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Exhibit 10.15
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (the "Pledge Agreement"), is made this
2nd day of March 1999, by and between the TRUST OF THE EMPLOYEE STOCK OWNERSHIP
PLAN OF TELECOMUNICACIONES DE PUERTO RICO, INC. (the "Pledgor") and
TELECOMUNICACIONES DE PUERTO RICO, INC. (the "Company").
W I T N E S S E T H:
WHEREAS, the Pledgor is a Trust established pursuant to the
Trust Agreement dated as of March 2, 1999, by and between Telecomunicaciones de
Puerto Rico, Inc. and U.S. Trust Company, National Association, to fund benefits
under the Employee Stock Ownership Plan of Telecomunicaciones de Puerto Rico,
Inc. (the "ESOP"); and
WHEREAS, the Pledgor and the Company have entered into an ESOP
Loan Agreement (the "Loan Agreement") of even date herewith pursuant to which
the Company is lending to the Pledgor Twenty-Six Million, One Hundred Thousand
Dollars (U.S. $26,100,000.00) (the "Loan") in order to finance the acquisition
of securities of the Company for the benefit of the participants and
beneficiaries of the ESOP; and
WHEREAS, the execution and delivery of this Pledge Agreement
is a condition precedent to the Company's obligation to make the Loan under the
Loan Agreement.
NOW, THEREFORE, the Pledgor and the Company agree as follows:
1. Collateral Pledged. The Pledgor hereby pledges, assigns and
sets over to the Company, its successors and assigns all of the Common Stock,
par value $0.01 per share, of the Company (the "Stock") purchased by the Pledgor
with the proceeds of the Loan made by the Company pursuant to the Loan
Agreement, together with any cash or other securities or property derived
therefrom, substituted therefor or otherwise subjected to the lien hereof
pursuant to any provision hereof (all of which shares of Stock, cash, securities
and property which have not been released from the Suspense Account (as provided
below) are herein called "Collateral"), as security for: (a) the punctual and
full payment of the principal of and interest on the Note referred to in the
Loan Agreement; and (b) the prompt observance and performance by the Pledgor of
all of the covenants, agreements and other provisions in the Note and Loan
Agreement and herein to be performed on its part.
The Stock and any securities that are part of the Collateral
and that are "employer securities" within the meaning of Section 409(1) of the
Internal Revenue Code of 1986, as amended (the "US Code"), and Section
1165(h)(2) of the Puerto Rico Internal Revenue Code of 1994, as amended (the "PR
Code"), shall be held by the Pledgor in a "Suspense Account" for the benefit of
the Company as "Qualifying Collateral." As of the last day of each Plan Year (as
defined in the ESOP) of the Pledgor, a portion of the Qualifying Collateral held
in the Suspense Account, determined in accordance with the following formula,
shall be released from the Suspense Account and shall not thereafter be deemed
Collateral for any purpose under this Pledge Agreement, the Loan Agreement or
the Note: For each Plan Year of the Pledgor during
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the duration of this Pledge Agreement, the number of shares of Stock released
shall equal the aggregate number of such shares remaining pledged before such
release multiplied by a fraction, the numerator of which is the amount of
principal and interest paid by the Pledgor on the Loan during the Plan Year in
question, and the denominator of which fraction is the sum of the numerator plus
the aggregate amount of the principal of and interest on the Loan to be paid in
all future Plan Years during which the Note remains outstanding and unpaid as
calculated as of such date. If the interest rate under the Note is variable, the
interest to be paid in future years shall be computed by using the interest rate
of the Note as of the end of the applicable Plan Year. If the ESOP has more than
one loan outstanding at the end of any Plan Year, the loans shall be aggregated
for purposes of determining the amount of collateral released by all loan
payments for that Plan Year, and the collateral released shall be attributed to
each loan in proportion to the principal and interest paid on that loan for the
Plan Year, unless each lender agrees in writing that the release of collateral
shall be determined separately for each loan. If the Qualifying Collateral
includes more than one class of employer securities as defined in Section 409(1)
of the US Code and Section 1165(h)(2) of the PR Code, the number of shares of
each class of employer securities to be released for such Plan Year must be
determined by applying the same fraction to each class of employer securities.
Once all Collateral is released pursuant to this Section 1, this Pledge
Agreement shall terminate.
2. Effect of Refinancing. A payment of principal or interest
to refinance all or any portion of the Loan shall not be taken into account
under the preceding paragraph to determine the amount of Qualifying Collateral
released from the Suspense Account. The Company may assign its rights and
interest in all or a portion of the Collateral under this Pledge Agreement to a
different lender in connection with a refinancing transaction.
3. Distribution on Collateral. The Pledgor shall receive and
shall hold pursuant to this Pledge Agreement as part of the Collateral all
dividends declared and paid by the Company on the Collateral other than in the
ordinary course of business and all dividends or distributions paid or made on
the Collateral in the course of dissolution or liquidation of the Company or as
the result of stock dividends, split-ups or other recapitalizations,
reclassifications or rearrangements of the capital structure of the Company and
all cash, securities or other property received as a result of any merger or
consolidation of the Company with any other person or as a result of any other
similar transaction. So long as no Event of Default (as defined in the Loan
Agreement) shall have occurred and be continuing as provided in the ESOP, all
dividends declared and paid on the Collateral in the ordinary course of business
by the Company shall be used to repay the Note or allocated to the accounts of
ESOP Participants. Upon the occurrence and continuation of an Event of Default,
all dividends declared and paid on the Collateral in the ordinary course of
business by the Company shall be used to repay the Note.
4. Voting of Stock Held As Collateral. So long as no Event of
Default shall have occurred and be continuing, the Pledgor shall have the right,
from time to time, to vote any and all shares of Stock or other securities with
voting rights included in the Collateral and to give consents, waivers and
ratifications in respect thereof, with the same force and effect as if such
shares and securities were not pledged hereunder; provided, however, that no
such vote shall be cast and no such consent, waiver or ratification shall be
given or action taken which would be inconsistent with or violate any of the
provisions of the Loan Agreement or this Pledge Agreement; and provided,
further, that the Pledgor shall vote such Stock and securities in
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accordance with the terms of the ESOP and the Trust Agreement and in accordance
with applicable law. Subject to the requirements of applicable law, upon the
occurrence and continuation of an Event of Default, the Pledgor shall not vote
or otherwise exercise any voting rights with respect to any or all shares of
Stock and such securities except in accordance with written instructions of the
Company.
5. Warranties. The Pledgor represents and warrants that the
Stock pledged hereby constitutes all of the issued and outstanding shares of
Common Stock, par value $0.01 per share, of the Company that were purchased by
the Pledgor with the proceeds of the Loan made by the Company pursuant to the
Loan Agreement.
6. Rights of the Company Upon Default.
(a) In the event that the Company desires to invoke the
remedies provided by this Pledge Agreement upon the occurrence of an Event of
Default, the Company shall mail or otherwise deliver to the Pledgor written
notice of such Event of Default and its intention to invoke such remedies. After
a ten (10) day period beginning on the date such notice is mailed or otherwise
delivered, and subject to the provisions of Section 1.06 of the Loan Agreement,
the Company may exercise in respect of the Collateral all the rights and
remedies of a secured party upon default under the Uniform Commercial Code (the
"UCC") in effect in the State of New York at that time, and the Company may also
in its sole discretion, without notice except as specified below or as required
by law, sell the Collateral or any part thereof in one or more transactions at
public or private sale, at any exchange, broker's board or at any of the
Company's offices or elsewhere, for cash, on credit or for future delivery, and
at such price or prices and upon such other terms as are commercially
reasonable. The Pledgor acknowledges that, to the extent notice of sale shall be
required by law, at least ten (10) days' notice to the Pledgor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification to the Pledgor. The Company shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given. The Company may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
(b) The Pledgor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933, as amended (the
"Securities Act"), and the securities laws of Puerto Rico and applicable state
securities laws, the Company may be compelled, with respect to any sale of all
or any part of the Collateral, to limit purchasers to those who will agree,
among other things, to acquire the Collateral for their own accounts, for
investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges that any such private sales may be at prices and on terms
less favorable to the Company than those obtainable through a public sale
without such restrictions (including, without limitation, a public offering made
pursuant to a registration statement under the Securities Act) and,
notwithstanding such circumstances, agrees, to the extent permitted by law, that
any such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Company shall have no obligation to engage in
public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit the issuer thereof to register it for a form
of public sale requiring registration under the
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Securities Act or under the securities laws of Puerto Rico and applicable state
securities laws, even if the Pledgor would agree to so delay.
(c) If the Company determines to exercise its right to sell
any or all of the Collateral, upon written request, the Pledgor shall from time
to time furnish to the Company all such information as the Company may request
in order to determine the number of shares of Stock and other assets included in
the Collateral that may be sold by the Company in exempt transactions under the
Securities Act and the rules of the Securities and Exchange Commission
thereunder, as the same are from time to time in effect.
(d) If the proceeds realized upon all such sales of Collateral
exceed the amount of the due and unpaid principal and interest of the Note, then
the balance of the proceeds will be deposited in the Suspense Account. The
Company shall not sell Collateral in excess of the amount required to make the
foregoing payments to the Company. The Pledgor shall remain liable for any
deficiency to the extent permitted by Section 1.06 of the Loan Agreement.
(e) In addition to the rights, remedies and powers of the
Company set forth above, the Company shall have any and all other rights,
remedies and powers of a secured party under the laws of the State of New York
and any other rights, remedies and powers provided by law or in equity or by
other agreements between the Company and the Pledgor which are consistent with
Section 7 of this Pledge Agreement. All of such rights, remedies and powers of
the Company are cumulative and may be exercised alternatively or conjunctively,
at such times, in such order and from time to time, all as determined by the
Company.
7. Discharge of Pledgor. At such time as all of the principal
of and interest on the Note shall have been paid in full, then all rights and
interests assigned and pledged hereby or pursuant hereto by the Pledgor shall
revert to the Pledgor, its administrators, successors and assigns, and the
right, title and interest of the Company in the Collateral shall cease and the
Collateral shall forthwith be transferred and delivered to the Pledgor, or its
administrators, successors and assigns.
8. Non-Recourse Nature. No Person (including, but not limited
to, the Company and any subsequent holder of the Note) entitled to payment with
respect to the Loan (whether under this Pledge Agreement, the Loan Agreement,
the Note or otherwise) shall have any right of recourse against the Pledgor (or
the Trustee in its individual capacity) with respect to the Loan or shall have
any right to assets of the Pledgor with respect to the Loan other than:
(a) the Collateral;
(b) Participant contributions, if any, and Company
Contributions other than contributions of employer securities, to the Pledgor
under the ESOP to meet the Pledgor's obligations under the Loan Agreement or
under the Note; and
(c) earnings attributable to the Collateral and the investment
of non-excluded contributions referred to in Section 8(b) above.
The Pledgor shall account for such earnings and nonexcluded contributions
separately on its books of account until the Loan is repaid in full.
Notwithstanding the foregoing, in the event of
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any default with respect to the Loan, the value of any assets of the Pledgor
applied in satisfaction of the Loan shall not exceed the amount of the default,
and if the Person (including, but not limited to, the Company and any subsequent
holder of the Note) for whose benefit such assets are or would be applied is a
disqualified person within the meaning of Section 4975(e)(2) of the US Code with
respect to the Pledgor, such application of assets of the Pledgor upon a default
with respect to the Loan shall be made only upon and to the extent of the
failure of the Pledgor to meet the payment schedule of the Loan. The provisions
of this Section 8 shall apply notwithstanding any other provision to the
contrary contained in this Pledge Agreement, the Loan Agreement or the Note.
9. Notices. All notices hereunder shall be deemed to have been
sufficiently given or served for purposes hereof when mailed, first class,
postage prepaid, to the addressee at the address given below, or at such other
address as either the Company or the Pledgor may have designated to the other in
writing:
(a) if to the Pledgor, to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
U.S. Trust Company, National Association
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇, Day, ▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
To the Company:
Vice President of Human Resources
Telecomunicaciones de Puerto Rico, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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With a copy to:
Fares ▇▇▇▇▇▇▇
GTE International Telecommunications
Incorporated
▇▇▇▇ ▇▇▇▇▇ ▇'▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
10. Definitions. Unless otherwise defined herein, all
capitalized terms which are defined in the Loan Agreement shall be used as
defined therein.
11. Persons Bound. This Pledge Agreement shall be binding upon
the Pledgor and its successors and assigns, and shall inure to the benefit of
and be enforceable by the Company, its successors and assigns.
12. Amendments. The terms of this Pledge Agreement may be
modified or amended only by an instrument in writing executed by the Pledgor and
by the Company.
13. Governing Law. This Pledge Agreement shall be deemed to be
a contract made under and shall be construed in accordance with and governed by
the laws of the State of New York without reference to the State of New York's
conflict of laws provisions.
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IN WITNESS WHEREOF, the Pledgor and the Company have executed
this Pledge Agreement on the day and year first above written by their
respective representatives thereunto duly authorized.
TELECOMUNICACIONES DE PUERTO
RICO, INC.
By:_________________________________
Name: _____________________________
Title _______________________________
TRUST OF THE EMPLOYEE STOCK
OWNERSHIP PLAN OF
TELECOMUNICACIONES DE PUERTO
RICO, INC.
By: U.S. TRUST COMPANY,
NATIONAL ASSOCIATION, solely
in its capacity
as trustee and not in its
individual capacity
By: ________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title Managing Director
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IN WITNESS WHEREOF, the Pledgor and the Company have executed
this Pledge Agreement on the day and year first above written by their
respective representatives thereunto duly authorized.
TELECOMUNICACIONES DE PUERTO
RICO, INC.
By:_________________________________
Name: _____________________________
Title _______________________________
TRUST OF THE EMPLOYEE STOCK
OWNERSHIP PLAN OF
TELECOMUNICACIONES DE PUERTO
RICO, INC.
By: U.S. TRUST COMPANY,
NATIONAL ASSOCIATION, solely
in its capacity as trustee and not in its
individual capacity
By: ________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title Managing Director
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