Exhibit 10.29
Stock Purchase Agreement by and among Convergence Communications, Inc.,
▇▇▇▇▇▇▇▇ ▇▇▇▇, and AES Telecom, Inc. dated as of September 11, 2001
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of
September 11, 2001, among CONVERGENCE COMMUNICATIONS, INC., a Nevada corporation
(the "Company"), ▇▇▇▇▇▇▇▇ ▇▇▇▇, an Argentine citizen ("Priu"), and AES Telecom
Americas, Inc., a Delaware corporation ("AES"). The Company, Priu and AES are
sometimes referred to collectively as the "Parties" and singularly as a "Party".
Priu and AES are sometimes referred collectively as the "Investors" and
singularly as an "Investor."
A. The Company, directly or through wholly-owned or controlled
subsidiaries, is engaged in the business of providing data transmission
services, domestic and international telephony, subscriber cable television,
value-added telecommunications services and services for access to and use of
the Internet in Latin America (together, the "Telecommunications Business"), and
proposes to continue to carry out and to expand and further develop such
Telecommunications Business, and for such purposes requires additional capital;
B. The Investors desire to invest in the Company on the terms and
conditions herein specified; and
C. The Parties are entering into this Agreement and the other
agreements and instruments entered into or delivered in connection herewith to
memorialize the terms for such investments.
NOW, THEREFORE, the Parties agree as follows:
1. Definitions. Capitalized terms used in this Agreement have the
meanings given to them in the Schedule of Definitions attached to this Agreement
as Schedule 1, unless the context otherwise requires. The definition of terms
defined in the singular shall apply to the plural, and the definition of terms
defined in the plural shall apply to the singular.
2. The Transactions.
(a) The Transactions. On and subject to the terms and conditions
of this Agreement, the Parties shall carry out the following transactions, and
enter into and deliver the following agreements and instruments (such agreements
and such other documents as are referred to herein being referred to
collectively as the "Transaction Documents") at a closing (the "Closing") to
occur within five Business Days following the satisfaction of the conditions set
out in Section 6:
(i) The Company will sell, and the Investors will purchase,
pursuant to the provisions of this Section 2(a)(i), 23,529,410 shares in the
aggregate of the Company's common stock, par value US$.001 per share ("the
Shares"), for an aggregate purchase price, in cash or other immediately
available funds, of Twenty Million United States Dollars (US$20,000,000), such
purchases and sales of the Shares to occur as follows:
(A) The purchase by and sale to Priu , at the Closing,
of an aggregate of Eleven Million Seven Hundred Sixty-Four Thousand Seven
Hundred Five (11,764,705) Shares for a purchase price per Share of 85/100th
United States Dollars (US$0.85), being an aggregate purchase price of Ten
Million United States Dollars (US$10,000,000), and
(B) the purchase by and sale of AES, at the Closing, of
an aggregate of Eleven Million Seven Hundred SixtyFour Thousand Seven Hundred
Five (11,764,705) Shares for a purchase price per Share of 85/100th United
States Dollars (US$0.85), being an aggregate purchase price of Ten Million
United States Dollars (US$10,000,000), and
(ii) the execution and delivery, at the Closing, of a
Registration Rights Agreement among the Investors and the Company in the form of
Exhibit A to this Agreement (the "Registration Rights Agreement") for the
purpose of setting out the rights of the Investors to require or join in the
registration of their Shares under U.S. Securities Law.
(b) The Closing. Subject to the satisfaction or waiver by the
appropriate Party or Parties of the conditions set out in Section 6, the Closing
shall take place at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇ in Salt Lake City,
Utah or such other place or places as the Parties may agree.
(c) Deliveries at the Closing. At the Closing, the Parties will
deliver or cause to be delivered the following agreements and instruments,
subject to the satisfaction or waiver by the appropriate Party or Parties of the
conditions set out in Sections 6(a) and 6(b):
(i) each of Priu and AES will deliver or cause to be
delivered the following:
(A) to the Company,
(1) in the case of Priu, Ten Million United States
Dollars (US$10,000,000) in cash or other immediately available funds, and
(2) in the case of AES, Ten Million United States
Dollars (US$10,000,000) in cash or other immediately available funds; and
(B) to the Company, the Registration Rights Agreement,
duly executed and delivered by such Investor;
(ii) the Company will deliver or cause to be delivered the
following:
(A) to each of the Investors, certificates representing
the Shares, as follows:
(1) to Priu, Eleven Million Seven Hundred
Sixty-Four Thousand Seven Hundred Five (11,764,705) Shares; and
(2) to AES, Eleven Million Seven Hundred Sixty-Four
Thousand Seven Hundred Five (11,764,705) Shares;
(B) to the Investors, the Registration Rights Agreement,
duly executed and delivered by the Company; and
(C) to the Investors, legal opinions of counsel in the
form of Exhibit B, addressed to the Investors and dated the Closing Date (the
"Legal Opinions").
3. Representations and Warranties of Investors. Each Investor, as to
itself, represents and warrants to the Company and to each other Investor that
the statements contained in this Section 3, with respect to such Investor only,
are true, correct and complete in all material respects as of the date of this
Agreement and will be true, correct and complete in all material respects as of
the Closing Date. Each such representation and warranty shall survive the
Closing and shall continue in force for a period of 24 months from the Closing
Date.
(a) Organization of the Investors. If the Investor is other than
an individual, it is duly organized, validly existing, and in good standing
under the laws of the place of its organization.
(b) Authorization of Transaction. He or it has full power and
authority to execute and deliver this Agreement and each Transaction Document to
which he or it is a party and to perform his or its obligations hereunder and
thereunder, and as of the Closing Date, this Agreement and each such Transaction
Document delivered at the Closing shall have been duly authorized and executed
by him or it and shall constitute his or its valid and legally binding
obligation, enforceable under Applicable Law in accordance with its terms,
except as may be limited by bankruptcy, reorganization, moratorium, fraudulent
conveyance and insolvency laws and by other laws affecting the rights of
creditors generally and except as may be limited by the availability of
equitable remedies. There is no requirement of Applicable Law that any notice be
given, nor any filing, authorization, consent, or approval of any governmental
authority be obtained in order that he or it may execute, deliver and consummate
the transactions contemplated by this Agreement and each other Transaction
Document to which he or it is a party.
(c) Noncontravention. Neither the execution nor the delivery by
him or it of this Agreement or of any other Transaction Document to which he or
it is or becomes a party, nor the performance of his or its obligations
hereunder or thereunder will (i) violate any Applicable Law to which he or it is
subject or, in the case of an Investor not an individual, any provision of its
charter or other organizational documents or bylaws or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any material contract to which he or it is a party
or by which he or it or any of his or its property may be bound.
(d) Brokers' Fees. He or it has not incurred any liability or
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated hereunder or under any other
Transaction Document to which he or it is or becomes a party for which any other
Party could become liable.
(e) Investment Intent. He or it understands that the Shares have
not been registered under the United States Securities Act of 1933, as amended
(the "Securities Act"). He or it is acquiring the Shares without a view to or
for sale in connection with any distribution thereof inside the United States
within the meaning of Regulation S under the Securities Act or other exemptions
from the registration requirements of the Securities Act. He or it understands
that the Shares will constitute "restricted securities" under the Securities
Act, and may not be resold without registration under, or the availability of an
exemption from, the registration requirements of the Securities Act and similar
state laws. He or it is familiar with Securities and Exchange Commission ("SEC")
Regulation S and Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
(f) Restrictive Legend. He or it understands that the certificate
or certificates evidencing his or its Shares may bear legends in substantially
the following form:
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF
STOCK. THE CORPORATION WILL FURNISH WITHOUT CHARGE TO THE
HOLDER OF THIS CERTIFICATE UPON REQUEST THE POWERS,
DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF THE
CORPORATION'S STOCK OR SERIES THEREOF AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE IN
THE UNITED STATES IN VIOLATION OF THE SECURITIES ACT AND MAY
NOT BE SOLD, MORTGAGED, PLEDGED OR HYPOTHECATED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT FOR SUCH SHARES UNDER THE SECURITIES
ACT OR THE DELIVERY TO THE CORPORATION OF AN OPINION OF
COUNSEL THAT REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT.
THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS AND
CONDITIONS OF AN AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
DATED AS OF SEPTEMBER 10, 2001, AS AMENDED, BY AND BETWEEN THE
SHAREHOLDER, THE CORPORATION AND CERTAIN OTHER HOLDERS OF THE
STOCK OF THE CORPORATION WHICH PROVIDES RESTRICTIONS ON THE
TRANSFERABILITY OF THE SHARES REPRESENTED BY THIS CERTIFICATE.
BY ACCEPTING ANY INTEREST IN THE SECURITIES REPRESENTED BY
THIS CERTIFICATE, THE PERSON ACCEPTING SUCH INTEREST SHALL BE
BOUND BY ALL THE PROVISIONS OF SAID AGREEMENT. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE CORPORATION.
(g) Accredited Investor. He or it is an "accredited investor," as
that term is defined in Regulation D promulgated under the Securities Act, can
bear the risk of his or its investment in the Shares that he or it proposes to
acquire, and has such knowledge and experience in financial and/or business
matters that he or it is capable of evaluating the merits and risks of an
investment in such Shares.
4. Representations and Warranties of the Company Concerning the Company
and its Subsidiaries. In reliance on the representations and warranties of the
Investors, as set forth in Section 3, the Company represents and warrants to
each Investor that the statements contained in this Section 4 are true, correct
and complete in all material respects as of the date of this Agreement and will
be true, correct and complete in all material respects as of the Closing Date.
Each such representation and warranty shall survive the Closing and shall
continue in force and effect for a period of 24 months from the Closing Date,
except that (i) the representations and warranties set out in clause (f) below
with respect to claims or lawsuits shall not expire, and (ii) the
representations and warranties set out in clause (e) below with respect to
environmental claims shall continue in force and effect for a period of 60
months from the Closing Date. Each of the Corporation's representations in this
Section 4 is qualified by reference to the Corporation's recently implemented
cash constraint measures, and the effect of those measures on the Corporation's
performance of its contractual obligations, its compliance with Applicable Law,
the status of its Subsidiaries under law relating to insolvency and its
relationship with vendors, customers and employees or former employees.
(a) Organization, Qualification and Corporate Power. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada, each of the Subsidiaries is an entity, duly
organized and validly existing (and, to the extent the jurisdiction of its
organization recognizes the concept, is in good standing) under the laws of the
place of its organization, and each of the Company and the Subsidiaries is duly
authorized to conduct business under the laws of each jurisdiction where such
qualification is required and the failure to so qualify would have a material
adverse effect on the Telecommunications Business, and has all requisite
corporate power and authority to own and operate its properties and to carry on
its business as now conducted and as contemplated to be conducted in the
Business Plan. The articles of incorporation, bylaws and any other
organizational documents of the Company and its Subsidiaries that the Company
previously delivered to each Investor were true, correct and complete as of the
date of delivery, and are true, correct and complete as of the date hereof, and
will be true, correct and complete as of the Closing Date.
(b) Authorization of Transaction. The Company has full power and
authority to execute and deliver this Agreement and each Transaction Document to
which it is a party and, to perform its obligations hereunder and thereunder,
and, as of the Closing Date, this Agreement and each such Transaction Document
shall have been duly authorized and executed by the Company and constitute its
valid and legally binding obligation, enforceable in accordance with its terms,
except as may be limited by bankruptcy, reorganization, moratorium, fraudulent
conveyance and insolvency law and by other laws affecting the rights of
creditors generally and except as may be limited by the availability of
equitable remedies. There is no requirement of Applicable Law that any notice be
given, nor any filing, authorization, consent, or approval of any governmental
authority be obtained by the Company or its Subsidiaries in order that the
Company may execute, deliver and consummate the transactions contemplated by
this Agreement and each other Transaction Document to which it is a party.
(c) Capitalization. Prior to the consummation of the transactions
contemplated by the Transaction Documents, the Company's authorized capital
consists of 100 million shares of Common Stock, par value of $.001 per share (of
which 11,348,626 shares are outstanding), and 25 million shares of preferred
stock, par value of $.001 per share (of which 13,620,472 Series C convertible
preferred shares and 2,643,636 Series D convertible preferred shares are
outstanding). All of the issued and outstanding shares of stock of the Company
and of each of the Subsidiaries have been duly authorized, are validly issued,
fully paid, and are nonassessable, are owned by the Company (with respect to the
stock of the Subsidiaries), and the holders thereof (with respect to the stock
of the Company). Except as is set forth in the Disclosure Schedule delivered to
the purchasing parties to the terms of the Umbrella Stock Purchase Agreement
among the Company and other parties dated February 7, 2001 (the "Disclosure
Schedule") (with appropriate adjustments to such disclosures relating to the
number of common shares subject to options in favor of employees that have been
terminated since the date of the Disclosure Schedule), there are no outstanding
or authorized options, warrants, purchase rights, preemptive rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require the Company or any of the Subsidiaries to issue,
sell, or otherwise cause to become outstanding any additional or other capital
stock. Except as contemplated by the Transaction Documents, neither the Company
nor any Subsidiary is under any obligation (contingent or otherwise) to
repurchase or otherwise acquire, redeem or retire any of its equity interests or
any warrants, options or other rights to acquire its equity interests. The
Shares will be duly authorized and validly issued, fully paid and nonassessable
shares of the capital stock of the Company and will not be issued in violation
of any preemptive rights. Upon their issuance, each Investor will receive good
and marketable title to the Shares, free and clear of all claims and Liens,
other than those arising under the Transactions Documents.
(d) Noncontravention. Neither the execution and delivery of this
Agreement or any Transaction Document to which the Company is a party, nor the
performance of its obligations hereunder or thereunder, will (i) violate any
provision of the charter or organizational document of the Company or any of its
Subsidiaries or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
material contract to which it is a party or by which it or any of its property
may be bound, or (iii) result in the creation of any Lien on the Shares (other
than as created by the Transaction Documents) or any assets of the Company or
its Subsidiaries.
(e) Environmental Laws and Regulations. To the Knowledge of the
Company, the business of the Company and each of the Subsidiaries is and has
been conducted in compliance with all Environmental Laws. To the Knowledge of
the Company, the operations of, and the buildings and property owned, leased or
used by, the Company and each of the Subsidiaries comply with all such
Environmental Laws. To the Knowledge of the Company, there is no existing
practice, action or activity of the Company or any Subsidiary and no existing
condition relating to any of the properties or assets owned or used by the
Company or any Subsidiary which might require clean up or remediation or give
rise to any civil or criminal liability under, or violate or prevent compliance
with, any such Environmental Laws or any health or occupational safety or other
applicable statute, regulation, ordinance or decree. Neither the Company nor any
Subsidiary has received any notice from any governmental authority revoking,
canceling, materially modifying or refusing to renew any permit, license or
authorization or providing written notice of violations under any such
Environmental Laws.
(f) Litigation. Except as disclosed in the Reports, as defined
below, and except as may relate to the Company's inability to timely pay its
obligations to its creditors, there is no suit, claim, action, proceeding or
investigation pending or, to the Knowledge of the Company, threatened (or any
basis therefor known to the Company) which, either in any case or in the
aggregate, might result in a material adverse change or in any impairment of the
right or ability of the Company or any Subsidiary to carry on their respective
businesses as now conducted or as proposed to be conducted or in any liability
on the part of the Company or any Subsidiary, either individually or taken as a
whole, and none which questions the validity of this Agreement or any
Transaction Document or any action taken or to be taken in connection herewith.
Neither the Company nor any of the Subsidiaries is a party or subject to the
provisions of any order, injunction, judgment or decree of any court or
government agency or instrumentality (other than government decrees of general
applicability) which might adversely affect their respective businesses.
(g) Bankruptcy. Neither the Company nor any Subsidiary has filed
any voluntary petitions admitting its bankruptcy or requesting a reorganization,
nor, to the Knowledge of the Company, have any petitions alleging insolvency
been filed against the Company or any Subsidiary, nor have any of them been
judicially declared to be bankrupt or insolvent, nor is any of them in the state
of being liquidated or dissolved.
(h) Brokers. The Disclosure Schedule describes the Company's
contractual obligations with FondElec Group, Inc. Other than a potential claim
under that contractual obligation, neither the Company nor any of its
Subsidiaries will be liable directly or indirectly to pay any brokerage fee,
commission, finder's fee or financial advisory or similar fee by reason of the
transactions contemplated by any Transaction Document to any Person claiming
such compensation by reason of any agreement or relationship with the Company or
any of its shareholders or any affiliate thereof or with any Subsidiary or any
of its shareholders or any affiliate thereof.
(i) Compliance with Laws. Neither the Company nor any Subsidiary
is in violation of, or in default under, any term of its organizational
documents or of any judgment, decree, writ, statute, governmental rule or
regulation applicable to the Company or any of its Subsidiaries or to which they
or any of them is bound, except to the extent that such violations or defaults
would not (i) affect the validity or enforceability of any Transaction Document,
or (ii) impair the ability of the Company to perform any material obligation
which the Company has under any Transaction Document.
(j) Complete Statements. No representation or warranty of the
Company in this Agreement contains any untrue statement of a material fact, and
the representations and warranties of the Company (together with the Reports),
taken as a whole, do not omit any statement necessary in order to make any
material statements or descriptions contained herein or therein in light of the
circumstances in which they were made, not misleading or incomplete.
(k) Reports. Through the date of the Company's report on form 8-K
filed with the SEC on August 7, 2001, the Company made all filings required of
it under the Securities Exchange Act of 1934, as amended. The Company has made
available to each requesting Investor each such report prepared by it since
December 31, 1998, including its Annual Reports on Form 10-KSB for the years
ended December 31, 1998, 1999 and 2000 in the form (including exhibits, annexes
and any amendments thereto) filed with the SEC (collectively, but not including
any such reports filed subsequent to the date hereof, its "Reports"). As of
their respective dates, the Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in
which they were made, not misleading and no statement of material fact that was
true and not misleading as of the date of the Report in which it was made is
untrue or misleading as of the date hereof in light of events or changes in
circumstances occurring since the date of the Report which are not otherwise
disclosed in the Reports or the opening paragraph of this Section 4. Each of the
consolidated balance sheets included in or incorporated by reference into the
Reports (including the related notes and schedules) fairly presents the
consolidated financial position of the Company and its Subsidiaries as of its
date and each of the consolidated statements of income and of cash flows
included in or incorporated by reference into its Reports (including any related
notes and schedules) fairly presents in material respects the consolidated
results of operations, retained earnings and cash flows, as the case may be, of
it and its Subsidiaries for the periods set forth therein (subject, in the case
of unaudited statements, to notes and normal year-end audit adjustments that
will not be material in amount or effect), in each case in accordance with
United States generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein.
(l) Foreign Corrupt Practices Act. None of the Company nor any of
the Subsidiaries or any of their respective officers, employees, directors,
representatives or agents acting in such a capacity at the direction of the
Company or any of the Subsidiaries, has taken any action in violation of any
anti-bribery, anti-corruption or criminal laws of the United States, Guatemala,
El Salvador, Venezuela, Costa Rica, Panama, Mexico or Argentina, including the
Foreign Corrupt Practices Act of 1977 of the United States, as amended, and
including, but not limited to, the making of improper payments, directly or
indirectly, in the form of cash or otherwise, to officials of any governmental
authority.
5. Pre-Closing and Post-Closing Covenants.
(a) Pre-Closing Covenants. The Parties agree as follows with
respect to the period, if any, between the execution of this Agreement and the
Closing Date:
(i) General. Each of the Parties will use its reasonable best
efforts to take all actions and to do all things necessary in order to
consummate the transactions contemplated by this Agreement (including the
satisfaction, but not the waiver, of the closing conditions set forth in section
6 below) and the other Transaction Documents.
(ii) Notices and Consents. Each of the Parties will give any
notices, make any filings and use its reasonable best efforts to obtain any
authorizations, consents, and approvals necessary to consummate the transactions
described herein.
(iii) Operation of Business. Subject only to measures
relating to the
application of the Company's cost-conservation policies pending the Closing, the
Company will not, and will not cause or permit any Subsidiary to, prior to the
Closing, engage in any practice, take any action, or enter into any transaction
outside the ordinary course of business.
(iv) Preservation and Conduct of Business. Subject only to
measures relating to the application of the Company's cost-conservation policies
pending the Closing, the Company will keep its business and properties
substantially intact, including each Subsidiary's present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, subscribers and employees and operate and carry on the
Telecommunications Business in the ordinary course of business.
(v) Full Access. The Company will permit, and the Company
will cause each of the Subsidiaries to permit, representatives of the Investors
to have full and complete access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of such entities, to all
premises, properties, personnel, books, records (including tax records),
contracts, and documents of or pertaining to each of such entities for the
purpose of enabling the Investors or their representatives to verify the
accuracy of the representations and warranties contained herein, to verify that
the covenants of this Agreement have been complied with and to determine whether
the conditions to Investors' performance set forth herein have been satisfied.
(vi) Notice of Developments. The Company will give prompt
written notice to the Investors of any of the following that occur prior the
termination of this Agreement under the provisions of Section 8:
(A) any material adverse development that causes or is
likely to cause a breach of any of the representations and warranties set forth
in Section 4 above, or
(B) any other event or condition which could reasonably
be expected to have a material adverse effect on the assets, operations,
operating results, customer or employee relations, business or financial
condition or prospects of the Company or of any material Subsidiary.
Each Investor will give prompt written notice to the other Parties of any
material adverse development that occurs prior to the Closing and causes a
breach of any of its own representations and warranties in Section 3 above. No
disclosure by any Party pursuant to this Section (a)(vi), however, shall be
deemed to prevent or cure any misrepresentation, breach of warranty, or breach
of covenant.
(b) Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing Date:
(i) Promptly after the Closing Date, the Company, shall form
a committee of the Board of Directors (to be chaired by a representative
designated by AES) to review the Company's currently approved business plan and,
upon the conclusion of such review, which shall be concluded within 30 days
following the Closing Date, to make recommendations to the Company's Board of
Directors regarding the matter set forth in (C), and recommendations to the
Company's Board of Directors regarding modifications to the business plan with
respect to the matters set forth in (A), (B) and (D) through (G):
(A) the Company's current management stock option plan
(with the intent that the Committee review and make recommendations with respect
to aligning the interests of management more closely with those of the Company's
shareholders);
(B) reporting requirements and procedures which will
assist the Company in monitoring the progress of its network buildout, sales and
installation;
(C) the search for and recommendation of a candidate to
become the chief financial officer of the Company;
(D) clarification of the roles, responsibilities and the
delegation of authority for the chief executive, financial, technical and
information officers of the Company;
(E) the locations where the Company maintains business
or other offices;
(F) the Company's status as a reporting entity under the
federal securities laws and the situs of its incorporation; and
(G) a schedule for the Company's Board of Directors
meetings which will allow the Board of Directors to more closely monitor the
Company's progress against the business plan.
(ii) Promptly after the Closing Date, the Company shall,
subject to the approval by the requisite vote of its shareholders, use
reasonable commercial efforts to amend its Articles of Incorporation to (A)
increase the maximum number of the members of its board of directors from 10 to
12, and (B) require that, prior to December 31, 2007, any new Equity Financing,
as that term is defined in that certain Amended and Restated Shareholders
Agreement among the Company and certain of its shareholders dated of even date
herewith, be approved by a minimum of 75% of the Company's directors.
(iii) During the period prior to the amendment of the
Company's articles of incorporation as set forth in Section 5(b)(ii), the
Company shall not, without the approval of the holders of at least 75% of the
Common Stock, engage in any Equity Financing.
(iv) Within two (2) business days of the Closing, pay all
amounts represented by that certain promissory note delivered by the Company in
July, 2001 in favor of ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, in the approximate amount of
US$1,810,538.78 as of September 10, 2001.
6. Conditions to Obligations.
(a) Conditions to Obligations of Each Investor at the Closing. The
obligation of each Investor to consummate or cause to be consummated the
transactions to be performed at the Closing as described in the appropriate
clauses of Section 2(a) is subject to the satisfaction or waiver by it of the
following conditions:
(i) Each other Party shall consummate or cause to be
consummated the transactions contemplated in the appropriate clauses of Section
2(c) to be performed at the Closing;
(ii) the representations and warranties of the Company set
forth in Section 4, and the representations and warranties of each other
Investor set forth in Section 3, shall have been true and correct at the
execution hereof and shall be true and correct in all respects at and as of the
Closing Date as if made on the Closing Date;
(iii) the Company and each other Investor shall have
performed and complied with all of its covenants hereunder (including the
delivery requirements of Section 2(c)) in all material respects through the
Closing Date;
(iv) there have been received by the Investors the Legal
Opinions, addressed to the Investors and dated as of the Closing Date;
(v) no court or governmental authority shall have enacted,
issued, promulgated, enforced or entered any law, statute, ordinance, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) that continues in effect and restrains, enjoins or
otherwise prohibits consummation of the transactions to be performed at the
Closing; and
(vi) the parties thereto shall have executed and delivered to
the Company (A) a warrant amendment and exercise agreement in the form of
Exhibit C hereto (the "Warrant Amendment Agreement"), (B) a preferred stock
conversion agreement in the form of Exhibit D hereto (the "Agreement Regarding
Conversion") (C) the amended and restated shareholders agreement in the form of
Exhibit E hereto (the "Amended and Restated Shareholders Agreement"), (D)
options to the Persons set forth on Exhibit F hereto to acquire shares of the
Company's Common Stock at a purchase price of $1.25 per share at any time during
the one year period after the Closing Date (the "Options"), (E) an option in
favor of the International Finance Corporation to acquire up to U.S. $765,000 of
the Company's common stock in the form of Exhibit G (the "IFC Option"), (F) an
option in favor of TCW/Latin America a Partners, LLC to acquire up to US
$3,566,310 of the Company's common stock in the form of Exhibit H (the "TCW
Option"), (G) a preemptive rights waiver in the form of Exhibit I (the
"Preemptive Rights Waiver"), and (H) a waiver in the form of Exhibit J (the
"Most Favored Nations Waiver").
(b) Conditions to Obligations of the Company at the Closing. The
obligation of the Company to consummate or cause to be consummated the
transactions to be performed at the Closing as described in Section 2(c) is
subject to the satisfaction or waiver of the following conditions:
(i) each Investor shall consummate or cause to be consummated
the transactions contemplated in the appropriate clauses of Section 2(c) to be
performed by it at the Closing;
(ii) the representations and warranties set forth in Section
3 above shall be true and correct in all material respects as to each Investor
at and as of the Closing Date;
(iii) no court or governmental authority shall have enacted,
issued, promulgated, enforced or entered any law, statute, ordinance, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) that continues in effect and restrains, enjoins or
otherwise prohibits consummation of the transactions to be performed at the
Closing;
(iv) the parties thereto other than the Company shall have
executed and delivered to the Company the Warrant Amendment Agreement, Agreement
Regarding Conversion, Amended and Restated Shareholders Agreement, the Options,
the IFC Option, the TCW Option, the Preemptive Rights Waiver and the Most
Favored Nations Waiver; and
(v) each Investor shall have performed and complied with all
of its respective covenants (including its delivery requirements under Section
2(c)) hereunder in all material respects through the Closing Date as if made on
that Closing Date.
7. Indemnity.
(a) Company Indemnity. Subject to the terms and conditions set
forth herein, from and after the Closing Date, the Company agrees to indemnify,
defend and hold harmless the Investors, their shareholders, directors, officers,
employees, affiliates, controlling persons, agents and representatives and their
successors and assigns (individually an "Indemnified Party" and collectively,
the "Indemnified Parties") from and against any and all losses, claims, damages,
liabilities, obligations, penalties, judgments, awards, costs, expenses and
disbursements (and any and all actions, suits, proceedings and investigations in
respect thereof and any and all legal and other costs, reasonable expenses or
disbursements in giving testimony or furnishing documents in response to a
subpoena or otherwise), including, without limitation, the costs, expenses and
disbursements as and when incurred, of investigating, preparing or defending any
such action, suit, proceeding or investigation (whether or not in connection
with litigation in which the party requesting indemnification is a party)
(collectively, "Losses"), directly or indirectly, caused by, relating to, based
upon, arising out of or in connection with litigation in which the party
requesting indemnification in connection with (i) the breach of any
representation, warranty, agreement or covenant set forth in this Agreement or
any Transaction Document (provided, however, that claims that are based on a
breach of the Company's representations and warranties may be made only if
notice of such breach is given by the Indemnified Parties to the Company during
the period of validity of such representations and warranties, as set forth in
Section 4), or (ii) any order made or any inquiry, investigation or proceeding
commenced or threatened by any governmental or securities regulatory authority
against an Indemnified Party in connection with the transactions contemplated
hereby. The Company shall not have any obligation to indemnify any Indemnified
Party to the extent that the losses suffered or claims made by the Indemnified
Party results from the breach of that party's representations, warranties or
agreements in this Agreement or the other Transaction Documents or the
Indemnified Party's gross negligence or willful misconduct.
(b) Disagreements. If there occurs a disagreement between any
Indemnified Party and the Company as to the application of this Section 7, the
matter shall be the subject of dispute resolution in the manner set out in
Section 10(n).
(c) Basket Amount. Notwithstanding anything to the contrary
herein, each of the Indemnified Parties shall be entitled to indemnification
hereunder only to the extent that the aggregate amount of indemnifiable claims
made by the Indemnified Parties exceeds (i) US$100,000 in one single
indemnifiable claim or (ii) if several indemnifiable claims, when added to the
Losses suffered by all Indemnified Parties by reason of several different events
as to which an indemnity pursuant to Section 7(a) has not been satisfied,
exceeds US$250,000; provided, however, that in the event the aggregate amount of
indemnifiable claims made by the Indemnified Parties exceed US$100,000 or
US$250,000, as the case may be, then the Indemnified Parties shall be entitled
to be indemnified for all such indemnifiable claims from the first dollar
thereof.
(d) Indemnification Procedure. The Indemnified Party seeking
indemnification shall give the Company prompt written notice of any claim,
assertion, event or proceeding concerning any liability or damage as to which
the Indemnified Parties may request indemnification from the Company hereunder;
provided, however, that any failure by any Indemnified Party to notify the
Company shall not relieve the Company from its obligations hereunder, or from
any other obligation or liability that the Company may have to the Indemnified
Parties other than under this Section 7. Upon written notice to the Indemnified
Parties given by the Company after receipt of notice of any such action or
proceeding, the Company may assume the defense thereof at its own expense with
counsel chosen by the Company; provided, however, counsel retained by the
Company shall be subject to the prior approval of the Indemnified Parties.
Notwithstanding the foregoing, with respect to any action, suit, proceeding or
investigation to which any Indemnified Party is also a party, the Indemnified
Parties may assume the defense thereof with counsel chosen by them, at the
expense of the Company. In the circumstances referred to in the immediately
preceding sentence, if the Indemnified Parties do not assume such defense, the
Company shall not, without the prior written consent of the Indemnified Parties,
settle or compromise any claim, or permit a default or consent to the entry of
any judgment in respect thereof, unless such settlement, compromise or consent
includes, as an unconditional term thereof, the giving by the claimant to the
Indemnified Parties, of an unconditional release from all liability in respect
of such claim. If the Indemnified Parties assume the defense of any such claim
or proceeding pursuant to this Section and propose to settle such claim or
proceeding prior to such a final judgment thereon or to forgo appeal with
respect thereto, then the Indemnified Parties shall give the Company prompt
written notice thereof and the Company, as the case may be, shall have the right
to participate in the settlement or assume the defense of such claim or
proceeding and no such claim or proceeding shall be settled or compromised
without the approval of the Company, which approval shall not be unreasonably
withheld.
(e) Adjustment to the Purchase Price. Any payments made pursuant
to this Section shall be treated for all tax purposes as adjustments to the
purchase price. No Party or any of its affiliates shall take a position on a tax
return or in any proceeding with any tax authority contrary to such treatment,
unless otherwise required by Applicable Law.
8. Termination.
(a) Termination of Agreement. The Parties may terminate this
Agreement as provided below:
(i) The Parties may terminate this Agreement as to all
Parties by mutual written consent;
(ii) Any Investor may terminate this Agreement as to itself
if,
(A) prior to the Closing,
(1) the Company or any other Investor has breached
any of its representations, warranties, or covenants contained in this Agreement
in any material respect,
(2) such Investor has notified the Company and each
other Investor of the breach prior to the Closing, and
(3) the breach has continued without cure for a
period of two Business Days after the notice of breach, or
(B) if the Closing shall not have occurred on or before
September 12, 2001 (unless the failure results primarily from such Investor
breaching any representation, warranty, or covenant contained in this
Agreement).
(iii) The Company may terminate this Agreement as to a given
Investor if
(A) prior to Closing.
(1) such Investor has breached any of its
representations, warranties, or covenants contained in this Agreement in any
material respect,
(2) the Company has notified the Investor of the
breach, and
(3) the breach has continued without cure for a
period of two Business Days after the notice of breach, or
(B) if the Closing shall not have occurred on or before
September 12, 2001 (unless the failure results primarily from the Company itself
breaching any representation, warranty, or covenant contained in this
Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to Section 8(a) above, all rights and obligations of the Party
hereunder shall terminate without any liability of any Party to any other Party,
except for any liability of the terminating Party resulting from a breach by it
that occurs prior to the termination. A termination as to a given Investor as
contemplated in clause (ii) or clause (iii) of Section 8(a) shall not have the
effect of removing such Investor's performance from among the conditions
precedent to any other Party's obligation hereunder as set out in Section 6, and
each of the other Parties shall be obligated to proceed with its respective
transactions contemplated hereunder only if and when all of the conditions to
their obligations set out in Section 6 are either fully performed, or expressly
waived by such Party.
(c) Specific Performance. Nothing in this Agreement shall be
interpreted to preclude any Party's right to seek and obtain specific
performance of the terms of this Agreement or any equitable remedy.
9. Removal of Legend. The Company agrees to remove, at the request of
an Investor, any legend placed on the Investor's certificate covering any
securities issued pursuant to this Agreement or any of the Transaction Documents
in order to comply with the requirements of U.S. Securities Laws at such time as
the legend is no longer required thereby.
10. Miscellaneous.
(a) Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of each other Party;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by Applicable Law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will advise the other Parties and afford such Parties a reasonable opportunity
under the circumstances to comment prior to making the disclosure).
(b) No Third Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any person or entity other than the Parties, their
related Indemnified Parties and their respective successors and permitted
assigns.
(c) Entire Agreement. This Agreement and other Transaction
Documents (including the documents referred to herein) constitute the entire
agreement among the Parties and supersedes any prior understandings, agreements,
or representations by or among the Parties, written or oral (including,
specifically, any letter of intent or letter or understanding between the
Parties), to the extent they relate in any way to the subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties and their respective successors and
permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Parties, except to a Person to whom a transfer of Company Shares (
as such term is defined in the Amended and Restated Shareholders Agreement) is
made to a Related Party (as such term is defined in the Amended and Restated
Shareholders Agreement) or otherwise free of the restrictions of the Amended and
Restated Shareholders Agreement.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument. For purposes of this
Agreement, the delivery of a counterpart signature by telephonic facsimile
transmission shall be deemed the equivalent of the delivery of an original
counterpart signature.
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given when actually
received, whether personally delivered, transmitted by fax or sent by reputable
air courier (such as Federal Express or DHL) and addressed to the intended
recipient as set forth below:
If to the Company:
-----------------
Convergence Communications, Inc.
c/o ▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: Senior Vice President
Administration & Legal
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to:
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▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to Priu:
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▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇
▇▇▇▇▇▇▇▇- ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
Fax: ▇▇-▇▇-▇▇▇▇-▇▇▇▇
Copy to:
-------
▇▇▇▇▇-▇▇▇▇▇▇ & Orts
Florida ▇▇▇, ▇▇▇▇ ▇
▇▇▇▇▇▇▇▇ - ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇, Esq.
Fax: ▇▇-▇▇-▇▇▇▇-▇▇▇▇
If to AES:
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AES Telecom Americas, Inc.
c/o AES Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
Copy to:
-------
▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, messenger service, telecopy,
telex, ordinary mail, or electronic mail), but no such notice, request, demand,
claim, or other communication shall be deemed to have been duly given unless and
until it actually is received by the intended recipient. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the state of New York, United
States of America, without giving effect to any choice or conflict of law
provision or rule (whether of the state of Nevada or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
state of New York.
(i) Amendments and Waivers. This Agreement may be amended,
extended or modified by a writing signed by the Investors and the Company. No
waiver shall be deemed to have been made unless in writing, nor shall any waiver
by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, be deemed to extend to any prior
or subsequent default, misrepresentation, or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Expenses. Each of the Parties will bear its own costs and
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. The Parties intend that each representation,
warranty, and covenant contained herein shall have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty, or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached shall not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
(m) Incorporation of Attachments and Exhibits. The Schedules and
Exhibits identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) Disputes.
(i) The provisions of this Section 10(n) shall be the sole
and exclusive method for resolving disputes between the Parties or their
respective successors or permitted assigns arising under or relating to the
transactions contemplated by this Agreement or any other Transaction Documents.
In the event there is a dispute under this Agreement or any Transaction
Documents, the Parties shall meet with one another and diligently attempt to
resolve their disagreements. If they are unable to do so, then upon request of
any Party to the dispute, they will conciliate the dispute, utilizing a single
conciliator pursuant to the ICC Rules of Optional Conciliation in a proceeding
to take place in New York, New York, and carried out in the English language.
If, after 60 calendar days, the conciliation is not successful, then any Party
to the dispute may bring arbitration to resolve the dispute as contemplated in
this Section 10(n).
(ii) Assuming negotiations and mediation are unsuccessful,
any Party to the dispute may submit the disagreement to binding arbitration by
making a written demand for arbitration. The arbitration shall occur before a
panel of three arbitrators in New York, New York, and shall be governed by the
Rules of Arbitration of the International Chamber of Commerce including, in the
event of more than two Parties to the dispute, Article 10 of such rules. To
assure predictability, the arbitrators shall be persons selected by the Parties
with experience in telecommunication issues and commercial transactions. The
arbitrators shall base their decision on the terms and conditions of this
Agreement (and shall not vary the same), New York statutory law, and judicial
precedent, and will include in the award findings of fact and conclusions of law
upon which the award is based. Subject to the limitations set out in the
Indemnity clause above, the arbitrators may grant such legal or equitable relief
as they deem to be appropriate, including money damages, specific performance
and injunctive relief. Except as required by law, each of the parties to the
dispute shall treat the existence and results of the dispute as confidential and
shall disclose the same only to his or its legal and financial advisors.
(iii) Questions of whether the dispute is subject to
arbitration shall also be decided by the panel of arbitrators.
(iv) Any Party may request and obtain from a court of
competent jurisdiction provisional or ancillary remedies for relief such as an
injunction or the appointment of a receiver, but the institution of a judicial
proceeding will not affect the binding obligation of the Parties to submit a
dispute to arbitration. Judgment upon an arbitration award may be entered in any
court having jurisdiction. Subject to the award of the arbitrators, each Party
shall pay an equal share of the arbitrators' fees, except the arbitrators shall
have the power to award all expenses (including attorney's fees, costs and
expert witness fees) to the prevailing Party, as determined by the arbitrators.
All matters relative to the arbitration, including the result thereof, shall be
maintained as confidential by all Parties to this Agreement, except as required
to obtain judgment upon an arbitration award or otherwise as required by law.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
CONVERGENCE COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇ ▇'▇▇▇▇▇▇▇▇
-------------------------
Its: Senior Vice President
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇
AES Telecom Americas, Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Its: Attorney-in-Fact
