Exhibit 10.3
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JOINT VENTURE AGREEMENT
dated as of
February 4, 1999
by and between
TELEFONICA LARGA DISTANCIA DE PUERTO RICO, INC.
and
CLEARCOMM, L.P.
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TABLE OF CONTENTS
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ARTICLE I. JOINT VENTURE........................................................................................2
Section 1.01 Articles of Incorporation..............................................................2
Section 1.02 The By-Laws............................................................................2
Section 1.03 CC's Capital Contribution..............................................................2
Section 1.04 TLD's Contribution.....................................................................2
Section 1.05 Additional Contributions...............................................................3
Section 1.06 Management Contract and Technology Transfer Agreement..................................6
Section 1.07 The Closing............................................................................6
ARTICLE II. STOCK TRANSFERS......................................................................................6
Section 2.01 Restrictions on Transfers and Issuance of Stock........................................6
Section 2.02 Right of First Refusal and Right to Join in Sale.......................................7
Section 2.03 Prohibited Transfers..................................................................10
Section 2.04 Certain Transfers Not Prohibited......................................................10
Section 2.05 Termination of Restrictions...........................................................10
ARTICLE III. CORPORATE GOVERNANCE................................................................................11
Section 3.01 Board of Directors....................................................................11
Section 3.02 Meetings of the Board of Directors....................................................12
Section 3.03 Indemnification.......................................................................12
ARTICLE IV. CORPORATE ACTION....................................................................................13
Section 4.01 Restricted Actions....................................................................13
Section 4.02 Deadlock..............................................................................14
ARTICLE V. BUY-OUT.............................................................................................14
Section 5.01 TLD Buy-Out...........................................................................14
Section 5.02 CC Buy-Out Event......................................................................16
ARTICLE VI. REGISTRATION RIGHTS.................................................................................18
Section 6.01 Required Registration.................................................................18
Section 6.02 Piggy-Back Registration...............................................................20
Section 6.03 "Market Stand-Off" Agreement..........................................................24
Section 6.04 Listing...............................................................................24
ARTICLE VII. ADDITIONAL COVENANTS................................................................................25
Section 7.01 Best Efforts..........................................................................25
Section 7.02 FCC Filing............................................................................25
Section 7.03 Filing of Documentation and Information...............................................25
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Section 7.04 Nondisclosure of Confidential Information.............................................26
Section 7.05 Filing of Agreement...................................................................27
Section 7.06 Corporation Designee..................................................................27
Section 7.07 Attorneys and Auditors................................................................27
Section 7.08 Marketing.............................................................................28
Section 7.09 Oregon Litigation.....................................................................28
Section 7.10 Accrued Interest on the CC Debt.......................................................28
Section 7.11 Reservation of Common Stock...........................................................29
Section 7.12 Endorsement of Stock Certificates.....................................................29
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES OF CC...............................................................30
Section 8.01 Existence and Power...................................................................30
Section 8.02 Corporate Authorization...............................................................30
Section 8.03 Governmental Authorization............................................................30
Section 8.04 Non-Contravention.....................................................................31
Section 8.05 Ownership.............................................................................31
Section 8.06 Finder's Fees.........................................................................31
Section 8.07 CC Debt...............................................................................32
Section 8.08 Litigation............................................................................32
ARTICLE IX. REPRESENTATIONS AND WARRANTIES OF TLD..............................................................32
Section 9.01 Organization and Existence............................................................32
Section 9.02 Corporate Authorization...............................................................32
Section 9.03 Governmental Authorization............................................................33
Section 9.04 Non-Contravention.....................................................................33
Section 9.05 Finder's Fees.........................................................................33
ARTICLE X. CONDITIONS TO CLOSING..............................................................................33
Section 10.01 Conditions to the Obligations of CC...................................................33
Section 10.02 Conditions to Obligation of TLD.......................................................34
ARTICLE XI. INDEMNIFICATION....................................................................................35
Section 11.01 TLD's and NewComm's Right to Indemnification..........................................35
Section 11.02 CC's and NewComm's Right to Indemnification...........................................36
Section 11.03 Notice................................................................................36
Section 11.04 Third-Party Claims....................................................................37
ARTICLE XII. DEFAULTS...........................................................................................38
Section 12.01 Defaults..............................................................................38
Section 12.02 Remedies..............................................................................39
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ARTICLE XIII. TERMINATION........................................................................................39
Section 13.01 Grounds for Termination...............................................................39
Section 13.02 Effect of Termination.................................................................40
ARTICLE XIV. MISCELLANEOUS......................................................................................41
Section 14.01 Survival..............................................................................41
Section 14.02 Notices...............................................................................41
Section 14.03 Amendments; No Waivers................................................................42
Section 14.04 Expenses..............................................................................42
Section 14.05 Successors and Assigns................................................................42
Section 14.06 Governing Law.........................................................................42
Section 14.07 Counterparts; Effectiveness...........................................................42
Section 14.08 Entire Agreement......................................................................43
Section 14.09 Captions; Definitions.................................................................43
Section 14.10 Dispute Resolution; Arbitration.......................................................43
Section 14.11 Third Party Beneficiaries; Parties Bound..............................................45
JOINT VENTURE AGREEMENT
This Agreement (this "Agreement") is entered into this 4th day of
February, 1999, by and between Telefonica Larga Distancia de Puerto Rico, Inc.,
a corporation organized under the laws of the Commonwealth of Puerto Rico,
herein represented by its General Manager, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, of legal age,
married, executive and resident of Rio Piedras, Puerto Rico (hereinafter,
"TLD"), and ClearComm, L.P., a limited partnership organized under the laws of
Delaware, herein represented by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, of legal age, married,
executive and resident of Rio Piedras, Puerto Rico (hereinafter, "CC"), in its
capacity as President of CC's general partner SuperTel Communications Corp.
("SuperTel").
WITNESSETH
WHEREAS, CC is the licensee of the personal communications service
("PCS") licenses for the 1902.5-1910.0 and 1982.5-1990.0 MHZ bands for the San
▇▇▇▇, Puerto Rico (B488) and Mayaguez - Aguadilla - Ponce, Puerto Rico (B489)
Basic Trading Areas (collectively, the "Licenses") and of certain radio
frequency plans, transmission plans, business plans, preliminary engineering
design work, and other studies, plans or reports relevant to the operation a PCS
network in Puerto Rico (the "Other Assets");
WHEREAS, TLD is a licensed telecommunications carrier engaged in
business in Puerto Rico;
WHEREAS, CC and TLD are interested in jointly developing a 1900 MHZ
band PCS network in Puerto Rico (the "Network");
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NOW THEREFORE, in consideration of the foregoing premises and for other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, and relying on each party's respective covenants, representations
and warranties, the parties agree as follows:
ARTICLE I. JOINT VENTURE
Section 1.01 Articles of Incorporation. CC has organized a corporation
under the Puerto Rico General Corporation Laws to develop and operate the
Network. The name of the corporation will be NewComm Wireless Services, Inc.
("NewComm"). The articles of incorporation of NewComm are attached as Exhibit A
hereof.
Section 1.02 The By-Laws. At the Closing Date, CC will cause the
adoption by NewComm of by-laws substantially in the form of Exhibit B hereof.
Section 1.03 CC's Capital Contribution. At the Closing Date, CC will
transfer all of its rights, title and interest to the Licenses and the Other
Assets to NewComm and NewComm will assume CC's debt with the Federal
Communications Commission ("FCC") (the "CC Debt") pursuant to an Assumption
Agreement in the form required by the FCC (the Licences and the Other Assets,
net of the CC Debt, the "CC Contribution"). In exchange for the CC Contribution,
NewComm will issue to CC 750 shares of its Class A Common Stock, par value one
cent ($0 .01) per share, constituting all of NewComm's issued and outstanding
shares of stock.
Section 1.04 TLD's Contribution. Concurrently with the CC Contribution,
TLD will transfer NINETEEN MILLION NINE HUNDRED SIXTY THOUSAND DOLLARS
($19,960,000.00) to NewComm in exchange for NewComm's Secured Convertible
Promissory
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Note, substantially in the form of Exhibit C hereof (the "Secured Convertible
Promissory Note"). In consideration of TLD's contribution, NewComm will also
execute and deliver a Security Agreement, substantially in the form Exhibit D
hereof and any other documents reasonably required to constitute, subject to the
CC Debt, a valid and enforceable preferential lien upon all of the tangible and
intangible assets and contractual rights of NewComm, including without
limitation the Licenses. In addition, CC will issue a Guarantee and a Pledge
Agreement, substantially in the form of Exhibits E and F hereof.
Section 1.05 Additional Contributions.
(a) CC and TLD shall cause NewComm to use its best efforts to secure
financing for the development and construction of the Network . The financing
shall be procured from sources available in the market, under such terms and
conditions as TLD may be able to obtain in its capacity as Manager under the
Management Agreement. In the event that, notwithstanding NewComm's best efforts,
the required financing is not obtained, CC and TLD shall have the option,
subject to any required FCC approval, to contribute the necessary funds to
NewComm, in the same proportion as their respective ownership of NewComm's
common stock (including the common stock into which the Secured Convertible
Promissory Note will be converted)(the "Additional Contribution") in exchange
for (i) NewComm's Class A or Class B Common Stock, par value one cent ($0.01)
per share, in an amount equal to the amount resulting from dividing the amount
of funds contributed by CC or TLD by the market value of each share of NewComm's
common stock agreed to by the parties (or if the parties are unable to agree on
such market value, determined as provided under Section 5.02 of this Agreement)
or (ii) a Promissory Note, substantially in the form of Exhibit G hereof, in
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a principal amount equal to the funds contributed (the "Promissory Note"), at
the option of CC and TLD, respectively; provided that, if any of the parties
does not exercise its option to contribute its share of the Additional
Contribution, the other party may elect to contribute all or a portion of such
party's share.
(b) Notwithstanding anything to the contrary provided in Sections
1.05(a), neither TLD nor CC shall make an Additional Contribution without the
consent of the other party (the "Diluted Party") to the extent that such
Additional Contribution results (or may result upon the conversion of the
Promissory Note) in reducing the percentage of NewComm's common stock held by
the Diluted Party to less than 40% of NewComm's issued and outstanding shares of
common stock taking into account the number of shares of NewComm common stock
issued in exchange for the Additional Contributions and/or the number of NewComm
shares into which the Promissory Note can be converted. The Diluted Party shall
not withhold its consent if it is demonstrated to the reasonable satisfaction of
the Diluted Party that the Additional Contribution is required to enable NewComm
to develop and operate the Network without materially adversely affecting
NewComm's financial condition, and that NewComm has been unable to secure
additional financing in place of the Additional Contribution.
(c) In the event that NewComm has the obligation to redeem the CC Debt
prior to its maturity, CC (and TLD, if at the time TLD is a shareholder of
NewComm) shall cause NewComm to borrow funds to redeem the CC Debt. In the event
that NewComm does not have the financial capacity to borrow such funds, or if
any such borrowing would materially adversely affect the financial condition of
NewComm, TLD and CC shall have the option, subject to any required FCC
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approval, to make an Additional Contribution to NewComm, in exchange for
NewComm's common stock or a Promissory Note, at the election of TLD and CC,
respectively, as provided in Section 1.05(a).
(d) In the event that the financing necessary to develop and construct
the Network is not secured and neither CC nor TLD exercises its option to make
an Additional Contribution to NewComm as provided in this Section 1.05, either
party may terminate this Agreement by giving written notice to the other party
and CC and TLD will dissolve NewComm. Upon such dissolution (i) CC shall receive
the Licenses and the Other Assets and shall assume the CC Debt; (ii) TLD shall
receive all remaining assets of NewComm or, at its option, shall receive the
cash and other liquid assets, other tangible assets selected by TLD (the
"Tangible Assets") and the proceeds from the assets sold by NewComm at TLD's
request, net of the unpaid purchase price of such assets, (the "Sold Assets");
(iii) TLD shall assume NewComm's liabilities consisting of the unpaid purchase
price of the Tangible Assets, (iv) CC shall reimburse TLD all principal and
interest payments made by NewComm on the CC Debt, (v) each of CC and TLD shall
be responsible for one half of all outstanding liabilities, other than
liabilities consisting of the unpaid purchase price of Tangible Assets and the
CC Debt, (vi) CC shall reimburse TLD an amount equal to one half of the amount
resulting after subtracting (A) the disbursements made to acquire the Tangible
Assets, (B) the proceeds from the sale of the Sold Assets, and (C) all principal
and interest payments made by NewComm on the CC Debt, from NewComm's
disbursements, and (vii) CC and TLD shall divide the retained earnings, if any,
of NewComm in proportion to their respective holdings of the common stock of
NewComm.
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Section 1.06 Management Contract and Technology Transfer Agreement. On
the Closing Date, CC shall cause NewComm to execute a Management Agreement with
TLD and a Technology Transfer Agreement with Telefonica Internacional, S.A.
substantially in the form of Exhibits H and I hereof (respectively, the
"Management Agreement" and the "Technology Transfer Agreement").
Section 1.07 The Closing. The closing of the transactions contemplated
hereunder shall take place at the offices of Axtmayer, Adsuar, ▇▇▇▇▇ & ▇▇▇▇▇,
P.S.C., Hato Rey Towers, Suite 1400, Hato Rey, Puerto Rico, as soon as possible,
but in no event later than thirty (30) business days, after satisfaction or
waiver of the conditions set forth in Article X, or at such other time or place,
as CC and TLD may agree (the date of the closing, the "Closing Date").
ARTICLE II. STOCK TRANSFERS
Section 2.01 Restrictions on Transfers and Issuance of Stock.
(a) Neither CC nor TLD (upon becoming a shareholder of NewComm) will
Transfer (directly, indirectly or in bankruptcy) its NewComm stock (including
any interest in such stock and any contractual rights that may entitle the
holder to acquire any such stock or an interest therein), whether by operation
of law or otherwise, prior to the Restriction Expiration Date (as defined in
Section 2.02 of this Agreement). As used in this Agreement, the term "Transfer"
shall include any sale, pledge, gift, assignment or other disposition of or
encumbrance of NewComm's stock.
(b) Except pursuant to the conversion of the Secured Convertible
Promissory Note, the Promissory Note or the Class B Common Stock, or as
otherwise permitted under this Agreement,
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CC and TLD (upon becoming a shareholder of NewComm) will cause NewComm not to
issue any of its shares of common stock (directly, indirectly or in bankruptcy),
including any interest in any such shares or any contractual rights that may
entitle the holder to acquire any such shares of stock or any interest therein,
whether by operation of law or otherwise.
(c) In the event that any of the restrictions imposed in Sections
2.01(a) or 2.01(b) upon CC, TLD (upon becoming a shareholder of NewComm) or
NewComm may not be enforced, for any reason whatsoever, the Optionee (as defined
in Section 2.02 of this Agreement) shall have with respect to any Transfer by CC
or TLD, and any issuance by NewComm, of NewComm's stock prohibited by Section
2.01(a) or Section 2.01(b) the right of first refusal set forth in Section 2.02
of this Agreement. In any such event, if at the time of such Transfer the
Optionee is precluded from acquiring the NewComm stock because of (i) the
restrictions upon the transfer of control of the Licenses from SuperTel to
NewComm or the foreign ownership of the Licenses, imposed under the
Communications Act of 1934, as amended, or orders or regulations promulgated
thereunder, or (ii) the designated entity rules set out at 47 CFR 24.709, or any
successor provisions, the Optionee will be entitled to assign such right of
first refusal, in whole or in part, to any person. If the Optionee fails to
exercise the Option (as defined in Section 2.02(b) of this Agreement) the
transferee shall be subject to the obligations of a Third Party under Section
2.02(e) of this Agreement.
Section 2.02 Right of First Refusal and Right to Join in Sale. After
the ownership restrictions on the Licenses under the FCC designated entity rules
set out at 47 CFR Section 24.709, or any successor provisions, expire (the
"Restrictions Expiration Date"), CC or TLD (upon becoming a shareholder of
NewComm) (the "Transferring Shareholder") may Transfer any of its NewComm
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stock to any third party if it receives a bona fide offer (the "Offer") from a
reputable, financially responsible person ("Third Party") which is acceptable to
it, and not less than thirty (30) days prior to the closing date of the proposed
sale, gives written notice thereof (the "Notice of Transfer") to the other party
(the "Optionee") subject to the provisions of this Section 2.02:
(a) The Notice of Sale shall state that a bona fide offer has been
received and shall contain all the terms and conditions of the Offer and a copy
of all supporting documents.
(b) The Optionee shall have the option (the "Option") for a period of
fifteen (15) days (the "Option Period ") after receipt of the Notice of Sale to
(i) if the Transfer is of all of the Transferring Shareholder's NewComm stock,
commit to purchase all, but not less than all, of the NewComm stock of the
Transferring Shareholder on the same terms and conditions as set forth in the
Offer, or (ii) if the Transfer is a sale or exchange of less than all of the
Transferring Shareholder's NewComm stock, elect to join in the sale or exchange;
in each case by delivering written notice of its election to the Transferring
Shareholder within the thirty (30) day period.
(c) If the Optionee elects to purchase the NewComm stock, the closing
of the purchase shall take place on the date designated as the closing date of
the Offer, but in no event later than fifteen (15) days after the expiration of
the Option Period, in the offices of NewComm, or at such other time and place as
may be mutually agreed upon in writing by the Transferring Shareholder and the
Optionee.
(d) If the Optionee elects to join in the sale or exchange, it will be
entitled to sell or exchange, pursuant to the terms of the Offer, a number of
shares of its NewComm common stock determined by multiplying the Applicable
Percentage times the number of shares of NewComm's
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common stock held by the Optionee. In such event, the Transferring Shareholder
shall use commercially reasonable efforts to obtain the agreement of the Third
Party to the participation of the Optionee in the sale or exchange, but if no
such agreement is obtained the Transferring Shareholder shall not transfer any
of such Transferring Shareholder's shares to the Third Party. For purposes of
this Section 2.02(d), the Applicable Percentage means a percentage determined by
dividing the number of shares of NewComm's common stock that the Transferring
Shareholder proposes to transfer by the number of NewComm's common stock held by
the Transferring Shareholder (including the number of shares of NewComm's common
stock into which any NewComm security held by the Transferring Shareholder may
be converted).
(e) In the event the Optionee (i) fails to exercise the Option within
the Option Period, or, (ii) after electing to purchase the Transferring
Shareholder's stock, fails to close the purchase hereunder (unless such failure
to close is attributable to the action or inaction of the Transferring
Shareholder), the Transferring Shareholder shall have the right to Transfer the
NewComm stock to the Third Party designated in the Notice of Transfer in
accordance with the terms of the Offer. However, as a condition to the
effectiveness of such transfer, the Third Party shall thereupon become a party
to this Agreement with the same rights and obligations of the Transferring
Shareholder and, shall confirm such fact by executing a counterpart of this
Agreement.
(f) The provisions of this Section 2.02 shall not be applicable to a
Transfer to a Permitted Transferee (as defined in Sections 2.04 of this
Agreement) or to a Qualified Public Offering (as defined in Section 2.04(a)(ii)
of this Agreement.
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Section 2.03 Prohibited Transfers. Notwithstanding anything to the
contrary provided in this Agreement, neither CC nor TLD (upon becoming a
shareholder of NewComm) will Transfer any of its shares of NewComm's stock, to
any person (other than CC or TLD) (i) that competes directly or indirectly with
NewComm in the "Business", or (ii) if such person's ownership of shares of
NewComm's stock would (A) breach the stock ownership limitations imposed upon
NewComm's stock by the United States federal communications laws or the rules
and regulations promulgated thereunder, or (B) accelerate the repayment of the
CC Debt. In addition, CC will not Transfer any of its shares of NewComm's stock
to any direct or indirect competitor of TLD in Puerto Rico and TLD will not
Transfer any of its shares of NewComm stock to any direct or indirect competitor
of CC. For purposes of this Agreement, "Business" shall mean the ownership or
operation of a personal communication service network in Puerto Rico directly or
through any Affiliate (as such term is defined in Section 2.04(a)(i) of this
Agreement).
Section 2.04 Certain Transfers Not Prohibited.
(a) The restrictions on Transfers of NewComm's stock contained in
Section 2.01(a) shall not be construed to prohibit Transfers of NewComm's stock
by TLD or CC to any of its
Affiliates (as such term is defined in Rule 501(b) under the Securities Act of
1933, as amended (the "Securities Act") ("Permitted Transfers");
(b) Any and all shares of NewComm's stock in the hands of any
transferee pursuant to Section 2.04(a)(each, a "Permitted Transferee") shall
remain subject to this Agreement.
Section 2.05 Termination of Restrictions.
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(a) Upon the sale of NewComm's stock as part of a firm commitment
underwritten public offering or widely distributed private placement
underwritten by a nationally recognized full-service investment bank effected
after the Restriction Expiration Date, pursuant to which the aggregate gross
proceeds received by NewComm and/or any of its shareholders are at least Forty
Million Dollars ($40,000,000.00) (a "Qualified Public Offering"), all
restrictions imposed upon the transfer and issuance of NewComm's stock,
corporate governance, and corporate action by Articles II, III and IV of this
Agreement shall expire. In addition, upon TLD's acquisition of a controlling
stock interest in NewComm, the restrictions on Transfers or issuance of
NewComm's stock imposed by Sections 2.01(a), Section 2.01(b) and Section 2.03
and the provisions of Article III and IV shall expire.
ARTICLE III. CORPORATE GOVERNANCE
Section 3.01 Board of Directors.
(a) So long as TLD holds the Secured Convertible Promissory Note or at
least twenty percent (20%) of NewComm's outstanding voting common stock one (1)
member of NewComm's Board of Directors shall be designated by TLD and four (4)
members of the Board of Directors shall be designated by CC.
(b) After the Restriction Expiration Date, in the event that TLD
becomes the holder of at least forty-nine point eight percent (49.8%) of
NewComm's voting common stock, the number of members of NewComm's Board of
Directors shall be increased to six (6). Subject to any required
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FCC approval, fifty percent (50%) of the members shall be designated by TLD and
fifty percent (50%) shall be designated by CC.
(c) Each of TLD (upon becoming a shareholder of NewComm) and CC agrees
to vote its shares in favor of the persons nominated by the other as set forth
in Sections 3.01(a) and (b). Each designated director shall serve at the
pleasure of the designating person and shall be removed upon the request of the
designating person. Any vacancy in the Board of Directors shall be filled by a
director nominated by the person that designated the director being replaced.
Section 3.02 Meetings of the Board of Directors. NewComm's Board of
Directors shall meet at least quarterly until such time as the Board of
Directors determines that meetings of such frequency are no longer required. In
addition, any director shall be entitled to call a special meeting of the Board
if a meeting has not been held within the prior ninety (90) days. NewComm shall
reimburse members of the Board of Directors for the customary and reasonable
expenses of attending the meetings of the Board of Directors.
Section 3.03 Indemnification. NewComm shall not amend the
indemnification provisions of its Articles of Incorporation (as amended, the
"Articles") or By-Laws to eliminate or reduce the indemnification provided for
all directors and such provisions as so written shall be deemed to be a contract
with each director regarding his or her indemnification by NewComm. NewComm
shall also enter into separate indemnification agreements with each director.
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ARTICLE IV. CORPORATE ACTION
Section 4.01 Restricted Actions. Each of CC and TLD agrees that,
notwithstanding any provision of this Agreement, the Articles or By-Laws to the
contrary, it will not vote its shares of NewComm stock in favor of, and will
ensure the Director(s) designated by it will not to vote in favor of, any of the
following actions without the consent of the other or the Director(s) designated
by the other, as applicable:
(a) the liquidation, dissolution or winding up of NewComm's business
operations;
(b) the sale, exchange or other disposition of all or substantially
all of NewComm's assets, business or of any of the Licenses;
(c) the merger, spin off, strategic alliance or other business
combination or reorganization of NewComm with any corporation partnership,
limited liability company or other entity;
(d) any material change in the nature of the Business conducted by
NewComm;
(e) the amendment of NewComm's Articles of Incorporation or By-Laws;
(f) the issuance of any shares of NewComm's stock to any person or
entity, other than as provided for in this Agreement, including persons who are
then existing shareholders, or the addition of any new shareholder;
(g) the redemption of part or all of the stock outstanding or the
prepayment of any debt securities; including without limitation the Secured
Convertible Promissory Note;
(h) incurring any indebtedness in excess of One Million Dollars
($1,000,000.00) in a single transaction;
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(i) the granting of any mortgage or deed of trust or the placing of any
other lien or encumbrance on the assets of the Corporation or any portion
thereof that exceed One Million Dollars ($1,000,000.00) in value, to secure any
loan except as otherwise provided herein;
(j) the making of a single capital expenditure in excess of Three
Million Dollars ($3,000,000.00);
(k) the approval of any dividend distribution to shareholders in excess
of the net income for the year of the distribution, net of any prior year
losses;
(l) a change in outside attorneys or auditors; and
(m) any transaction between NewComm and a shareholder or an Affiliate
(as defined in Section 2.04(a)(i) of this Agreement) of such shareholder, other
than the Management Agreement between NewComm and TLD and the Technology
Transfer Agreement between NewComm and Telefonica Internacional, S.A.
Section 4.02 Deadlock. Upon a deadlock between CC and TLD on any matter
described in Section 4.01, hereof, the Shareholders agree that the action
proposed shall not be undertaken or approved and the status quo shall be
preserved.
ARTICLE V. BUY-OUT
Section 5.01 TLD Buy-Out.
(a) For the period between one year in advance of the Restriction
Expiration Date and the Restriction Expiration Date, CC shall have the option to
purchase the Secured Convertible Promissory Note or the NewComm common stock
into which the Secured Convertible Promissory
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Note is convertible, as applicable, for a purchase price equal to the higher of
(i) one hundred fifty percent (150%) of the sum of the principal and accrued
interest of the Secured Convertible Promissory Note and (ii) one hundred twenty
five-percent (125%) of the market value, at the time of purchase, of the NewComm
stock into which the Secured Convertible Promissory Note and the Interest Note
(as defined in the Secured Convertible Promissory Note) are convertible (the "CC
Option"). The CC Option shall be exercised by delivery of written notice to TLD
of exercise (an "Option Notice") prior to the Restriction Expiration Date. If
the parties are unable to agree on such market value within thirty (30) days of
the Option Notice, CC shall notify to TLD the names of three (3) reputable
internationally recognized investment banking firms ("Bank"). TLD shall within
ten (10) days of receipt of the names, select one Bank who shall determine the
fair market value of such NewComm stock. In the event that TLD fails to select
the Bank within the ten (10) day period, CC shall select the Bank that will
determine the fair market value of such NewComm stock. The determination of the
Bank shall be conclusive and the parties agree not to challenge such
determination value in court proceedings or otherwise. All fees of the Bank
shall be paid by NewComm.
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(b) The closing of a purchase pursuant to this Section 5.01, shall be
held at a mutually acceptable place and on a mutually acceptable date not sooner
than ten (10) days after receipt of the valuation from the Bank. At such closing
TLD's debt or equity interests in NewComm, as applicable, shall be transferred
free and clear of all pledges, liens, security interest or encumbrances of any
nature whatsoever. The parties shall execute all other documents that may be
reasonably necessary or advisable to effectuate the transactions contemplated
hereby, and CC shall pay the purchase price of the TLD debt or equity interest,
as applicable, in cash, by a cashier's check or by wire transfer.
(c) If CC exercises the CC Option,
(i) the option provided in Section 5.02 of this Agreement
shall be without further effect;
(ii) any and all guarantees issued by TLD or any of its
Affiliates on any outstanding debt of NewComm shall cease to be effective; and
(iii) each of TLD and Telefonica Internacional, S.A. will have
the option to terminate the Management Agreement and the Technology Transfer
Agreement, respectively, within thirty (30) days of closing of the purchase
pursuant to this Section 5.01.
Section 5.02 CC Buy-Out Event.
(a) At any time after the Restriction Expiration Date, TLD shall have
the option, exercisable at its sole discretion and subject only to any
applicable requirements of the Communications Act of 1934, as amended, or orders
or regulations promulgated thereunder, and/or the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvement Act of 1976 and its implementing regulations,
- 17 -
to elect to purchase any of the shares of Class A Common Stock held by CC in the
amount required for TLD to acquire 50.1% of the issued and outstanding common
stock of NewComm (the "Call"). Any such purchase shall be at a price per share
equal to the market value at the time of purchase of a share of NewComm's Class
A Common Stock. The Call shall be exercised by delivery of an Option Notice to
CC. If the parties are unable to agree on such market value within thirty (30)
days of the Option Notice, TLD shall notify to CC the names of three (3)
reputable internationally recognized investment banking firms ("Bank"). CC shall
within ten (10) days of receipt of the names, select one Bank who shall
determine the fair market value of a share of NewComm's Class A Common Stock. In
the event that CC fails to select a Bank within the ten (10) day period, TLD
shall select the Bank that will determine the fair market value of a share of
NewComm's Class A Common Stock. The determination of the Bank shall be
conclusive and the parties agree not to challenge such determination value in
court proceedings or otherwise. All fees of the Bank shall be paid by NewComm.
(b) The closing of a purchase pursuant to this Section 5.02, shall be
held at a mutually acceptable place and on a mutually acceptable date not sooner
than ten (10) days after receipt of the valuation from the Bank. At such closing
the shares of NewComm's Class A Common Stock shall be transferred free and clear
of all pledges, liens, security interests or encumbrances of any nature
whatsoever. The parties shall execute all other documents that may be reasonably
necessary or advisable to effectuate the transactions contemplated hereby, and
TLD shall pay the purchase price of the Class A Common Stock in cash, by a
cashier's check or by wire transfer.
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ARTICLE VI. REGISTRATION RIGHTS
Section 6.01 Required Registration.
(a) At any time on or after the Restriction Expiration Date, if CC
proposes to dispose of at least the Minimum Number (as defined below) of its
NewComm shares of stock (the "CC Shares") in a registered offering, it may
request NewComm in writing to effect the registration of such CC Shares, stating
the number of CC Shares to be disposed of and the intended method of disposition
of such CC Shares. NewComm will use all commercially reasonable efforts to
effect promptly the registration under the United States Securities Act of 1933,
as amended (the "Act") of all CC Shares specified in CC's request. The managing
underwriters that will place the CC Shares shall be those mutually acceptable to
CC and TLD.
(b) If TLD determines, in response to a request for registration of CC
Shares that the filing of a registration statement under the Act would not be in
the best interests of NewComm, NewComm may delay acting upon such request for a
period (not to exceed one hundred eighty (180) days from its receipt of such
request) that TLD deems reasonable so as to be in the best interests of NewComm.
(c) The "Minimum Number" shall mean all of the issued and outstanding
shares of NewComm common stock held by CC; provided that such shares have an
aggregate estimated disposition price (before deduction of underwriting
discounts and expenses of sales) of at least Forty Million Dollars
($40,000,000.00) million (but in no event in an initial public offering less
than an amount to create a viable public trading market).
- 19 -
(d) NewComm shall not be required to effect more than one registration
pursuant to this Section 6.01. For purposes of the foregoing sentence, in the
event that NewComm shall have filed a registration statement upon the request of
CC, and thereafter such request shall have been withdrawn by CC other than after
a delay caused by NewComm pursuant to Section 6.01(b), such withdrawn
registration shall be considered to be a registration.
(e) NewComm shall not be required to cause a registration statement
requested hereunder to become effective prior to one hundred eighty (180) days
following the effective date of the most recent registration by NewComm of
equity or equity-linked securities under the Act (other than a registration
effected solely to implement an employee benefit plan or a transaction to which
Rule 145 of the Securities and Exchange Commission (the "SEC") is applicable);
provided, however, that NewComm shall use all commercially reasonable efforts to
achieve such effectiveness promptly following such one hundred eighty (180) day
period if CC's request has been made prior to the expiration of such one hundred
eighty (180) day period.
(f) Notwithstanding anything to the contrary herein provided, upon the
exercise by CC of its registration rights pursuant to this Section 6.01, TLD
shall have the option of transferring TLD shares of common stock to CC in
exchange for the CC Shares and effect the registration of such TLD shares, as
provided hereunder, in lieu of the registration of the CC Shares; provided that
a nationally recognized investment banking firm selected by CC from a list of
three (3) such investment banking firms prepared by TLD determines that it would
be in the best interest of CC to offer the shares of TLD instead of the CC
Shares. In such event, the TLD shares of common stock to be issued in exchange
for the CC Shares shall have a market value equal to the market
- 20 -
value of the CC Shares, as determined by the investment banking firm selected by
CC. The fees, costs and expenses of the investment banking firm shall be paid by
TLD.
(g) CC shall bear and pay all expenses incurred in connection with the
registration, filing or qualification of CC Shares pursuant to this Section
6.01, including (without limitation) all registration, filing and qualification
fees, printing and accounting fees relating or apportionable thereto, the fees
and disbursements of counsel, underwriting discounts and commissions, and TLD,
in its capacity as Manager under the Management Contract will participate at the
expense of NewComm in the presentations made by NewComm to promote the sale of
the CC Shares.
Section 6.02 Piggy-Back Registration.
(a) If at any time after the Restriction Expiration Date NewComm
determines to register any of its shares of common stock under the Act in
connection with the public offering of such securities by NewComm solely for
cash (other than a registration relating solely to the sale of securities to
participants in a NewComm employee benefit plan or a transaction to which Rule
145 of the SEC applies, or a registration on any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of NewComm stock other than information
on selling shareholders), NewComm shall, at such time, promptly give CC written
notice of its intention to effect such registration. Upon the written request of
CC given within twenty (20) days after mailing of such notice by NewComm,
NewComm shall use commercially reasonable efforts to cause to be registered
under the Act all of the shares that CC has requested to be registered (the
"Piggy-Back Shares") (a "Piggy-Back
- 21 -
Registration"); provided that NewComm shall have the right to postpone or
withdraw any such registration effected pursuant to this subsection without
obligation to CC.
(b) It shall be a condition precedent to NewComm's obligation to take
any action pursuant to this Section with respect to the Piggy-Back Shares that
CC shall furnish to NewComm such information regarding itself, the NewComm stock
held by it, and the intended method of disposition of such securities as shall
be required to effect the registration of such shares.
(c) NewComm shall bear and pay all expenses incurred in connection with
the registration, filing or qualification of the Piggy-Back Shares with respect
to CC's Piggy-Back Registrations, including (without limitation) all
registration, filing and qualification fees, printing and accounting fees
relating or apportionable thereto, and the fees and disbursements of one counsel
for CC (provided it shall be counsel to NewComm), but excluding underwriting
discounts and commissions relating to Piggy-Back Shares which shall be paid by
CC.
(d) In connection with any offering involving an underwriting of
NewComm's stock, NewComm shall not be required to include any Piggy-Back Shares
in such underwriting unless CC accepts the terms of the underwriting as agreed
upon between NewComm and the underwriters, and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by NewComm. If the total amount of Piggy-Back Shares to be
included in such offering exceeds the amount of shares sold other than by
NewComm that the underwriters determine in their sole discretion is compatible
with the success of the offering, then NewComm shall be required to include in
the offering only that number of PiggyBack Shares which the underwriters
determine in their sole discretion will not jeopardize the success of the
offering.
(e) CC shall not have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Agreement.
(f) In the event any Piggy-Back Shares are included in a registration
statement under this Agreement:
(i) To the extent permitted by law, NewComm will indemnify and
hold harmless CC and its officers and directors, any underwriter (as defined in
the Act) for CC and each person, if any, who controls CC or the underwriter
within the meaning of the Act or the Securities Exchange Act of 1934 (the "1934
Act") (each, for purposes of this Section 6.02, an "Indemnitee"), against any
losses, claims, damages or liabilities to which they may become subject under
the Act, or the 1934 Act or other federal or state law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any of the following statements, omissions or violations
(collectively, a "Violation"): (A) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (B) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary to make the
statements therein not misleading, or (C) any violation or alleged violation by
NewComm of the Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the Act, or the 1934 Act or any state securities
law; and
- 22 -
NewComm will pay to each such Indemnitee, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that this indemnity agreement shall not apply to amounts paid in settlement of
any such loss, claim, damage, liability or action if such settlement is effected
without the consent of NewComm (which consent shall not be unreasonably
withheld), nor shall NewComm be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any such Indemnitee.
(ii) To the extent permitted by law, CC will indemnify and
hold harmless NewComm, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls NewComm
within the meaning of the Act, any underwriter, any other NewComm shareholder
selling securities in such registration statement and any controlling person of
any such underwriter or other NewComm shareholder, against any losses, claims,
damages, or liabilities to which any of the foregoing persons may become
subject, under the Act, or the 1934 Act or other federal or state law, insofar
as such losses, claims, damages, or liabilities (or actions in respect thereto)
arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in
conformity with written information furnished by CC expressly for use in
connection with such registration; and each CC will pay, as incurred, any legal
or other expenses reasonably incurred by any person intended to be indemnified
hereunder, in connection with investigating or defending any such loss,
- 23 -
claim, damage, liability, or action; provided, however, that this indemnity
agreement shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of CC, which consent shall not be unreasonably withheld.
(iii) Promptly after receipt by an indemnified party of notice
of the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided, however,
that an indemnified party (together with all other indemnified parties which may
be represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the indemnifying
party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if materially prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
to the extent of such prejudice, but the omission so to deliver written notice
to the indemnifying party will not relieve it of any liability that it may
otherwise have to any indemnified party.
- 24 -
(iv) The obligations of NewComm and the CC under this Section
6.02 shall survive the completion of any offering of NewComm stock under this
Agreement and termination of this Agreement.
Section 6.03 "Market Stand-Off" Agreement. During the period of
duration specified by NewComm and an underwriter of NewComm Stock or other
equity and equity-linked securities of NewComm (which period shall not exceed
one hundred eighty (180) days), following the effective date of a registration
statement of NewComm filed under the Act, neither CC nor TLD shall, to the
extent requested by NewComm and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
those who agree to be similarly bound) any equity and equity-linked securities
of NewComm held by it at any time during such period (except, (i) transfers
between or among CC and TLD; (ii) NewComm stock included in such registration;
and (iii) transfers to Affiliates of the transferor).
Section 6.04 Listing. In connection with a registration pursuant to
Article VI of this Agreement, NewComm will use all commercially reasonable
efforts to qualify the NewComm or TLD stock sold pursuant to such registration
to trade on a United States national securities exchange or on the National
Association of Securities Dealers Automated Quotation ("NASDAQ") system and to
maintain the inclusion of such NewComm Stock on a United States national
securities exchange or the NASDAQ system for a period of four years after the
effective date of a registration statement filed with the SEC pursuant to this
Agreement. The NASDAQ system shall mean the NASDAQ National Market.
- 25 -
ARTICLE VII. ADDITIONAL COVENANTS
Section 7.01 Best Efforts. Subject to the terms and conditions of this
Agreement, each party will use commercially reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. TLD and CC each agree to execute and deliver
such other documents, certificates, agreements and other writings and to take
such other actions as may be necessary or desirable in order to consummate or
implement expeditiously the transactions contemplated by this Agreement.
Section 7.02 FCC Filing.
(a) Upon the execution and delivery of this Agreement (or as soon as
practicable thereafter), an application will be filed by TLD and NewComm (and
CC, if applicable), with the FCC requesting the pro forma transfer of the
Licenses from CC to NewComm.
(b) At the Closing Date (or as soon as practicable thereafter), an
application will be filed by TLD and NewComm (and CC, if applicable), with the
FCC requesting authorization for TLD (as a foreign corporation) to hold more
than a 25% equity interest in NewComm and for the transfer of control of the
Licenses from SuperTel to NewComm or to CC.
Section 7.03 Filing of Documentation and Information. In the event that
TLD elects to exercise any of its rights under this Agreement that result in its
acquisition of a controlling interest in NewComm, each of TLD and CC shall file
and shall cause NewComm to file promptly all such documentation and information
required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvement
- 26 -
Act of 1976, the Exon-▇▇▇▇▇▇ Amendment to the Defense Production Act of 1950, as
amended, and any other applicable legislation to enable TLD to acquire such
controlling interest.
Section 7.04 Nondisclosure of Confidential Information.
(a) Each of TLD and CC hereby agrees that it will not use Confidential
Information (as defined below) for its own purposes or for the purposes of any
person other than NewComm and will not disclose Confidential Information to any
person (other than its directors, officers or employees), except (i) to the
extent required by law, (ii) with the prior written permission of the other
party, or (iii) in the case of TLD, to the extent required to comply with its
obligations under the Management Contract. Each of TLD and CC also agrees to
take all reasonable precautions to prevent inadvertent disclosure or use of such
Confidential Information by its directors, officers or employees and shall
forever maintain confidential and in complete secret such Confidential
Information except as to any item or portion thereof that is or becomes publicly
known through no fault of itself. Nothing herein shall preclude each of TLD and
CC from using or disclosing information rightfully disclosed to it by a third
party not employed by NewComm or any individual who may be working with or
assisting a competitor, to the extent such third party is entitled to disclose
such information.
(b) For purposes of this Section 7.04 the term "information" includes
without limitation, information relating directly or indirectly to: research and
development; patent, trademark, and copyright development and licensing thereof;
trade secrets and inventions; formulas, designs, drawings, specifications and
engineering; processes and equipment; financing, distribution, marketing, sales,
customer services, and operation techniques, strategies and
- 27 -
maintenance costs; price lists, pricing policies and quoting procedures;
financial and accounting information; names of customers and their
representatives; potential business of promotional opportunities; computer and
technology fundamentals, programs, database, and software; and the type,
quantity, quality and specifications of services given to clients.
(c) The term "Confidential Information" means facts, details,
intelligence, content, materials, ideas, or information, whether or not
contained in books, records, statements, or plans, which (i) are proprietary to
NewComm, (ii) are provided to NewComm by TLD pursuant to the Management
Agreement or by Telefonica Internacional, S.A., pursuant to the Technology
Transfer Agreement, (iii) are designated or deemed or treated as confidential by
NewComm, (iv) are not generally known by outside personnel, (v) are known by TLD
or CC through its ownership of, or services rendered to NewComm, or (vi) are
provided or available to NewComm and required to keep in confidence pursuant to
any agreement.
Section 7.05 Filing of Agreement. A copy of this Agreement, as amended
from time to time, shall be filed with and retained by the Secretary of NewComm.
Section 7.06 Corporation Designee. All rights granted to NewComm by the
terms of this Agreement may be exercised by such person, persons, entity or
entities as the Board of Directors of the Corporation, in its sole discretion,
shall designate acting by vote or unanimous written consent.
Section 7.07 Attorneys and Auditors. CC shall cause NewComm to retain
Axtmayer Adsuar ▇▇▇▇▇ & ▇▇▇▇▇, P.S.C., as its counsel for general legal matters
and Steptoe & ▇▇▇▇▇▇▇
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L.L.P. as its counsel for legal matters pertaining to FCC rules and regulations.
CC shall also cause NewComm to retain the services of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ L.L.P. as
outside auditors.
Section 7.08 Marketing. CC and TLD acknowledge and agree that, although
the name of the corporation organized pursuant to this Agreement will be NewComm
Wireless Services, Inc., the company will use the trade names of "TLD",
"Telefonica Larga Distancia", or contractions, portions or derivations thereof
in the marketing of NewComm, its services and products. In the event that CC
exercises the CC Option or TLD ceases to hold any NewComm stock or the Secured
Convertible Promissory Note, NewComm will cease to use such trade names and
contractions, portions or derivations thereof in the marketing of NewComm, its
services and products.
Section 7.09 Oregon Litigation. CC and TLD acknowledge and agree that
in the event that any of the plaintiffs (or its successors or assigns) in a
certain consolidated proceeding entitled Black et al. vs. Arizala et al.
originally filed in the Circuit Court of the State of Oregon for Multnomah
County (Case No. 9611-09017) (the "Oregon Litigation") asserts a claim against
NewComm related to the allegations made in such proceeding, TLD shall have the
option to obtain indemnification from CC for any liabilities, losses,
obligations, claims, costs and expenses (including without limitation court
costs and reasonable attorneys fees) suffered or incurred by NewComm as a result
of such claim.
Section 7.10 Accrued Interest on the CC Debt. CC shall pay all interest
accrued on the CC Debt up to the Closing Date.
- 29 -
Section 7.11 Reservation of Common Stock. NewComm shall, at all times,
have reserved the appropriate number of shares of Common Stock for the
conversion of the Secured Convertible Promissory Note and any other outstanding
convertible debt securities.
Section 7.12 Endorsement of Stock Certificates. All certificates
representing NewComm's shares of stock owned by CC or TLD shall have
conspicuously endorsed thereon a legend substantially as follows:
"TRANSFER RESTRICTED
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS UPON TRANSFER PURSUANT TO A JOINT VENTURE
AGREEMENT BY AND AMONG CLEARCOMM L.P. AND TELEFONICA LARGA
DISTANCIA DE PUERTO RICO, INC. A COPY OF THE SHAREHOLDERS
AGREEMENT MAY BE OBTAINED FROM THE CORPORATION WITHOUT CHARGE
UPON THE WRITTEN REQUEST OF THE HOLDER HEREOF.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT COVERING SUCH SHARES UNDER
THAT ACT AND ANY APPLICABLE SECURITIES LAWS, UNLESS, IN THE
OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION, AN
EXEMPTION FROM REGISTRATION THEREUNDER IS AVAILABLE."
- 30 -
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES OF CC
CC hereby represents and warrants to TLD that:
Section 8.01 Existence and Power. CC is a validly existing limited
partnership duly organized under the laws of Delaware and has all requisite
power, authority and legal right to conduct its affairs as currently conducted.
CC has no subsidiaries.
Section 8.02 Corporate Authorization.
(a) The execution, delivery and performance by CC of this Agreement and
the documents to be delivered in connection herewith are within CC's powers and
have been duly authorized by its general partner, SuperTel Communications Corp.
and, upon execution thereof, will be duly executed and delivered by CC. The
authorization of CC's limited partners is not required for CC to be empowered to
execute, deliver and perform under this Agreement.
(b) This Agreement constitutes the valid and binding agreement of CC,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors generally, by
general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by an implied covenant of
good faith and fair dealing.
Section 8.03 Governmental Authorization. The execution, delivery and
performance by CC of this Agreement and the documents to be delivered in
connection herewith require no approval or other action by or in respect of, or
filing with, any Puerto Rico or United States governmental authority other than
compliance with any applicable requirements of the Communications Act of 1934,
as amended (the "Communications Act") and any rules, regulations,
- 31 -
practices and policies promulgated by the FCC ("FCC Rules"), with respect to the
transfer of the Licenses.
Section 8.04 Non-Contravention. The execution, delivery and performance
by CC of this Agreement and the documents to be delivered in connection herewith
do not and will not (i) contravene or conflict with the partnership agreement
and any other governing document of CC, (ii) assuming compliance with matters
set forth in Section 8.03, contravene or conflict with or constitute a violation
of any provision of any Puerto Rico or United States law, regulation, judgment,
injunction, order or decree binding upon or applicable to CC; or (iii) result in
the creation or imposition of any lien on any asset of CC.
Section 8.05 Ownership. CC is currently the record and beneficial owner
of each of the Licenses and the Other Assets and will transfer and deliver the
Licenses and the Other Assets to NewComm free and clear of any liens or
encumbrances, except for any lien in favor of the FCC as collateral for the CC
Debt. CC acquired the Licenses from the FCC pursuant to the terms of a license
dated January 22, 1997 and modified on June 8, 1998 (the "FCC License"), a true
and exact copy of which was delivered by CC to TLD. The FCC License is in full
force and effect, and has not been amended or modified; CC is not in breach of,
or default under such license; and no event or circumstances have occurred that
may result in a default under the FCC License.
Section 8.06 Finder's Fees. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of CC who might be entitled to any fee or commission from TLD or
NewComm upon consummation of the transactions contemplated herein.
- 32 -
Section 8.07 CC Debt. The CC Debt amounts to FIFTY ONE MILLION THREE
HUNDRED THIRTY NINE THOUSAND FIVE HUNDRED AND FIFTY FIVE DOLLARS
($51,339,555.00).
Section 8.08 Litigation. Except as set forth in the Disclosure Schedule
attached hereto and made a part hereof, there is no pending, or to CC's
knowledge, threatened claim or litigation that could affect CC's title and
interest in the Licenses and no events or circumstances have occurred that may
result in any such claim or litigation.
ARTICLE IX. REPRESENTATIONS AND WARRANTIES OF TLD
TLD hereby represents and warrants to CC that:
Section 9.01 Organization and Existence. TLD is a corporation duly
incorporated, validly existing and in good standing under the laws of Puerto
Rico.
Section 9.02 Corporate Authorization.
(a) The execution, delivery and performance by TLD of this Agreement
and the consummation by each of them of the transactions contemplated herein are
within its corporate powers and have been duly authorized by all necessary
corporate or other action on the part of TLD.
(b) This Agreement constitutes the valid and binding agreement of TLD,
enforceable against it in accordance with its terms except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors
- 33 -
generally, by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
Section 9.03 Governmental Authorization. The execution, delivery and
performance by TLD of this Agreement require no action by or in respect of, or
filing with, or consent of any governmental authority, other than compliance
with any applicable requirements of the Communications Act or FCC Rules.
Section 9.04 Non-Contravention. The execution, delivery and performance
by TLD of this Agreement do not and will not (i) contravene or conflict with the
certificate of incorporation or by-laws, or (ii) assuming compliance with the
matters referred to in Section 9.03, contravene or conflict with any provision
of any law, regulation, judgment, injunction, order or decree binding upon TLD.
Section 9.05 Finder's Fees. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of TLD who might be entitled to any fee or commission from CC or
NewComm. upon consummation of the transactions contemplated herein.
ARTICLE X. CONDITIONS TO CLOSING
Section 10.01 Conditions to the Obligations of CC. The obligations of
CC to execute the documents and take the actions required under this Agreement
at the Closing Date are subject to the satisfaction of the following conditions:
- 34 -
(a) (i) the representations and warranties of TLD contained in this
Agreement and in any certificate or other writing delivered by TLD pursuant
hereto shall be true in all material respects at and as of the Closing Date, as
if made at and as of such time; and (ii) CC shall have received a certificate
signed by the General Manager of TLD to the foregoing effect;
(b) CC shall have received an opinion of Axtmayer, Adsuar, ▇▇▇▇▇ &
▇▇▇▇▇, P.S.C. substantially in the form of Exhibit J hereof;
(c) CC shall have received a Secretary's Certificate substantially in
the form of Exhibit K hereof;
(d) TLD shall have executed the documents and taken the actions
required under Article I of this Agreement; and
(e) the FCC shall have issued an unconditional firm and final
authorization to the transfer of the Licenses to NewComm.
Section 10.02 Conditions to Obligation of TLD. The obligations of TLD
to execute the documents and take the actions required under this Agreement at
the Closing Date are subject to the satisfaction of the following conditions:
(a) (i) the representations and warranties of CC contained in this
Agreement and in any certificate or other writing delivered by CC pursuant
hereto shall be true in all material respects at and as of the Closing Date, as
if made at and as of such time; and (ii) TLD shall have received a certificate
signed by the President of SuperTel, CC's general partner, to the foregoing
effect;
(b) TLD shall have received an opinion from ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & Calabria
substantially in the form of Exhibit L hereof;
- 35 -
(c) TLD shall have received an unqualified opinion from ▇▇▇▇▇ & ▇▇▇▇
LLP reasonably satisfactory to TLD to the effect that CC may transfer the
Licenses and the Other Assets to NewComm concurrently with NewComm's issuance of
the Secured Convertible Promissory Note to TLD without the consent of CC's
limited partners;
(d) TLD shall have received a Secretary's Certificate substantially in
the form of Exhibit M hereof;
(e) CC shall have executed the documents and taken the actions required
under Article I of this Agreement;
(f) the FCC shall have issued an unconditional firm and final
authorization to the transfer of the Licenses to NewComm; and
(g) except for the Oregon Litigation, the pending litigation described
in the Disclosure Schedule shall have been settled, such settlement shall be
firm, final and non-appealable to the reasonable satisfaction of TLD, and there
shall be no pending or threatened litigation against CC.
ARTICLE XI. INDEMNIFICATION
Section 11.01 TLD's and NewComm's Right to Indemnification. CC will
indemnify TLD and NewComm and hold TLD and NewComm, and their respective present
and future directors, officers and employees, harmless from any and all
liabilities, losses, obligations, claims, costs and expenses (including without
limitation court costs and reasonable attorneys fees) of any type or nature that
TLD or NewComm may suffer or incur as a result of or relating to (i) the breach
or inaccuracy, or any alleged breach or inaccuracy, of any of the
representations,
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warranties, covenants or agreements made by CC in this Agreement or in any of
the exhibits hereof, or (ii) any acts or omissions of CC occurring prior to the
Closing Date related to the Licenses or the CC Debt.
Section 11.02 CC's and NewComm's Right to Indemnification. TLD shall
indemnify and hold CC and NewComm, and their respective present and future
directors, officers and employees harmless from any and all liabilities, losses,
obligations, claims, costs and expenses (including without limitation court
costs and reasonable attorneys fees) that CC or NewComm may suffer or incur as a
result or relating to the breach or inaccuracy, or any alleged breach or
inaccuracy, of any representations, warranties, covenants or agreements made by
TLD in this Agreement or in any of exhibits hereof.
Section 11.03 Notice. The party seeking indemnification hereunder (for
purposes of this Article XI, "Indemnitee") shall promptly, and within thirty
(30) days after notice to it (notice to Indemnitee being the filing of any legal
action, receipt of any claim in writing, or similar form of actual notice) of
any claim as to which it asserts a right to indemnification, notify the party
from whom indemnification is sought (for purposes of this Article XI,
"Indemnitor") of such claim. If notice is given, Indemnitor shall promptly
indemnify Indemnitee upon receipt of any such notice. The failure of Indemnitee
to give such notification shall not relieve the Indemnitor from any liability
that it may have pursuant to this Agreement unless the failure to give such
notice within such time shall have been prejudicial and in such case only to the
extent thereof, and in no event shall the failure to give such notification
relieve the Indemnitor from any liability it may have other than pursuant to
this Agreement. In the event that the Indemnitor fails to fully
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indemnify the Indemnitee within ten (10) days after the Indemnitee's right to
indemnity hereunder is notified to the Indemnitor, without any legally valid
reason to deny its obligations to indemnify, the Indemnitor shall be liable to
pay the amount claimed plus interest at five percent (5%) over The Chase
Manhattan Bank, N.A. base rate, fluctuating concurrently with any changes in
such base rate, for the period commencing after the expiration of the ten (10)
day period and ending on the day of payment in full of the indemnity amount.
Section 11.04 Third-Party Claims. If any claim for indemnification and
hold harmless by Indemnitee arises out of a claim by a person other than
Indemnitee, Indemnitor may, by written notice to Indemnitee, undertake to
conduct any proceedings or negotiations in connection therewith or necessary to
defend Indemnitee and take all other steps or proceedings to settle or defeat
any such claims or to employ counsel to contest any such claims; provided that
Indemnitor shall reasonably consider the advice of Indemnitee as to the defense
of such claims, and Indemnitee shall have the right to participate, at its own
expense, in such defense, but control of such litigation and settlement shall
remain exclusively with Indemnitor. Indemnitee shall provide all reasonable
cooperation in connection with any such defense by Indemnitor. Counsel, filing
fees, court fees and other costs or expenses of all proceedings, contests or
lawsuits with respect to any such claim or asserted liability shall be borne by
Indemnitor. If any such claims is made hereunder and Indemnitor does not elect
to undertake the defense thereof by written notice to Indemnitee, Indemnitee
shall be entitled to control such litigation and settlement and shall be
entitled to indemnity with respect thereto pursuant to the terms of this Article
XI. To the extent that Indemnitor undertakes the defense of such claim by
written notice to Indemnitee and diligently
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pursues such defense at its expense, Indemnitee shall be entitled to
indemnification hereunder only to the extent that such defense is unsuccessful
as determined by a final and unappealable judgment of a court of competent
jurisdiction, or by written acknowledgment of the parties.
ARTICLE XII. DEFAULTS
Section 12.01 Defaults. The occurrence of any of the following events
shall constitute an "Event of Default" for purposes of this Agreement on the
part of the party with respect to which such event occurs (the "Defaulting
Party"):
(a) the institution by the Defaulting Party of proceedings of any
nature under any laws of any jurisdiction, whether now existing or subsequently
enacted or amended for the relief of debtors wherein such party is seeking
relief as a debtor;
(b) a general assignment by the Defaulting Party for the benefit of
creditors;
(c) the institution against the Defaulting Party of a case or other
proceeding under any bankruptcy or similar laws as now existing or hereunder
amended or becoming effective, which proceeding is not dismissed, stayed or
discharged within a period of sixty (60) days after the filing thereof;
(d) the appointment of a receiver for all or substantially all of the
Defaulting Party's business or assets on the grounds of insolvency, and such
appointment is not vacated within sixty (60) days of such occurrence;
(e) the admission by the Defaulting Party in writing of its inability
to pay its debts as they come due;
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(f) the breach by the Defaulting Party of any of the material
provisions contained in this Agreement;
(g) the breach by CC of any of its obligations under the Guarantee or
the Pledge Agreement; and
(h) the breach by NewComm of any of its obligations under the Secured
Convertible Note, the Promissory or the Security Agreement.
Section 12.02 Remedies. Upon an Event of Default, pursuant to Sections
12.01(a) through (f), inclusive, the other party (the Non-Defaulting Party), and
upon an Event of Default pursuant to Sections 12.01(g) or (h), TLD, may elect to
dissolve NewComm or purchase the shares of Common Stock of the Defaulting Party
or CC, as applicable, applying the procedure contained in Article V of this
Agreement. In the event, that the Non-Defaulting Party or TLD elects to dissolve
NewComm, the Defaulting Party or CC, as applicable, shall vote its shares of
NewComm's stock to effect such dissolution.
ARTICLE XIII. TERMINATION
Section 13.01 Grounds for Termination.
(a) This Agreement may be terminated at any time:
(i) by mutual written agreement of TLD and CC;
(ii) by either TLD or CC if the transactions contemplated by
Sections 1.01, 1.02, 1.03, 1.04, 1.06 and 1.07 shall not have been consummated
on or before June 30, 1999, or such other date, if any, as TLD and CC shall
agree in writing; provided that no party may
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terminate this Agreement pursuant to this clause if such party's failure to
fulfill any of its obligations under this Agreement shall have been the reason
that the transactions contemplated herein shall not have been consummated on or
before such date; and
(iii) by either TLD or CC if such other party is then in
material breach of this Agreement, and the terminating party is not then in
material breach of this Agreement.
The party desiring to terminate this Agreement pursuant to
this Section 13.01(a) shall give two (2) business days notice of such
termination to the other party.
(b) This Agreement shall terminate upon the exercise by CC of the CC
Option and in the event CC and TLD agree to the acquisition by TLD of all the
shares of NewComm stock held by CC; provided however, that upon any such
termination the provisions of Section 7.04, Article VIII, Article IX, Article XI
and Article XIV shall remain in full force and effect.
Section 13.02 Effect of Termination. If this Agreement is terminated as
permitted by Section 13.01(a)(i), 13.01(a)(ii), 13.01(b) or 1.05(d) such
termination shall be without liability to either party (or any shareholder,
director, officer, employee, agent, consultant or representative of such party)
to this Agreement. If the termination is pursuant to Section 13.01(a)(iii) as
the result of the failure of any party to fulfill a material covenant of this
Agreement or a misrepresentation by any party to this Agreement, such party
shall be fully liable for any and all damages, costs and expenses (including,
but not limited to, reasonable counsel fees) sustained or incurred by the other
party as a result of such failure, breach or misrepresentation.
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ARTICLE XIV. MISCELLANEOUS
Section 14.01 Survival. The representations, warranties, covenants and
agreements contained herein shall survive the execution of this Agreement.
Section 14.02 Notices. All notices, requests and other communications
to each party hereunder shall be in writing (including telecopy or similar
writing, with confirmation of receipt) and shall be given:
if to TLD, to:
Telefonica Larga Distancia de Puerto Rico, Inc.
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
with a copy to:
Axtmayer Adsuar ▇▇▇▇▇ & ▇▇▇▇▇, P.S.C.
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇, Esq.
if to CC, to:
ClearComm, L.P.
▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Section 14.03 Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived subject to
the requirements of applicable law if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by TLD and CC, or in the
case of a waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege.
Section 14.04 Expenses. Except as otherwise expressly provided in this
Agreement, all costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense.
Section 14.05 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other parties hereto and compliance with applicable
laws and regulations.
Section 14.06 Governing Law. This Agreement shall be construed in
accordance with and governed by the law of Puerto Rico without giving effect to
principles of conflicts of laws.
Section 14.07 Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become
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effective when each party hereto shall have received a counterpart hereof signed
by the other party hereto.
Section 14.08 Entire Agreement. This Agreement, including the Exhibits
hereto, constitutes the entire agreement between the parties with respect to the
subject matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter of this Agreement. No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been made or
relied upon by either party hereto.
Section 14.09 Captions; Definitions. The captions herein are included
for convenience of reference only and shall be ignored in the construction or
interpretation hereof.
Section 14.10 Dispute Resolution; Arbitration.
(a) The parties agree with the principle that disputes, claims and
controversies arising out of or related to this Agreement or any of the notes or
agreements set forth in Exhibits C, D, E, F and G (including the performance,
enforcement, breach, or termination thereof, and any remedies relating thereto)
(each, a "Dispute") should be regarded as business problems to be resolved
promptly through business-oriented negotiations before resorting to arbitration.
The parties agree to use their best efforts and to attempt in good faith to
resolve any Dispute promptly by negotiation between the executives of the
parties who have authority to settle the Dispute. Either party may give the
other party written notice of any Dispute not resolved in the normal course of
business ("Notice of Dispute"). Within fifteen (15) days after receipt of the
Notice of Dispute by the receiving party ("Date of Notice"), the receiving party
shall submit to the other a
- 44 -
written response, which shall include a statement of such party's position.
Within thirty (30) days after the Date of Notice, the parties shall meet at a
mutually acceptable time and place, and thereafter as often as they reasonably
deem necessary, to attempt to resolve the Dispute. All reasonable requests for
information made by one party to the other will be honored.
(b) If the Dispute has not been resolved by these persons within
forty-five (45) days of the Date of Notice, the Dispute shall be referred to a
more senior executive of each party who has authority to settle the Dispute and
who shall likewise meet to attempt to resolve the Dispute.
(c) All negotiations pursuant to this Section 14.10 shall be
confidential and shall be treated as compromise and settlement negotiations for
purposes of applicable rules of evidence.
(d) In the event the Dispute has still not been resolved by
negotiation, then such Dispute shall be settled by binding arbitration according
to the rules of the American Arbitration Association before an Arbitral Panel
composed of three (3) Arbitrators. One of such Arbitrators shall be selected by
CC, another by TLD and the third one by two Arbitrators selected by CC and TLD.
The Arbitration shall be legally binding, shall take place in San ▇▇▇▇, Puerto
Rico and shall be conducted in the Spanish language. The arbitral award or order
("Award") shall be given in writing, shall detail the disputed matters and the
reasons upon which the Award is based. The Award of the Arbitrators shall be
final and binding upon the parties and shall not be subject to appeal to any
court or other authority. Judgment upon the award or order may be entered in any
court of competent jurisdiction, and application may be made to any such court
for enforcement thereof. Each party shall bear its own costs and expenses in
connection with the Arbitration, but shall share equally in the costs and fees
of the Arbitration proceedings. Each party accepts and
- 45 -
submits to the arbitral jurisdiction referenced above and to any court of
competent jurisdiction with regard to enforcement of the Award. Process in any
such action or proceeding may be served on any party anywhere in the world.
Section 14.11 Third Party Beneficiaries; Parties Bound.
(a) No provision of this Agreement shall create any third party
beneficiary rights in any person (except in favor of NewComm), nor shall any
provision of this Agreement modify any rights of any third party under any
existing law, regulation or contract with any third party.
(b) TLD and CC are entering into the Agreement in their capacity as
corporations and limited partnerships, respectively, only and no officer,
director or other individual associated therewith shall have any personal
liability under this Agreement.
IN WITNESS WHEREOF, the parties hereto here caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
TELEFONICA LARGA DISTANCIA DE
PUERTO RICO, INC.
By: _________________________
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
CLEARCOMM, L.P.
By: __________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
