Summary

INTERNATIONAL CENTRE FOR DISPUTE RESOLUTION
International Arbitration Tribunal
CASE NUMBER 01-21-0000-4309
ARBITRATION PURSUANT TO
THE COMMERCIAL ARBITRATION RULES OF
THE AMERICAN ARBITRATION ASSOCIATION

BETWEEN:

TELECOM BUSINESS SOLUTION, LLC, on its own behalf and derivatively, on behalf of CONTINENTAL TOWERS LATAM HOLDINGS LIMITED, and LATAM TOWERS, LLC, on its own behalf and derivatively on behalf of CONTINENTAL TOWERS LATAM HOLDINGS LIMITED,

Claimants,

vs.

TERRA TOWERS CORP., TBS MANAGEMENT,S.A., DT HOLDINGS INC., JORGE HERNANDEZ and ALBERTO ARZU,

Respondents,

and

CONTINENTAL TOWERS LATAM HOLDINGSLIMITED,

Nominal Respondent,

TERRA TOWERS CORP., TBS MANAGEMENT,S.A., DT HOLDINGS INC. derivatively and on behalf of CONTINENTAL TOWERS LATAM HOLDINGS LIMITED,

Counterclaimants,

vs.

TELECOM BUSINESS SOLUTION, LLC, LATAM TOWERS, LLC, F. HOWARD MANDEL, JOHN RANIERI, RYAN LEPENE, and AMLQ HOLDINGS (CAY) LTD.,

Counterclaim Respondents.

-and-

CONTINENTAL TOWERS LATAM HOLDINGS LIMITED,

Nominal Respondent.

AMLQ HOLDINGS (CAY) LTD., Counterclaimant,

vs.

TERRA TOWERS CORP. and TBS MANAGEMENT,S.A.

Counterclaim Respondents.

PARTIAL FINAL AWARD CONCERNING SALE OF THE COMPANY

WE, THE UNDERSIGNED ARBITRATORS, having been designated in accordance with an arbitration provision contained in the Shareholders Agreement, dated October 22, 2015, between and among Claimants Telecom Business Solution, LLC and Latam Towers LLC ("Peppertree Claimants"), AMLQ Holdings (Cay) Ltd. ("AMLQ") a Counterclaim Respondent and Counterclaimant, aligned with the Peppertree Claimants (collectively hereinafter "Claimants"), Respondents Terra Towers Corp. and TBS Management S.A. ("Terra" or the "Shareholder Respondents"), and nominal party Continental Towers Latam Holdings Limited, and having been duly sworn, and having duly heard and considered the proofs and allegations of the parties, do hereby issue this Partial Final Award.

1. This arbitration involves claims and counterclaims between the majority and minority owners of a company, Continental Towers LATAM Holdings, Ltd. ("Continental" or the "Company"), whose business is the development and operation of telecommunications towers in Central and South America. The Company was formed in 2015 when investors, the Claimants here, made a private equity investment in the Company's predecessor, until then wholly owned by or through affiliates of the Respondents Terra Towers Corp. and TBS Management S.A. (together, herein referred to as "Terra") each of which is controlled by Respondent Jorge Hernandez. Terra became the majority shareholders of the Company, holding about 55%, and Claimants become the minority shareholders, holding about 45%.

Claimants Telecom Business Solution, LLC and Latam Towers LLC are affiliates of a Cleveland, Ohio private equity firm, Peppertree Capital. Claimant AMLQ Holdings is an affiliate of Goldman Sachs.

2. Greatly simplified, the business model of the Company is to build telecom towers at suitable locations and then rent "space" on the towers to mobile communications operators.

The construction of towers is an expense not a revenue stream for the Company, but such construction is a revenue stream for an affiliate of the majority shareholders, DT Holdings (DTH"). a Respondent in this case. DTH is paid by the Company for the construction.

One key element of the disputes in this arbitration is the divergent views of the majority and minority shareholders about what towers should be built and where, and the minority shareholders defend their having opposed certain tower construction, that the majority shareholders advocated, on the basis that the towers would not be profitable to operate. The majority shareholders, for their part, contend that the minority's opposition to tower construction has had a different and allegedly improper motive: to depress the value of the Company so that an alleged affiliate of one of the minority shareholders could acquire the Company at an artificially low price.

3. The Company, Continental, is a "nominal" party to this arbitration, because the case mainly presents disputes between the majority and minority shareholder groups. However, certain of the shareholders' claims and counterclaims purport to be asserted derivatively on behalf of Continental. When Claimants made their investments in 2015, this entailed the creation of Continental as a new corporate entity with a set of new agreements contemporaneously executed that include a Shareholder Agreement (the "SHA" or "Agreement"), Articles of Association and By-Laws, and a Development Agreement and other agreements to which DTH is a party, including a service agreement with DTH whereby the Company pays DTH to provide the operating and management functions of Continental in consideration of a stipulated monthly payment by the Company.

4. In a procedural order issued in August 2021, the Tribunal after hearing the Parties decided that a Phase 1 of the arbitration would be conducted to determine whether to grant Claimants' claims for specific performance in regard to two matters. The first matter involves the sale of the Company. The SHA provides that after five years from the date of Claimants' investment, a sale of the Company would occur if the sale process defined in the SHA were initiated by Claimants according to the stated procedure. Claimants did purport to initiate that procedure, but due to objections by Terra the initiative culminated in this arbitration, commenced in February 2021, rather than in the sale of the Company.

The first question presented in this Phase 1 is whether the Tribunal should grant specific performance by an Award directing a sale of the Company in the manner provided in the SHA. The second matter in Phase 1 concerns the process for the Company to make decisions about construction of new towers. It is alleged by Claimants and not disputed by Respondents that certain tower construction has taken place at the Company's expense, with payments having been made to DTH for such construction, despite the fact that the Board of the Company did not approve the new towers, the Claimants' representatives on the Board having voted in opposition. The Parties dispute whether those tower rejections by Claimants' appointees to the Board were proper. But the question presented in Phase 1 is whether Claimants are entitled prospectively to specific performance of the Agreements' provisions for approval of new tower construction -- that is to say, for Board approval as a condition of such construction -- or whether alternatively Claimants are limited to a damages remedy for any harm caused to their shareholder interests (or the Company, on whose behalf they also bring the case in a derivative capacity) as a result of the Company having proceeded with tower construction rejected by its Board of Directors, but nevertheless directed by Terra. Respondents have made extensive factual and expert submissions purporting to show that there is no such injury but that instead the Company and the Claimants as minority shareholders have benefited and will continue to benefit from new tower construction of the type that Claimants' Board representatives have disapproved.

...

Melida N. Hodgson, Co-Arbitrator
Richard F. Ziegler, Co-Arbitrator
Marc J. Goldstein, Tribunal Chair