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EXHIBIT 10.14
ESOP LOAN AGREEMENT
THIS ESOP LOAN AGREEMENT (the "Loan Agreement"), executed and delivered
this 2nd day of March 1999, by and between the TRUST OF THE EMPLOYEE STOCK
OWNERSHIP PLAN OF TELECOMUNICACIONES DE PUERTO RICO, INC. (the "Borrower"), and
Telecomunicaciones de Puerto Rico, Inc., a corporation organized and existing
under the laws of Puerto Rico (the "Company").
W I T N E S S E T H:
WHEREAS, U.S. Trust Company, National Association ("UST") is trustee of
Borrower pursuant to the terms of a Trust Agreement dated as of March 2, 1999 by
and between the Company and UST; and
WHEREAS, the Borrower wishes to borrow from the Company and the Company has
agreed to lend to the Borrower the principal sum of Twenty Six Million and One
Hundred Thousand Dollars (U.S. $26,100,000.00) in order to finance the
acquisition of securities of the Company for the benefit of the participants and
beneficiaries of the Employee Stock Ownership Plan of Telecomunicaciones de
Puerto Rico, Inc. ("ESOP").
NOW, THEREFORE, in consideration of the agreements, covenants,
representations and warranties set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Borrower and the Company hereby agree as follows:
ARTICLE I
THE LOAN
Section 1.01. The Loan. Upon the terms and subject to the conditions
contained herein, the Company shall lend to the Borrower, and the Borrower shall
borrow from the Company, the principal amount of $26,100,000.00 (the "Loan").
The proceeds of the Loan shall be used by the Borrower solely for the purpose of
acquiring shares of Common Stock, par value $0.01 per share (the "Common
Stock"), of the Company for the Borrower in such a manner that the Loan shall
constitute an Exempt Loan as defined in the trust agreement which established
the Borrower. The Loan shall be evidenced by, and repayable in accordance with,
a promissory note of the Borrower substantially in the form of Exhibit A hereto,
with the blanks appropriately filled in (the "Note").
Section 1.02. Interest Rate. Interest shall accrue on the outstanding
principal balance of the Loan at a rate equal to (i) LIBOR plus 2.25 percent
(2.25%) per annum, or (ii) in the event that LIBOR for any period shall not be
available, then the Prime Rate. For purposes hereof: "LIBOR" shall mean the
London Interbank Offered Rate, as quoted from time to time in the Wall Street
Journal, for funds borrowed for an interest period of one (1) year. The "Prime
Rate" shall mean the Prime Rate as quoted from time to time in the Wall Street
Journal. The
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interest rate applicable to the Loan shall be determined for each year,
commencing on the date of borrowing hereunder and on each successive anniversary
thereof. In the case of LIBOR, such rate shall be determined as of the close of
business on the second Business Day preceding the date of determination. The
Prime Rate shall be the Prime Rate as quoted from time to time for each day
during the period for which such rate is applicable. Interest shall be
calculated based on a year of 365 days or 366 days (as the case may be) and the
actual number of days elapsed.
Section 1.03. Installment Payments. On December 31, 1999, the Borrower
shall pay to Lender the interest accrued on the Loan for the period ending
December 31, 1999. The Loan shall amortize over a period of twenty (20) years,
and the principal thereof together with interest thereon shall be payable in
accordance with the amortization schedule set forth in Exhibit B hereto. On any
payment date in any given year pursuant to this Section 1.03, the accrued
interest being paid shall be the interest that would have accrued if such
payment date were December 31st of such year. The unpaid principal balance, and
accrued and unpaid interest, together with other charges and fees, if any, shall
be due and payable on the last Business Day of December, 2019.
Section 1.04. Prepayment. (a) Optional Prepayment. The Borrower may prepay
the Loan, in whole, without payment of any penalty or premium, at any time or
times upon five Business Days written notice to the Company.
(b) Mandatory Prepayment. The Borrower shall prepay the Loan, on an annual
basis, out of any excess cash available on the first Business Day following the
first day on which distributions to participants are made under the ESOP during
a year. "Excess cash" shall mean any cash comprising assets of the Borrower
after payment by the Borrower of the expenses and liabilities thereof for the
prior year, including interest and regularly scheduled principal on the Loan,
and all amounts payable as distributions to participants for the prior year out
of the assets of the Borrower, but only to the extent the cash represents
amounts described in Section 1.06 (b) or (c), below, or dividends on shares
purchased with the Loan that have been allocated to the accounts of participants
under the ESOP.
Section 1.05. Security. The Note shall be secured pursuant to the terms of
a pledge agreement, substantially in the form of Exhibit C hereto, with the
blanks appropriately filled in (the "Pledge Agreement"). As used herein, the
term "Collateral" shall have the meaning ascribed to such term in the Pledge
Agreement.
Section 1.06. Non-Recourse Nature of Loans. No Person (as defined below,
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
Agreement, the Pledge Agreement, the Note or otherwise) shall have any right of
recourse against the Borrower (or UST in its individual capacity) with respect
to the Loan or shall have any right to assets of the Borrower with respect to
the Loan other than:
(a) the Collateral;
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(b) participant contributions, if any, and Company contributions,
other than contributions of employer securities, to the Borrower under the
ESOP to meet the Borrower's obligations hereunder or under the Note; and
(c) earnings attributable to the Collateral and the investment of
non-excluded contributions referred to in Section 1.06(b) above.
The Borrower shall account for such earnings and nonexcluded contributions
separately on its books of account until the Loan is repaid. Notwithstanding the
foregoing, in the event of any default with respect to the Loan, the value of
any assets of the Borrower 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 Internal Revenue Code of 1986, as amended (the "Code") with
respect to the Borrower, such application of assets of the Borrower upon a
default with respect to the Loan shall be made only upon and to the extent of
the failure of the Borrower to meet the payment schedule of the Loan. The
provisions of this Section 1.06 shall apply notwithstanding any other provision
to the contrary contained in this Agreement, the Pledge Agreement or the Note.
Section 1.07. Application of Payments. All payments made in connection
with this Agreement or under the Note shall be applied in the following order
with no portion of such payment applied to a subsequently listed item until all
previous items have been paid in full:
(a) to interest on the Note then due and payable; and
(b) to the unpaid principal balance of the Note in the order of the
next succeeding annual installments.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.01. Representations and Warranties of the Borrower. The
Borrower represents and warrants that the following are true and correct as of
the date of this Agreement:
(a) Authority. The Borrower, acting by and through the Trustee, has
all requisite power, authority and legal right to execute and deliver this
Agreement, the Pledge Agreement and the Note and to perform its obligations
hereunder and thereunder.
(b) Enforceability. This Agreement, the Pledge Agreement and the Note
will constitute valid and binding obligations of the Borrower enforceable
against the Borrower in accordance with their respective terms, except as
the enforceability hereof and thereof may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or other laws affecting the enforcement of creditors' rights generally and
by general principles of equity.
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Section 2.02. Representations and Warranties of the Company. The
Company represents and warrants that the following are true and correct as of
the date of this Agreement:
(a) Authority. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action. This Agreement has been duly executed and
delivered by the Company and, assuming due execution and delivery by
the Borrower, constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms,
except as the enforceability hereof may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity.
(b) No Violations. The execution, delivery, performance and
compliance with the terms, of this Agreement by the Company does not
and will not, and consummation by the Company of the transactions
contemplated by this Agreement will not, (i) result in a violation of
any laws applicable to the Company or any of its subsidiaries; (ii)
result in the violation of the constituent documents of the Company or
any of its subsidiaries; (iii) result in the breach of, or constitute
a default under, or permit the acceleration of any obligation under,
any agreement or instrument to which the Company or any of its
subsidiaries is a party or by which any of them or any of the
respective assets of the Company and its subsidiaries is bound; (iv)
result in the mandatory acceleration, redemption, payment or
prepayment of any obligation of the Company or any of its subsidiaries
under any such agreement or instrument or afford the holder of any
such obligation the right to require the Company or any of its
subsidiaries to purchase, redeem or otherwise acquire, reacquire or
repay any such obligation; (v) result in the creation or imposition in
favor of any person of any lien upon any of the assets of the Company
or any of its subsidiaries; or (vi) constitute an event which, after
notice or lapse of time or both, would result in any of the foregoing.
(c) Prohibited Transactions. Assuming the Borrower has properly
discharged its fiduciary duties pursuant to ERISA and complied with
the applicable provisions of the Code, the execution, delivery and
performance by the Company of this Agreement and the Pledge Agreement
do not involve or constitute: (i) a non-exempt "prohibited
transaction" within the meaning of Section 406 of ERISA or (ii) a
non-exempt "prohibited transaction" within the meaning of Section
4975(c) of the Code.
ARTICLE III
CONDITIONS TO LOAN
Section 3.01. Conditions Precedent to Loan. The obligation of the
Company to make the Loan shall be subject to the prior or concurrent
satisfaction of the following conditions:
(a) Note. The Borrower having executed and delivered the Note;
and
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(b) Pledge Agreement. The Borrower having executed and delivered
the Pledge Agreement, together with all documents referred to therein.
ARTICLE IV
EVENTS OF DEFAULT
Section 4.01. Events of Default. If any one or more of the
following events (each, an "Event of Default") shall occur and be continuing:
(a) Payment Default Under Note. Default shall be made in the
payment of any principal of or interest on the Note for more than five
(5) Business Days after the same shall become due and payable, whether
at a date fixed for the payment of an installment or at final
maturity, if the Borrower has sufficient available funds under the
ESOP for the payment on the Note and if not, after the Company has
contributed sufficient funds to the Borrower to pay such amount; or
(b) Representations and Warranties. If any representation or
warranty made by the Borrower in this Agreement shall cease to be true
or shall prove to have been false in any material respect on the date
as of which made, and such representation or warranty is not corrected
or made good within thirty (30) days after written notice thereof
shall have been given to the Borrower by the Company; or
(c) Other Covenants. Default shall be made in the due observance
or performance of any other material covenant or agreement contained
in this Agreement or the Note to be observed or performed by the
Borrower and such default shall remain unremedied for thirty (30) days
after written notice thereof shall have been given to the Borrower by
the Company; or
(d) Pledge Agreement. Default shall be made in the due observance
or performance of any covenant or agreement or obligation of the
Borrower under the Pledge Agreement or any event of default shall
occur and continue under the Pledge Agreement and, in each case, shall
remain unremedied for thirty (30) days after written notice thereof
shall have been given to the Borrower by the Company;
then, and in every such event, the Company may, at its option, exercise its
rights with respect to the Collateral. Subject to Section 1.06 hereof, if any
Event of Default shall occur and be continuing, the Company or any subsequent
holder of the Note may declare any outstanding principal and accrued interest on
the Note to be immediately due and payable.
Section 4.02. Remedies. Each of the rights, powers and remedies
of the Company set forth in this Agreement and the Pledge Agreement may be
exercised alternatively or conjunctively and at such times, in such order and
from time to time, all as determined by the Company. No partial exercise of any
right, remedy or power by the Company shall preclude any further exercise of
such right, power or remedy or the exercise of any other right, power or remedy
consistent with the terms hereof. The rights, remedies and powers of the Company
set
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forth herein or in the Pledge Agreement are cumulative and are in addition
to any provided by law or in equity. No delay or omission on the part of the
Company in exercising any right, power or remedy shall impair such right, power
or remedy or be construed as a waiver of any Event of Default or acquiescence
therein. No waiver of any Event of Default shall extend to any subsequent Event
of Default of the same or a dissimilar nature. The Company, in its discretion,
may proceed against the Collateral without first proceeding against the
Borrower.
ARTICLE V
DEFINITIONS
Section 5.01. Additional Definitions. The terms defined in this
Section 5.01, which are in addition to terms defined elsewhere in this
Agreement, shall have the meanings indicated below.
"Business Day" - means any Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York are
authorized or obligated to close by law or executive order, and for purposes of
the definition of LIBOR in Section 1.02 hereof, a day on which transactions are
effected in the London interbank market.
"ERISA" - means the Employee Retirement Income Security Act of
1974, as from time to time in effect or as otherwise expressly specified herein,
and references to particular sections or provisions of ERISA (or the Code)
include any successor section covering substantially the same subject matter or
area covered by the specified section on the date hereof as well as all rules,
regulations and orders issued pursuant thereto.
"Person" - includes an individual, a corporation, a partnership,
a limited liability company, a government or agency or political subdivision
thereof, a trust, joint venture, employee organization and an "employee benefit
plan," as defined in Section 3 of ERISA.
Section 5.02. Time. As used in this Agreement, a "day" is a
calendar day except in those instances where reference is expressly made to
Business Days.
ARTICLE VI
MISCELLANEOUS
Section 6.01. Notices. All notices, consents and demands
hereunder shall be in writing and mailed by first class mail, postage prepaid,
to the Borrower to:
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Xxxxxx X. Xxxxxxxx
U.S. Trust Company, National Association
000 Xxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxxx X. Xxxxx
Xxxxx, Day, Xxxxxx & Xxxxx
00 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000-0000
Telephone: (000) 000-0000
Fax: (000) 000-0000
To the Company:
Vice President of Human Resources
Telecomunicaciones de Puerto Rico, Inc.
0000 Xxxxxxxx X. Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxxx Xxxx 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
GTE International Telecommunications Incorporated
0000 Xxxxx X'Xxxxxx Xxxxxxxxx
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Fares Xxxxxxx
Section 6.02. Survival of Representations and Warranties. All
representations and warranties made in this Agreement or otherwise in writing in
connection herewith shall survive the execution and delivery of this Agreement,
any investigation at any time made by any Person, the execution and delivery of
the Note and the making of the Loan provided for in this Agreement.
Section 6.03. Entire Agreement. This Agreement, together with the
Stock Purchase Agreement, the Pledge Agreement and the Note, embodies the entire
agreement and understanding between the Borrower and the Company with respect to
the subject matter hereof and supersedes all prior agreements and understandings
relating to the subject matter hereof. The Company and the Borrower may enter
into further and additional written agreements to amend or supplement this
Agreement, and the terms and provisions of such further or additional written
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agreements shall be deemed a part of this Agreement as though incorporated
herein. No amendment of, modification or supplement to, or waiver of any
provision of, this Agreement shall in any event be effective unless in writing
and signed by the parties hereto.
Section 6.04. Parties in Interest. All the terms and provisions
of this Agreement shall inure to the benefit of and be binding upon and
enforceable by the parties hereto and their respective successors and assigns,
except that neither the Borrower nor the Company shall assign its respective
rights hereunder without the prior written consent of the other party; provided,
however, that the Company may at any time and without the prior consent of the
Borrower grant a security interest in any or all of its rights under this
Agreement, the Pledge Agreement and the Note.
Section 6.05. Construction; Governing Law. This Agreement and the
Note shall be governed by, and construed and enforced in accordance with, the
laws of the State of New York without reference to the State of New York's
conflict of laws provisions. The parties hereto intend that the Loan provided
for herein shall be an "exempt loan" within the meanings of Section 408(b)(3) of
ERISA and Section 4975(d)(3) of the Code, and that the terms of this Agreement
shall be construed in a manner consistent with that intention.
Section 6.06. Counterparts. This Agreement may be executed in
counterparts, each of which shall constitute an original, but both of which
taken together shall constitute one agreement.
IN WITNESS WHEREOF, the parties have caused this Loan Agreement
to be executed on the date first above written by their respective officers
thereunto duly authorized.
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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:
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Name: Xxxxxx X. Xxxxxxxx
Title: Managing Director
TELECOMUNICACIONES DE PUERTO RICO,
INC.
By:
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Name:
Title:
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