algar and the Company have agreed to execute
this Amendment, and to modify, supplement and amend the Agreement, with the
specific intent of having the following terms and conditions governed by the
dispositions of Chapter X, section V of, and pursuant to the provisions
contained in Article 118 of, Brazilian Law No. 6,404, enacted on December 15,
1976, which shall be governed by the following terms and conditions (certain
terms hereof are defined in Section 11):
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SECTION 1. LOAN AGREEMENT. Algar, in its capacity as a shareholder of
the Company, agrees to take all necessary corporate action, including any
necessary amendments to the Estatuto Social of the Company, to approve the
execution, delivery and performance by the Company of a Loan Agreement, dated
March 30, 1998 among the Company, as borrower, Algar as guarantor and Xxxxxxxx
as lender, substantially in the form and content attached hereto as Exhibit 1
(the "Loan Agreement"), and to cause the Company to execute, deliver and
perform the Loan Agreement in accordance with its terms, including the
borrowing of the Loan and the performance of the conversion option granted to
Xxxxxxxx therein, providing for the conversion of the Loan into shares of the
Company as set forth therein.
SECTION 2. XXXXXXXX SHARE SUBSCRIPTION RIGHTS.
(a) Algar agrees that, if the Company does not otherwise hold such a
meeting, Xxxxxxxx shall have the right at any time to call a board of directors
meeting (or if necessary, a general shareholders meeting) of the Company to
deliberate an increase in the capital of the Company in an amount of the Reais
Equivalent to US$100,000,000 (the "Subscription Price"), and the subscription
by Xxxxxxxx of the Conversion Shares by virtue of the exercise by Xxxxxxxx of
its right to convert the Loan under the Loan Agreement into the Conversion
Shares.
(b) Algar and the Company agree that, in the event that the Banco
Central for any reason does not approve the conversion of the Loan in
accordance with the terms of the Loan Agreement referred to in paragraph (a)
above, Xxxxxxxx, at its option and in lieu of pursuing exercise of conversion
rights under the Loan Agreement and as a separate contractual right provided to
Xxxxxxxx hereunder and independent from its rights under the Loan Agreement, is
hereby given a subscription right for an amount of shares of the Company, which
may be voting or non-voting, common and/or preferred shares as selected by
Xxxxxxxx in its discretion, equal to the Conversion Shares, and Xxxxxxxx, to
the extent permitted by applicable law, may elect to subscribe and pay for up
to an amount of shares of the Company equivalent to the Conversion Shares by
capitalizing in the Company for the Subscription Price with the principal of
the Loan paid or prepaid by the Company to Xxxxxxxx under the Loan Agreement.
The subscription right provided in this paragraph 2(b) shall continue in full
force and effect to and until the maturity date for repayment of the Loan,
provided, however, in the event the approval of the Central Bank to the
conversion of the Loan into a capital increase of the Company is required and
not obtained or available at such time as Xxxxxxxx exercises its conversion
right on or prior to maturity of the Debt, then, at Xxxxxxxx' election the
Company shall not repay the Loan on the maturity date, the conversion rights
and Xxxxxxxx' rights hereunder shall not terminate and Xxxxxxxx shall exercise
the conversion rights as soon as practicable following such maturity date, and
until such time Xxxxxxxx shall have the full economic and other benefits of the
Required Percentage ownership of equity shares of the Company from the date of
execution of the conversion right as if the conversion had been accomplished.
The Company is obligated to use its best efforts to effect the obtaining of all
such regulatory approvals at the earliest date possible and Xxxxxxxx shall
fully cooperate with the Company in this regard.
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(c) If any change of law or circumstances should occur that would
reduce the number of shares Xxxxxxxx is entitled to receive pursuant to its
conversion rights under the Loan Agreement or pursuant to the foregoing share
subscription rights to an amount of shares of the Company that is less than the
full amount of Conversion Shares provided under the Loan Agreement and
hereunder, then Algar agrees that Xxxxxxxx' exercise of such rights and the
corresponding capital increase and share subscription shall be deemed to have
occurred one day prior to such change of law or circumstances.
(d) Algar hereby waives and agrees to express such waiver in the
corresponding deliberation, of all formalities of advance notice, notice
periods or publication required for the aforementioned board or shareholders
meetings by the Estatuto Social of the Company or by law, to the extent
permitted by law. Algar also agrees to authorize and cause any Algar-designated
directors of the Company to authorize and direct the Company to provide to
Xxxxxxxx the economic and other benefits provided in the last sentence of
Section 2(b) above.
(e) Algar assures that Xxxxxxxx shall be entitled to subscribe to 100%
of the shares provided to be issued pursuant to Section 2(a), (b) or (f). Algar
hereby assigns to Xxxxxxxx any and all preemptive rights to subscribe to any
such shares, and agrees to express such assignment of preemptive rights in any
corporate actions taken by the Company to approve the issuance of shares upon
Xxxxxxxx' exercise of its share subscription rights under Section 2(a), (b) or
(f).
(f) Subject at such time to the Company obtaining any and all required
regulatory approvals, in the event, at any time following fifteen (15) months
from the date hereof, (a) the Company definitively in good faith plans an
Initial Public Offering (as defined in the Loan Agreement) of its common or
preferred shares, as the case may be, and a listing thereof on the New York
Stock Exchange and on a recognized public exchange in Brazil, and (b) the total
equity market value of the Company's outstanding shares of common and preferred
shares at such time is US$750,000,000 or more, upon not less than ninety (90)
days prior written notice to Xxxxxxxx, Xxxxxxxx agrees to make, and the Company
may cause, a conversion of the Loan as a capital increase of the Company into
the Conversion Shares, when the provisions of the Loan Agreement shall be
applicable as if Xxxxxxxx had exercised the option without the Company's
request. If, at the time of the required exercise of the option by Xxxxxxxx or
such conversion of the Loan, the Company is subject to any legal inability
which prevents the Company from issuing to Xxxxxxxx the common and/or preferred
shares required hereby, the provisions of Section 4 hereto shall be applicable
and Xxxxxxxx shall be able to purchase Company shares owned by Algar as set
forth in Section 4. The Company is obligated to use its best efforts to effect
the obtaining of all such regulatory approvals at the earliest date possible
and Xxxxxxxx shall fully cooperate with the Company in this regard.
SECTION 3. VOTING AGREEMENT. Algar agrees to attend and to cause the
Algar-appointed directors to attend, the general shareholders meetings and
board of directors meetings (as the case may be) described in Section 2 and any
other meetings that may be required in relation thereto, and to vote and cause
the Algar-appointed directors to vote, in favor of all necessary corporate
actions, including any necessary amendments to the Estatuto Social of the
Company, to approve the increase
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of capital of the Company, if necessary, and the subscription of shares by
Xxxxxxxx provided for in Section 2(a), (b) or (f) above, and to cause the
Company to issue the above-mentioned shares to Xxxxxxxx.
SECTION 4. XXXXXXXX CALL OPTION ON ALGAR SHARES. In order to assure to
Xxxxxxxx that it will obtain the benefit bargained for by Xxxxxxxx under the
Loan Agreement and hereunder to be able to subscribe for the Required
Percentage of shares of the Company, Algar hereby grants to Xxxxxxxx a separate
call option to purchase from Algar a number of Company shares owned by Algar
(the "Call Option Shares") equal to (a) the total amount of Conversion Shares
as Xxxxxxxx is entitled to subscribe from the Company pursuant to Section 2(a),
(b) or (f) above, less (b) the actual number of shares Xxxxxxxx is able to
subscribe for under the provisions of Section 2(a), (b) or (f). Such option for
the Call Option Shares may only be exercised by Xxxxxxxx if at the time that
Xxxxxxxx exercises its share subscription rights under Section 2(a), (b) or
(f), there exists any legal impediment to the Company issuing to Xxxxxxxx for
the Subscription Price a total number of such shares equal at least to the
Required Percentage. Algar shall sell to Xxxxxxxx the Call Option Shares at a
cash purchase price of US$1.00 per share (the "Call Price"). Algar shall
contribute the Call Price to the Company as an increase of capital without any
resulting dilution of Xxxxxxxx share ownership in the Company of greater than
0.5%. The call option provided herein shall be exercised by Xxxxxxxx as soon as
practicable after the final determination of the amount of shares of the
Company that Xxxxxxxx is able to subscribe from the Company by virtue of its
conversion rights pursuant to Sections 2(a), (b) or (f). In addition, Algar
shall provide to Xxxxxxxx the economic and other benefits of the Call Option
Shares from the time that Xxxxxxxx exercises its share subscription rights
under Section 2(a), (b) or (f) as if the conversion by Xxxxxxxx had been
accomplished.
SECTION 5. LIMIT ON CAPITAL INCREASES. Algar agrees that to and until
completion by the Company of an Initial Public Offering, the Company shall
issue subscription rights for additional capital, whether common or preferred
shares, only at an equity value for the Company of US$750,000,000 or more, and
Algar shall refrain from voting in favor of any corporate action permitting any
issuance in violation thereof.
SECTION 6. XXXXXXXX SUPERMAJORITY PROVISIONS. Algar hereby consents to
and agrees to abide by the supermajority voting provisions provided for in the
Loan Agreement, in favor of Xxxxxxxx in its capacity as creditor of the
Company, to vote to amend the Estatuto Social of the Company in accordance
therewith, and to refrain from voting contrary to such provisions.
SECTION 7. RIGHTS UNDER AGREEMENT. The parties hereto agree that any
shares of the Company purchased by Xxxxxxxx hereunder shall be included within
the number of shares of the Company owned by Xxxxxxxx (the "Xxxxxxxx Shares")
for purposes of the Agreement and Xxxxxxxx shall be entitled to the full
benefits of the Agreement with respect to such shares; provided, however, for
purposes of Section 14.5 of the Agreement, following Xxxxxxxx acquisition of
shares of the Company pursuant to the Loan Agreement or hereunder, the
percentage referred to in the last sentence of Section 14.5 shall be 25% rather
than 50% of the Xxxxxxx Shares. In addition, in the
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event Xxxxxxxx assigns all or part of the shares of the Company acquired by
Xxxxxxxx under the Loan Agreement or hereunder, or all or part of Xxxxxxxx'
interest in the Loan and the Loan Agreement, to any third party, such third
party, at Xxxxxxxx option, shall be entitled to all of the benefits and subject
to the obligations of this Amendment and the benefits of Articles 7 and 9 of
the Agreement as specified in Section 14.5 of the Agreement but no other
rights.
SECTION 8. IFC AGREEMENT. The International Finance Corporation
("IFC") is also a shareholder of the Company. Algar and the Company agree to
use their best efforts to obtain the agreement of the IFC to the rights of
Xxxxxxxx provided to it under the Loan Agreement and hereunder. In the event
the IFC does not grant its agreement and consent to the terms hereof, Algar
agrees as a separate and independent obligation hereunder, by exercising its
voting rights as a shareholder, by transferring or selling shares of the
Company other than as specifically provided herein, or to take such other
action, as shall make available to Xxxxxxxx the benefits of the Loan Agreement
and this Amendment, including assuring to Xxxxxxxx its ability to acquire the
Required Percentage of the Company for the Conversion Price.
SECTION 9. PENALTY PROVISIONS.
(a) In the event that Algar does not exercise its obligations
hereunder to vote shares of the Company or to make available and sell to
Xxxxxxxx shares in exercise by Xxxxxxxx of its call option for the Call Option
Shares, or otherwise fails to perform its obligation under this Amendment, and
if such failure continues for a period of thirty (30) days following demand by
Xxxxxxxx, Xxxxx shall be liable to pay to Xxxxxxxx a penalty amount of
US$100,000,000 as payment to Xxxxxxxx of part of its damages resulting from
such failure. Xxxxxxxx also shall be able to seek such other damages and other
remedies as are available to Xxxxxxxx in respect of any breach by Algar of its
obligations hereunder. This penalty obligation shall be independent from
Algar's obligation as guarantor under the Loan Agreement and nothing herein
shall affect the obligation of the Company to repay the Loan or Algar's
obligation to guarantee repayment of the Loan.
(b) In the event that Xxxxxxxx does not give a request to convert the
Loan into the Conversion Shares upon due notice from the Company pursuant to
Section 2(f) above and/or fails to execute the formal documents necessary for
full accomplishment of the conversion of the Loan into Conversion Shares as
provided in Section 2(f) herein, and if such failure continues for a period of
thirty (30) days following demand by the Company, Xxxxxxxx shall be liable to
pay to the Company a penalty amount of US$100,000,000 as payment to the Company
of part of its damages resulting from such failure. The Company also shall be
able to seek such other damages and other remedies as are available to the
Company in respect of any breach by Xxxxxxxx of its obligations hereunder.
SECTION 10. JURISDICTION.
(a) At the option of Xxxxxxxx, this Agreement may be enforced in the
courts of the city of New York, State of New York located in the Southern
District of New York, United States of
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America, or in the central courts of the city of Sao Paulo, State of Sao Paulo,
Brazil. Final judgment issued by any of such courts shall be conclusive and may
be enforced in the other courts referred to herein, by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the
judgment, or in any other manner provided by law.
(b) By the execution and delivery of this Agreement, each of the
Company and Algar irrevocably submits to the jurisdiction of any such court in
any action, suit or proceeding arising out of or relating to this Agreement and
each of such parties designates, appoints and empowers CT Corporation System,
Inc. with an office at 0000 Xxxxxxxx, Xxx Xxxx, XX 00000, Xxxxxx Xxxxxx of
America as its authorized agent to receive for and on its behalf service of any
summons, complaint or other legal process in any such action, suit or
proceeding that Xxxxxxxx elects to bring in the State of New York.
Notwithstanding the foregoing, Xxxxxxxx reserves the right to make personal
service on each of the Company and Algar of any summons, complaint or other
legal process in any action, suit or proceeding.
(c) As long as this Amendment remains in force, each of the Company
and Algar shall maintain a duly appointed agent for the service of summons,
complaint and other legal process in New York, New York, United States of
America, for purposes of any legal action, suit or proceeding Xxxxxxxx may
bring in the courts of the City of New York in respect of this Agreement to
which any of the above parties is a party. The Company and Algar shall keep
Xxxxxxxx advised of the identity and location of such agent.
(d) Each of the Company and Algar also irrevocably consents, if for
any reason the Company's and Algar's authorized agent for service of process of
summons, complaint and other legal process in any such action, suit or
proceeding is not present in New York, New York, to service of such papers
being made out of those courts by mailing copies of the papers by registered
United States air mail, postage prepaid, to the relevant party at its address
specified in the Agreement. In such a case, Xxxxxxxx shall also send by telex
or facsimile, or have sent by telex or facsimile, a copy of the papers to the
Company or Algar, as the case may be.
(e) Service in the manner provided in Subsection (c) above in any such
action, suit or proceeding shall be deemed personal service, shall be accepted
by the Company or Algar, as the case may be, as such and shall be valid and
binding upon the relevant party for all purposes of any such action, suit or
proceeding.
(f) Each of the Company and Algar irrevocably waives to the fullest
extent permitted by applicable law:
(i) any objection which it may have now or in the future to
the laying of the venue of any such action, suit or proceedings in any court
referred to in this Section;
(ii) any claim that any such action, suit or proceeding has
been brought in an inconvenient forum;
70
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(iii) its right of removal of any matter commenced by
Xxxxxxxx in the courts of the State of New York to any court of the United
States of America; and
(iv) any and all rights to demand a trial by jury in any such
action, suit or proceeding brought against the Company and/or Algar by
Xxxxxxxx.
(g) To the extent that either the Company or Algar may be entitled in
any jurisdiction referred to in Subsection (a) above to claim for itself or its
assets immunity in respect of its obligations under this Amendment from any
suit, execution, attachment (whether provisional or final, in aid of execution,
before judgment or otherwise) or other legal process or to the extent that in
any such jurisdictions such immunity (whether or not claimed) may be attributed
to it or its assets, each of the Company and Algar irrevocably agrees not to
claim and irrevocably waives such immunity to the fullest extent permitted by
the laws of any of such jurisdictions.
(h) To the extent that the Company and/or Algar may, in any suit,
action or proceeding brought in any of the courts referred to in Subsection (a)
above arising out of or in connection with this Amendment be entitled to the
benefit of any provision of law requiring Xxxxxxxx in such suit, action or
proceeding to post security for the costs of any of such parties (cautio
judicatum solvi), or to post a bond or to take similar action, each of the
Company and Algar hereby irrevocably waives such benefit, in each case to the
fullest extent now or in the future permitted under the laws of the State of
New York, United States of America or Brazil.
(i) If Xxxxxxxx brings any legal action, suit or proceeding arising
out of or relating to this Amendment, in the central courts of the city of Sao
Paulo, State of Sao Paulo, Brazil, as referred to in Subsection (a), any party
hereto shall be entitled to claim in such Brazilian court the specific
performance of the obligations assumed by the other parties hereunder, or any
portion hereof or thereof, pursuant to the relevant articles of the Brazilian
Code of Civil Procedure, including, but not limited to, Articles 461, 632, 639,
and 798 as well as pursuant to Article 118 of Brazilian Law No. 6,404, enacted
on December 15, 1976.
(j) The parties hereto hereby acknowledge that the mere payment of
damages by the defaulting party to the non-defaulting parties shall not be
deemed appropriate indemnification for the failure by such defaulting party to
comply with its obligations hereunder.
(k) Each of the parties hereto acknowledges and agrees that in the
event of any breach of this Amendment, the non-breaching party or parties would
suffer irreparable harm, and no adequate remedy at law would exist and damages
would be difficult to determined. Accordingly, the parties agree that, in the
event of a breach of any provision of this Amendment, the injured party(ies)
shall be entitled to demand in court the fulfillment of all obligations of the
breaching party under this Amendment in accordance with the provisions of
Paragraph 3, Article 118, Law No. 6,404 of December 15, 1976, if applicable. In
addition the injured party(ies) may avail itself or themselves of the specific
performance provisions contained in Articles 461, 632, 639 and 798 of the
Brazilian Code of Civil Procedure.
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SECTION 11. MISCELLANEOUS.
(a) Whenever used in this Amendment, unless the context otherwise
requires, the following terms shall have the meanings herein:
"Conversion Shares" - means the number of shares to be issued and
outstanding of common and/or preferred stock of the Company, which shall be
voting and/or non-voting as selected by Xxxxxxxx in its discretion,
representing, on the date of the conversion the Required Percentage of the
total number of shares of the Company's common and preferred stock, but not
less than 73,179,311 shares of the Company.
"Dollar Equivalent" - (as of the relevant date of calculation) means
the equivalent in Dollars of any amount expressed in Reais by converting Reais
into Dollars by using the Exchange Rate.
"Exchange Rate" - (i) the official (A) rate for exchanging Reais into
Dollars (with respect to any Dollar Equivalent) or (B) rate for exchanging
Dollars into Reais (with respect to any Reais Equivalent) denominated as
PTAX-800, option 5, for the relevant date of calculation reported by the Banco
Central on such bank's SISBACEN Data System and set forth on Reuters page BRFR,
published on the Brazilian business day following the relevant date of
calculation and applicable for the remittance of funds (X) outside Brazil (with
respect to any Dollar Equivalent or (Y) into Brazil (with respect to any Reais
Equivalent), or (ii) if for the relevant date of calculation the PTAX-800 is
unavailable on the above-mentioned data system, then the Exchange Rate shall be
the PCOT-390, option 3, reported by the Banco Central on the SISBACEN Data
System. If the PCOT-390 rate is unavailable, then the Exchange Rate shall be
the official rate for exchanging Reais into Dollars (with respect to any Dollar
Equivalent) or for exchanging Dollars into Reais (with respect to any Reais
Equivalent) as published in the "Diario Oficial da Uniao" (Official
Gazette-Brazilian Government official publication) on the date following the
day on which such exchange rate is to be determined. In the case that none of
the above exchange rates are available, the Exchange Rate shall be the average
of the offer side of the interbank exchange rate replacing the PTAX-800 rate,
obtained from three major financial institutions making a market in Reais. In
the event that this rate is unavailable, a mutually acceptable substitute shall
be determined.
"Reais Equivalent" - (as of the relevant date of calculation) means
the equivalent in Reais of any amount expressed in Dollars by converting
Dollars into Reais by using the Exchange Rate.
"Required Percentage" - (as of the relevant date of calculation) means
twenty percent (20%) of the total number of shares of the Company's common
stock and preferred stock that is issued and outstanding immediately prior to
such conversion, which total shall include the number of all common stock and
preferred stock that could be converted or otherwise issuable from other forms
of equity or of Debt, including but not limited to other preferred shares,
warrants, convertible debt, and options to purchase in the Company or in any
other company into which assets or equity of the Borrower have been transferred
or spun off, but which shall not include the shares to be issued in connection
with such conversion or exercise by Xxxxxxxx of its subscription rights under
the Loan
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Agreement and hereunder. If in the period of time from April 1, 1998 until
Xxxxxxxx exercises its rights hereunder, (a) a strategic investor is issued as
a capital increase common or preferred equity shares in the Company and the
percentage of the total number of common or preferred shares of the Company at
such time so issued to such strategic investor equals or is less than (i) the
Dollar Equivalent amount of the new investment by the strategic investor
divided by (ii) US $750,000,000 then (b) the number of new shares issued to
such strategic investor shall be excluded from the number of shares subject to
the determination of the Required Percentage. The interest and Required
Percentage referred to in this Amendment is in addition to any other share
ownership in Company by Xxxxxxxx
(b) The parties hereto agree that the Agreement as amended hereby
continues in full force and effect and that the provisions of the Agreement are
valid and enforceable and remain in effect except as specifically amended,
modified or supplemented hereby. From and after the date hereof, references to
the Agreement shall refer to the Agreement as amended, modified and
supplemented by this Amendment.
(c) Each party to this Amendment agrees to execute, acknowledge,
deliver file and record such further certificates, amendments, instruments or
documents, and to do all such other acts and things, as may be required by law
or as may be necessary or advisable to carry out the intent and purpose of this
Amendment, including the Loan Agreement attached hereto and provided for
herein.
(d) All headings and captions contained in this Amendment are inserted
for convenience only and shall not be deemed part of this Amendment.
(e) This Amendment shall be governed and construed in accordance with
the laws of the Federative Republic of Brazil.
(f) This Amendment may be signed in one or more counterpart copies,
each of which shall constitute an original and all of which, when taken
together, shall constitute one agreement.
(g) Every provision of this Amendment is intended to be several. The
invalidity and unenforceability of any particular provision of this Amendment
in any jurisdiction shall not affect the other provisions hereof, and this
Amendment shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
(h) This Amendment shall be binding upon the parties hereto, their
respective successors, executors, administrators, legal representatives, heirs
and legal assigns and shall inure to the benefit of the parties hereto and,
except as otherwise provided herein, their respective successors, executors,
administrators, legal representatives, heirs and legal assigns. No person other
than the parties hereto and their respective successors, executors,
administrators, legal representatives, heirs and legal assigns, shall have any
rights or claims under this Amendment.
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(i) Algar hereby agrees to file one integral copy of this Amendment
with the Company at its head office for the purposes mentioned in Article 118
of Law No. 6.404, of December 15, 1976.
(j) The Company is party hereto in order to acknowledge the
obligations of the parties hereto.
(k) This Amendment and its Exhibit, constitute the entire agreement of
the parties hereto on the subject matter hereof, and can only be amended by a
written instrument signed by all of the parties hereto.
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IN WITNESS WHEREOF, the parties hereto, acting through their duly
authorized representatives, have caused this Amendment to be duly executed as
of the date first above written.
XXXXXXX X.X. TECNOLOGIA DA INFORMACAO
By: /s/ [ILLEGIBLE] /s/ X. XXXXXXX
-------------------------------------------------------
Name: [ILLEGIBLE] X. Xxxxxxx
-------------------------------------------------------
Title: Chief Financial Officer President
-------------------------------------------------------
XXXXX X.X. - EMPREEENDIMENTOS E PARTICIPACOES
By: /s/ [ILLEGIBLE] /s/ X. XXXXXXX
-------------------------------------------------------
Name: [ILLEGIBLE] X. Xxxxxxx
-------------------------------------------------------
Title: Chief Financial Officer Exec. Vice President
-------------------------------------------------------
XXXXXXXX INTERNATIONAL TELECOM LIMITED
By: /s/ XXXX X. XXXXXXXXX, XX.
-------------------------------------------------------
Name: Xxxx X. Xxxxxxxxx, Xx.
-------------------------------------------------------
Title: President
-------------------------------------------------------
Witnesses:
1. /s/ [ILLEGIBLE] 1.
------------------------ --------------------------
Name [ILLEGIBLE] Name
ID No. RG. 2095 Passport No.
2. /s/ [ILLEGIBLE] 2.
------------------------ --------------------------
Name [ILLEGIBLE] Name
ID No. CS. M.S. 349920 Passport No.
75
STATE OF OKLAHOMA )
) ss.
County of Tulsa )
Before me, the undersigned, a Notary Public, in and for said County
and State, on this 1st day of April, 1998, personally appeared Xxxx X.
Burngarner, Jr., to me known to be the identical person who executed the within
and foregoing instrument as President of Xxxxxxxx International Telecom Limited
and acknowledged to me that he executed the same as his free and voluntary act
and deed for the uses and purposes wherein set forth and as the free and
voluntary act and deed of such corporation.
Given under my hand and seal of office the day and year above written.
/s/ XXXXXXX X. XXXXX
[SEAL] --------------------------------
Xxxxxxx X. Xxxxx
My Commission Expires: Notary Public
April 30, 1998
