<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 2, 1997
REGISTRATION NO. 333-29865
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PAGING NETWORK DO BRASIL S.A.
(Exact name of registrant as specified in its charter)
PAGING NETWORK OF BRAZIL INC.
(Translation of Registrant's name into English)
<TABLE>
<S> <C> <C>
THE FEDERATIVE REPUBLIC OF BRAZIL 4841 NOT APPLICABLE
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
------------------------
RUA ALEXANDRE DUMAS, 1,711
CHACARA SANTO ANTONIO
SAO PAULO, 04717-004, BRAZIL
(TELEPHONE: 55-11-538-3800)
(Address and telephone number of registrants' principal
executive offices)
CT CORPORATION SYSTEM
1633 BROADWAY
NEW YORK, NY 10019
(TELEPHONE: 212-664-1666)
(Name, address and telephone number of agent for service)
------------------------------
COPY TO:
STEVEN J. GARTNER, ESQ.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
(212) 821-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED OFFERING PRICE(1) OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
13 1/2% Senior Notes due 2005........ $125,000,000 100% $125,000,000 $37,878.79
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
(COVER CONTINUED FROM PREVIOUS PAGE)
SUBJECT TO COMPLETION, DATED JUNE 23, 1997
PROSPECTUS
US$125,000,000
OFFER FOR ALL OUTSTANDING
13 1/2% SENIOR NOTES DUE 2005
[LOGO]
IN EXCHANGE FOR
UP TO US$125,000,000 PRINCIPAL AMOUNT OF
13 1/2% SENIOR NOTES DUE 2005
OF
PAGING NETWORK DO BRASIL S.A.
THE EXCHANGE OFFER
WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1997, UNLESS EXTENDED.
---------------------
Paging Network do Brasil S.A., a Brazilian corporation (the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying Letter of Transmittal (which together constitute
the "Exchange Offer"), to exchange an aggregate principal amount of up to
US$125,000,000 of its 13 1/2% Senior Notes due 2005 (the "New Notes"), which
have been registered under the Securities Act of 1933 (the "Securities Act"),
pursuant to a Registration Statement (as defined herein) of which this
Prospectus constitutes a part, for a like principal amount of its outstanding
13 1/2% Senior Notes due 2005 (the "Old Notes"), of which US$125,000,000
aggregate principal amount is outstanding.
The terms of the New Notes are identical in all material respects to the
terms of the Old Notes, except for certain transfer restrictions and
registration rights relating to the Old Notes and except that, if the Exchange
Offer is not consummated by November 3, 1997, the interest rate borne by the Old
Notes will increase by 0.50% per annum for the first 90-day period following
November 3, 1997 and will increase by an additional 0.50% per annum with respect
to each subsequent 90-day period up to a maximum amount of 2.00% per annum until
the Exchange Offer is consummated. The New Notes are being offered hereunder in
order to satisfy certain obligations of the Company under the Purchase Agreement
dated as of May 30, 1997 (the "Purchase Agreement") among the Company, Paging
Brazil Holding Co., LLC ("Holding LLC") and the initial purchasers of the Old
Notes (the "Initial Purchasers") and the Notes Registration Rights Agreement
dated June 6, 1997 (the "Notes Registration Rights Agreement") among the Company
and the Initial Purchasers. The New Notes evidence the same debt as the Old
Notes and will be issued under and entitled to the same benefits under the
Indenture (as defined herein). In addition, the New Notes and the Old Notes will
be treated as one series of securities under the Indenture. The New Notes and
the Old Notes are collectively referred to herein as the "Notes." See
"Description of the Notes."
Interest on the Notes of 13 1/2% per annum is payable semiannually in cash
in U.S. dollars in arrears on June 6 and December 6 of each year, commencing
December 6, 1997. The Notes will mature on June 6, 2005. At the closing of the
offering of the Old Notes, the Company used a portion of the net proceeds to
purchase a portfolio consisting of U.S. Government Securities (as defined
herein), representing funds sufficient to make the first six payments of
interest (exclusive of any Additional Amounts (as defined herein) or Additional
Interest (as defined herein) which may become payable) on the Notes, with any
balance to be retained by the Company. These securities were pledged as security
for the benefit of holders of the Notes. See "Description of the Notes--Escrow
Account." Payments under the Notes will be made in U.S. dollars free and clear
of, and without withholding or deduction for, any taxes imposed by Brazil to the
extent provided herein. See "Description of the Notes."
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after June 6, 2001 at the redemption prices set forth
herein, plus accrued and unpaid interest, if any, thereon to the applicable
redemption date. Notwithstanding the foregoing, on or prior to June 6, 2000, the
Company may, at its option, use the net proceeds of one or more Significant
Equity Offerings (as defined herein) yielding gross cash proceeds of not less
than US$35.0 million to redeem up to an aggregate of 35% of the principal amount
of the Notes originally issued from the holders of Notes on a pro rata basis (or
as nearly pro rata as practicable), at a redemption price of 113 1/2% of the
principal amount thereof, plus accrued and unpaid interest to the date of
redemption; PROVIDED that not less than US$81.25 million aggregate principal
amount of Notes would remain outstanding immediately after such redemption. In
addition, the Notes will be redeemable, in whole but not in part, at the option
of the Company at 100% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of redemption, at any time prior to maturity in
the event of certain changes affecting the withholding tax treatment of the
Notes. Upon a Change of Control, each holder of Notes will have the right to
require the Company to purchase such holder's Notes at 101% of the principal
amount thereof, plus accrued and unpaid interest, if any, to the date of
purchase. In the event of a Change of Control, there can be no assurance that
the Company (i) will obtain necessary approval from the Brazilian Central Bank
to permit such purchase, in whole or in part, or (ii) will have available funds
sufficient to pay for all of the Notes that might be delivered by holders. See
"Description of the Notes."
(COVER CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN FACTORS
THAT HOLDERS OF THE OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE
OFFER AND THAT PROSPECTIVE INVESTORS IN THE NEW NOTES SHOULD CONSIDER IN
CONNECTION WITH SUCH INVESTMENT.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
(COVER CONTINUED FROM PREVIOUS PAGE)
The Notes will be senior unsecured obligations of the Company ranking PARI
PASSU in right of payment with all existing and future unsubordinated unsecured
indebtedness of the Company. As of March 31, 1997, after giving effect to the
Offering, the Company would have had no indebtedness ranking PARI PASSU with or
junior in right of payment to the Notes. In addition, there are currently no
subsidiaries of the Company.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Securities and Exchange Commission (the "Commission") as set forth
in certain no-action letters addressed to other parties in other transactions.
However, the Company has not sought its own no-action letter and there can be no
assurance that the staff of the Commission would make a similar determination
with respect to the Exchange Offer as in such other circumstances. Based upon
these interpretations by the staff of the commission, the Company believes that
New Notes issued pursuant to this Exchange Offer in exchange for Old Notes may
be offered for resale, resold and otherwise transferred by a holder thereof
other than (i) a broker-dealer who purchased such Old Notes directly from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an "affiliate" (as defined in Rule
405 of the Securities Act) of the Company without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in the distribution of such New
Notes. Holders of Old Notes accepting the Exchange Offer will represent to the
Company in the Letter of Transmittal that such conditions have been met. Any
holder who participates in the Exchange Offer for the purpose of participating
in a distribution of the New Notes may not rely on the position of the staff of
the Commission as set forth in these no-action letters and would have to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any secondary resale transaction. A secondary resale
transaction in the United States by a holder who is using the Exchange Offer to
participate in the distribution of New Notes must be covered by a registration
statement containing the selling securityholder information required by Item 507
of Regulation S-K of the Securities Act.
Each broker-dealer (other than an "affiliate" of the Company) that receives
New Notes for its own account pursuant to the Exchange Offer must acknowledge
that it acquired the Old Notes as a result of market-making activities or other
trading activities and will deliver a prospectus in connection with any resale
of such New Notes. The Letter of Transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 180 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution." Any broker-dealer who is an
affiliate of the Company may not rely on such no-action letters and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any secondary resale transaction. See "The Exchange Offer."
The New Notes are new securities for which there is currently no market. The
Company presently does not intend to apply for listing of the New Notes on any
securities exchange or for quotation through the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"). The Company has been
advised by the Initial Purchasers, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Goldman, Sachs & Co. and Bear, Stearns & Co. Inc. that, following
completion of the Exchange Offer, they presently intend to make a market in the
New Notes; however, the Initial Purchasers are not obligated to do so and any
market-making activities with respect to the New Notes may be discontinued at
any time without notice. There can be no assurance that an active public market
for the New Notes will develop.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the rights and preferences and will be
subject to the limitations applicable thereto under the Indenture. Following
consummation of the Exchange Offer, the holders of Old Notes will continue to be
subject to the existing restrictions upon transfer thereof and the Company will
have no further obligation to such holders (other than the Initial Purchasers)
to provide for the registration under the Securities Act of the Old Notes held
by them. To the extent that Old Notes are tendered and accepted in the Exchange
Offer, a holder's ability to sell untendered Old Notes could be adversely
affected. It is not expected that an active market for the Old Notes will
develop while they are subject to restrictions on transfer.
The Company will accept for exchange any and all Old Notes that are validly
tendered and not withdrawn on or prior to 5:00 p.m., New York City time, on the
date the Exchange Offer expires, which will be , 1997 (the "Expiration
Date"), unless the Exchange Offer is extended by the Company in its sole
discretion, in which case the term "Expiration Date" shall mean the latest date
and time to which the Exchange Offer is extended. Tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration
Date. The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange. However, the Exchange Offer is subject to
certain conditions which may be waived by the Company and to the terms and
provisions of the Notes Registration Rights Agreement. Old Notes may be tendered
only in denominations of US$1,000 and integral multiples thereof. The Company
has agreed to pay the expenses of the Exchange Offer. See "The Exchange
Offer--Fees and Expenses." The New Notes will bear interest from the last
interest payment date of the Old Notes to occur prior to the issue date of the
New Notes or, if no such interest has been paid, from June 6, 1997. Holders of
the Old Notes whose Old Notes are accepted for exchange will not receive
interest on such Old Notes for any period subsequent to the last interest
payment date to occur prior to the issue date of the New Notes, if any, and will
be deemed to have waived the right to receive any interest payment on the Old
Notes accrued from and after such interest payment date or, if no such interest
has been paid, from June 6, 1997.
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Notes as of , 1997.
The Company will not receive any proceeds from this Exchange Offer. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
2
<PAGE>
THE NEW NOTES MAY NOT BE OFFERED OR SOLD IN BRAZIL EXCEPT UNDER
CIRCUMSTANCES WHICH DO NOT CONSTITUTE A PUBLIC OFFERING OR DISTRIBUTION OF
SECURITIES UNDER BRAZILIAN LAWS AND REGULATIONS. THE NEW NOTES HAVE NOT BEEN,
AND WILL NOT BE, REGISTERED WITH THE COMISSAO DE VALORES MOBILIARIOS ("CVM"),
THE SECURITIES COMMMISSION OF BRAZIL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Presentation of Certain Information........................................................................ 4
Enforceability of Civil Liabilities........................................................................ 4
Prospectus Summary......................................................................................... 5
Risk Factors............................................................................................... 15
The Company................................................................................................ 24
Use of Proceeds............................................................................................ 25
Exchange Rate Data......................................................................................... 26
Capitalization............................................................................................. 28
Selected Financial Data.................................................................................... 29
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 30
The Exchange Offer......................................................................................... 34
Industry................................................................................................... 41
Business................................................................................................... 44
Management................................................................................................. 55
Certain Transactions....................................................................................... 59
Principal Shareholders..................................................................................... 61
Description of the Notes................................................................................... 64
Book-Entry; Delivery and Form.............................................................................. 98
Tax Considerations......................................................................................... 99
Plan of Distribution....................................................................................... 103
Experts.................................................................................................... 104
Legal Matters.............................................................................................. 104
Available Information...................................................................................... 104
Index to Financial Statements.............................................................................. F-1
</TABLE>
UNTIL , 1997, ALL BROKER-DEALERS EFFECTING TRANSACTIONS IN THE
NEW NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF BROKER-DEALERS
TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
No broker-dealer, salesperson or other individual has been authorized to
give any information or to make any representations in connection with the
Exchange Offer other than those contained in this Prospectus and Letter of
Transmittal and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy the New
Notes in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation in such jurisdiction. The delivery of this Prospectus
shall not, under any circumstances, create any implication that the information
herein is correct at any time subsequent to its date.
3
<PAGE>
PRESENTATION OF CERTAIN INFORMATION
The accounts of the Company, which are maintained in Brazilian REAIS, were
adjusted to conform with accounting principles generally accepted in the United
States of America and translated into United States dollars on the basis set
forth in Note 2 of the Financial Statements (as defined herein) of the Company.
All references in this Prospectus to (i) "U.S. dollars," "$" or "US$" are to
United States dollars and (ii) "REAIS," "REAL" or "R$" are to Brazilian REAIS.
ENFORCEABILITY OF CIVIL LIABILITIES
The Company is a Brazilian corporation with substantially all of its assets
and operations located, and substantially all of its revenues derived, outside
the United States. The Company has appointed CT Corporation System, New York,
New York, as its agent to receive service of process with respect to any action
brought against it in any federal or state court in the State of New York
arising from the offering of the Old Notes and the Exchange Offer. However, it
may not be possible for investors to enforce outside the United States judgments
against the Company obtained in the United States in any such actions, including
actions predicated upon the civil liability provisions of the United States
federal and state securities laws. In addition, all of the directors and
officers of the Company are residents of Brazil, and all or substantially all of
the assets of such persons are located outside the United States. As a result,
it may not be possible for investors to effect service of process within the
United States upon such persons, or to enforce against them judgments obtained
in United States courts, including judgments predicated upon the civil liability
provisions of the United States federal and state securities laws.
The Company has been advised by its Brazilian counsel, Xavier, Bernardes,
Braganca, Sociedade de Advogados, that judgments of U.S. courts for civil
liabilities predicated upon the federal securities laws of the United States,
subject to certain requirements described below, may be enforced in Brazil. A
judgment against the persons described above or the Company obtained outside of
Brazil would be enforceable in Brazil against such persons or the Company
without reconsideration of the merits upon ratification of that judgment by the
Brazilian Federal Supreme Court. The ratification generally will occur if the
foreign judgment (a) fulfills all formalities required for its enforceability
under the laws of the country where the foreign judgment is granted, (b) is
issued following personal service of process on the Company or the persons
described above, or on a properly appointed agent for service of process, (c) is
issued by a competent court after proper service of process, (d) is not subject
to appeal, (e) is authenticated by a Brazilian consular office in the country
where the foreign judgment is issued and is accompanied by a sworn translation
into Portuguese and (f) is not contrary to Brazilian law, national sovereignty
or public policy or "good morals" (as set forth in Brazilian law) and does not
contain any provision which is or would for any reason not be upheld by the
courts of Brazil. Notwithstanding the foregoing, no assurance can be given that
ratification would be obtained, that the process described above can be
conducted in a timely manner or that a Brazilian court would enforce a monetary
judgment for violation of the United States securities laws with respect to the
Notes. The Company has been further advised by its Brazilian counsel that
original actions predicated on the federal securities laws of the United States
may be brought in Brazilian courts and that Brazilian courts may enforce civil
liabilities in such actions against the Company, its directors and certain of
its officers named herein. A plaintiff (whether Brazilian or non-Brazilian) who
resides outside Brazil during the course of litigation in Brazil must provide a
bond to guarantee court costs and legal fees if the plaintiff owns no real
property in Brazil.
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO (THE
"FINANCIAL STATEMENTS"), INCLUDED ELSEWHERE IN THIS PROSPECTUS. IN PARTICULAR,
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FACTORS SET FORTH UNDER
"RISK FACTORS." DATA CONCERNING PAGING SERVICES AVAILABLE IN BRAZIL AND CERTAIN
INFORMATION RELATING TO THE PAGING INDUSTRY IN BRAZIL AND THE UNITED STATES
REPRESENT ESTIMATES MADE BY THE COMPANY BASED IN PART ON PUBLIC STATEMENTS MADE
BY THIRD PARTIES AND COMPETITORS. WHILE THE COMPANY BELIEVES SUCH ESTIMATES TO
BE REASONABLE, THERE CAN BE NO ASSURANCE AS TO THEIR ACCURACY. UNLESS OTHERWISE
SPECIFIED, ALL OPERATING STATISTICS CONCERNING THE COMPANY ARE PRESENTED AS OF
APRIL 30, 1997. CERTAIN POPULATION DATA IN THIS PROSPECTUS ARE DERIVED FROM
REPORTS PREPARED BY INSTITUTO BRASILEIRO DE GEOGRAFIA E ESTATISTICA -- IBGE
(BRAZILIAN INSTITUTE FOR GEOGRAPHICS AND STATISTICS). CERTAIN OF THE STATEMENTS
IN THIS PROSPECTUS, INCLUDING STATEMENTS WITH REGARD TO THE COMPANY'S EXPECTED
PAGING OPERATIONS AND BUILDOUT, ITS STRATEGY FOR ITS PAGING BUSINESS AND RELATED
FINANCING AND CAPITAL EXPENDITURE PLANS, ARE FORWARD-LOOKING STATEMENTS. FOR A
DISCUSSION OF IMPORTANT FACTORS THAT COULD AFFECT SUCH MATTERS, SEE "RISK
FACTORS."
COMPANY OVERVIEW
PageNet do Brasil's objective is to become a leading provider of paging and
wireless messaging services in Brazil. The Company has secured licenses which
enable it to broadcast paging services throughout the country, and currently
serves approximately 3,500 subscribers. The Company has installed 44 paging
transmitters in 10 cities (the "Existing Coverage Area"), commenced offering
paging services in greater Sao Paulo in January 1997, and plans to begin
marketing paging services in greater Rio de Janeiro in the first quarter of 1998
and in three additional cities in the first quarter of 1999. PageNet do Brasil
was formed by Paging Network International N.V. ("PageNet NV"), a wholly owned
subsidiary of Paging Network, Inc. ("PageNet"), the largest paging company in
the United States, Warburg, Pincus Ventures, L.P. ("Warburg Pincus"), a private
equity fund, TVA Sistema de Televisao S.A. ("TVA"), a leading pay television
company in Brazil, and a wholly owned subsidiary of Abril S.A., Latin America's
largest publishing enterprise, IVP Paging (Cayman) L.P. ("IVP Cayman"), the
general partner of which is IVP-- International Venture Partners, Inc. ("IVP"),
a private investment fund focused on Brazil, and Multiponto Telecomunicacoes
Ltda. ("Multiponto"), an equity investor focused on the Brazilian
telecommunications sector. Management believes that a number of factors create a
favorable environment for the paging industry in Brazil, including: (i) Brazil's
large population, (ii) its growing and stable economy, (iii) the paging market's
relatively low penetration rate and high historical growth rate, and (iv) the
relatively high demand for reliable communications services. The Company
believes it will be well positioned to be a leading provider of paging services
in Brazil because of its state-of-the-art infrastructure, high quality services,
low cost structure and strategic relationships.
The Company has completed the buildout of the Sao Paulo system, installed
the infrastructure necessary to support its Sao Paulo operations and
substantially built out its paging system in Rio de Janeiro. The Company is
currently focused on Sao Paulo and Rio de Janeiro (the "Initial Markets") and
expects to offer paging services in Brasilia, Curitiba and Belo Horizonte (the
"Expansion Markets") by the first quarter of 1999. The Company currently offers
its Sao Paulo subscribers extended paging service in the other cities in the
Existing Coverage Area.
SUBSTANTIAL BUSINESS OPPORTUNITY
Brazil is the largest country in Latin America, with a population of
approximately 158 million people. Although the paging industry began in Brazil
in the 1960s, it remains largely underdeveloped, fragmented and
undercapitalized. The Company estimates that, as of December 1996, there were
approximately 800,000 pagers in operation in Brazil (up from an estimated
400,000 in 1995 and 200,000 in 1994), representing a market penetration of less
than one-half of one percent of the population and an annual
5
<PAGE>
growth rate of 100% since 1994. The one-half of one percent penetration rate in
Brazil is considerably lower than the United States rate of approximately 15%.
Although Brazil's economy has strengthened significantly as a result of its
recent openness to direct foreign investment and its reduced inflation rate for
the past two years, the telecommunications industry is still underdeveloped. As
of December 1996, the approximately 13.5 million telephone lines in service in
Brazil corresponded to a penetration rate of only 8.7%, which places Brazil
among the least developed countries in the world for availability of basic
telephone service. The Company believes that a principal factor driving the
significant growth of paging services, and wireless communications generally, is
the demand for reliable, portable communications alternatives to Brazil's
underdeveloped telephone system.
Management believes that paging is a particularly attractive and practical
method of communications. Generally, a pager is a highly reliable, portable and
economical communications alternative to cellular telephone service and often
complements cellular telephone service due to its longer battery life and better
building penetration which allows subscribers to receive pages when cellular
service is not available. Additionally, paging service increases communications
with mobile employees and facilitates call management by allowing the subscriber
to act on messages at the subscriber's convenience. Moreover, in Brazil,
alphanumeric pagers are an alternative to traditional telephone service in the
home, for which the waiting list to obtain ordinary telephone lines from the
local service providers is approximately one to three years and, for many
Brazilians, is prohibitively expensive. Also, the cost and speed of deploying a
paging system is relatively low on a per subscriber basis as compared to other
communications devices: (i) the transmitters and terminals have a lower cost
than certain other wireless communication systems; (ii) paging system capital
expenditures are required only for transmission facilities and the acquisition
of pagers for leasing to customers; and (iii) most costs associated with
increasing the capacity of a paging system and acquiring additional pagers for
lease may be incurred as customers are added to the system.
BUSINESS HIGHLIGHTS
ATTRACTIVE LICENSE AREAS. Pursuant to operating agreements with TVA,
Multiponto and an affiliate of IVP, the Company has secured the use of their
respective paging licenses. The Existing Coverage Area is comprised of the
following 10 cities: Sao Paulo, Rio de Janeiro, Brasilia, Curitiba, Belo
Horizonte, Porto Alegre, Salvador, Recife, Belem and Goiania. The cities of Sao
Paulo and Rio de Janeiro are the business centers of Brazil and encompass a
population of approximately 33 million and represent an estimated two-thirds of
the Brazilian paging market. The remaining eight cities have strong business
communities and their combined metropolitan areas encompassed an aggregate
population of approximately 18 million. Management believes that a significant
market of potential business customers has been neglected by the Company's
competitors and, as the Company enters each of its markets, it intends to
actively target such business customers.
EQUITY SPONSORSHIP/STRATEGIC RELATIONSHIPS. The Company's investors include
PageNet, Warburg Pincus, TVA, IVP and Multiponto. PageNet is the largest
provider of paging services in the United States, with approximately 9.5 million
pagers in service in the United States, more than the combined number of pagers
in service of the second and third largest U.S. providers of paging services.
PageNet has entered into an agreement (the "Technical Services Agreement") with
the Company which provides the Company with PageNet's products, intellectual
property (including the exclusive use of PageNet's tradename in Brazil), paging
expertise, volume discounts and other capabilities. In addition, certain of the
equity investors have extensive experience in the Brazilian communications
industry. At the closing of the offering of the Old Notes, Warburg Pincus, IVP
and Multiponto had provided approximately US$30 million of redeemable preferred
and common equity capital to the Company, and TVA, IVP and Multiponto had
secured paging licenses for the Company's use.
EXPERIENCED MANAGEMENT TEAM. The Company's senior management team, which
has been in place since the Company's inception, has extensive experience in the
development, growth and management of
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paging and other businesses in the United States and Brazil. Additionally,
members of the Company's senior management team have experience in formulating
and implementing marketing strategies directed at business and consumer paging
customers. The Company's management team includes former senior managers of two
of PageNet's largest operations in the United States, former senior managers of
multinational corporations operating in Brazil and former senior managers of
Brazilian paging companies.
STATE-OF-THE-ART PAGING NETWORK. The Company has built a state-of-the-art,
satellite linked, FLEX-Registered Trademark- based paging network with 44
transmitters in the 10 cities comprising the Existing Coverage Area. Relative to
the systems of the Company's competitors, which use terrestrial communications
networks, the Company believes that its satellite-linked transmission systems
provide customers with more reliable receipt of pages. Moreover, rather than
relying on manufacturers or vendors, management has applied PageNet's expertise
to design and implement all aspects of the paging infrastructure buildout, from
transmitter site selection and transmitter installation alignment to satellite
linkage and the programming of the paging terminal. The Company has completed
the buildout of the Sao Paulo system where it introduced paging services in
January 1997. The Rio de Janeiro system buildout is substantially complete and
local operations are scheduled to commence there in the first quarter of 1998.
In addition to Sao Paulo and Rio de Janeiro, the Company has built transmitters
in eight other cities, and offers subscribers extended paging service in those
cities. The Company expects to launch local operations in the Expansion Markets
in the first quarter of 1999, and will evaluate, on an ongoing basis, the
opportunity for the introduction and provision of services in other markets.
ADVANCED INFORMATION SYSTEMS. The Company uses an advanced proprietary
management information system, customized for the Brazilian market. This system
is used primarily to support three principal areas of the Company's business:
(i) customer service, including billing systems; (ii) network management and
operational support systems; and (iii) general business support systems,
including financial management. The Company's information systems have been
designed to accommodate efficiently the increased volumes of data that the
Company expects to process in the future as the Company's subscriber base
continues to grow.
BUSINESS STRATEGY
The Company's strategy is to become a leading provider of paging services in
Brazil. The principal elements of the Company's business strategy are to: (i)
provide high quality paging services at a low cost, (ii) leverage the PageNet
relationship, (iii) gain rapid market penetration, and (iv) provide superior
customer service.
PROVIDE HIGH QUALITY PAGING SERVICES AT A LOW COST. The Company has
employed state-of-the-art FLEX-Registered Trademark- technology developed by
Motorola, Inc. and is using equipment similar to that used by PageNet in the
United States. Furthermore, the Company utilizes a fully redundant paging system
that is linked by satellite. Management believes that as the number of
subscribers grows, this advanced technology will allow the Company to be a
provider of high quality paging services at a low cost per subscriber.
LEVERAGE THE PAGENET RELATIONSHIP. The Company is implementing a marketing
strategy and operating procedures similar to those of PageNet in the United
States, and several members of the Company's senior management have had
significant experience managing PageNet operations in the United States.
Moreover, pursuant to the Technical Services Agreement, PageNet provides the
Company with access to PageNet's products, paging expertise, intellectual
property (including the exclusive use of PageNet's tradename in Brazil), volume
supplier discounts and other capabilities. The Company also expects to benefit
from the favorable relationships that PageNet has established with suppliers of
paging equipment and from its use of the PageNet brand name, which is well
established among multinational corporations. PageNet do Brasil is PageNet's
first venture in the Latin American paging market, and PageNet's only enterprise
in Brazil. See "Business--Trademarks."
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GAIN RAPID MARKET PENETRATION. The Company seeks to gain subscribers in its
markets rapidly through extensive marketing and advertising and competitive
pricing. Unlike competitors whose primary focus has been the consumer market,
the Company focuses on both business and consumer paging customers. The Company
targets business customers through a commissioned direct sales force and through
telemarketing, and will target individual customers through advertising and
through retail distribution channels including the use of "retail showrooms"
located strategically throughout the Company's markets.
PROVIDE SUPERIOR CUSTOMER SERVICE. Management believes that its competitors
have not made customer service a primary focus of their business strategy and do
not provide the customer with service standards that are prevalent in the United
States. By focusing on key elements of customer satisfaction during the sales
process and over the life of the subscriber, the Company will provide high
levels of customer service similar to those provided by PageNet in the United
States. Moreover, similar to PageNet's practice in the United States, the
Company is introducing customer service account representatives to the paging
industry in Brazil, as a complement to sales representatives. The primary
function of customer service account representatives is to serve existing
accounts. In addition, customer service account representatives act as a
secondary sales force, targeting existing customers for additional services and
paging units. The Company believes this innovation will allow it to ensure
superior customer satisfaction, thereby minimizing customer turnover and
increasing subscriber base growth.
FINANCING REQUIREMENTS
The Company commenced the buildout of systems for its paging services in May
1996 and plans to substantially complete the buildout of the Initial Markets by
the first quarter of 1998 and the Expansion Markets by the first quarter of
1999. The Company expects that the available net proceeds from the sale of the
Old Notes, together with cash on hand, will be sufficient to complete the
planned buildout of the Initial Markets only and that it will need to secure
additional financing to complete the planned buildout of the Expansion Markets.
See "Use of Proceeds."
The principal capital expenditure requirements to construct a paging system
involve the acquisition of pagers for leasing and the acquisition and
installation of transmission facilities, both of which are directly related to
the demand for paging service. Additional capital is required to fund operating
losses incurred during the initial stages of constructing and rolling out
services. The Company currently anticipates that its cash requirements
(comprised of capital expenditures, working capital requirements, debt service
requirements and anticipated operating losses) from inception in May 1996
through December 2000, will be approximately US$150 million, including
approximately US$100 million in capital expenditures, of which approximately
US$55 million is attributable to the purchase of pagers for leasing. The Company
estimates that, of the US$150 million, approximately US$80 million will be
required to fund the capital requirements for the Initial Markets through 2000.
The actual amounts required by the Company will vary based upon the timing and
success of the Company's rollout of services in its markets as well as the mix
between leased and purchased pagers. If demand for the Company's services is
less than expected, the Company should be able to reduce certain costs that are,
to a large extent, demand driven and/or delay the rollout of its services in the
Expansion Markets. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
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THE EXCHANGE OFFER
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The Exchange Offer.................. The Company is offering to exchange pursuant to the
Exchange Offer an aggregate principal amount of up to
US$125,000,000 principal amount of its 13 1/2% Senior
Notes due 2005 (the "New Notes"), for a like
principal amount of its 13 1/2% Senior Notes due 2005
(the "Old Notes"). The Company will issue the New
Notes on or promptly after the Exchange Date. As of
the date of this Prospectus, US$125,000,000 aggregate
principal amount of Old Notes is outstanding. The
terms of the New Notes are identical in all material
respects to the terms of the Old Notes for which they
may be exchanged pursuant to this offer, except that
the New Notes have been registered under the
Securities Act and are issued free from any covenant
regarding registration, and except that if the
Exchange Offer is not consummated by November 3,
1997, the interest rate borne by the Old Notes will
increase by 0.50% per annum for the first 90-day
period following November 3, 1997 and will increase
by an additional 0.50% per annum with respect to each
subsequent 90-day period up to a maximum of 2.00% per
annum until the Exchange Offer is consummated. The
New Notes will evidence the same debt as the Old
Notes and will be issued under and be entitled to the
same benefits under the Indenture as the Old Notes.
The Issuance of the New Notes and the Exchange Offer
is intended to satisfy certain obligations of the
Company under the Purchase Agreement and pursuant to
certain registration rights granted under the Notes
Registration Rights Agreement. See "The Exchange
Offer" and "Description of the Notes."
Interest Payments................... Interest on the New Notes shall accrue from the last
Interest Payment Date (June 6 or December 6) on which
interest was paid on the Old Notes surrendered or, if
no interest has been paid on such Old Notes, from
June 6, 1997. See "The Exchange Offer--Interest on
the New Notes."
Expiration Date..................... The Exchange Offer will expire at 5:00 p.m., New York
City time on , 1997, unless extended by the
Company in its sole discretion. See "The Exchange
Offer--Expiration Date; Extensions; Amendments."
Exchange Date....................... The date of acceptance for exchange of the Old Notes
and the consummation of the Exchange Offer will be
the first business day following the Expiration Date,
unless extended. See "The Exchange Offer--Terms of
the Exchange."
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Conditions of the Exchange Offer.... The Company's obligation to consummate the Exchange
Offer will be subject to certain conditions. See "The
Exchange Offer--Conditions to the Exchange Offer."
The Company reserves the right to terminate or amend
the Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such
condition.
Withdrawal Rights................... Tenders may be withdrawn at any time prior to 5:00
p.m., New York City time, on the Expiration Date;
otherwise, all tenders will be irrevocable. See "The
Exchange Offer-- Withdrawal of Tenders."
Procedures for Tendering Notes...... See "The Exchange Offer--Procedures for Tendering."
Federal Income Tax Consequences..... The exchange of Old Notes for New Notes pursuant to
the Exchange Offer will not result in any income,
gain or loss to holders who participate in the
Exchange Offer or to the Company for U.S. Income tax
purposes. See "Tax Considerations."
Resale.............................. The Company is making the Exchange Offer in reliance
on the position of the staff of the Commission as set
forth in certain no-action letters addressed to other
parties in other transactions. However, the Company
has not sought its own no-action letter and there can
be no assurance that the staff of the Commission
would make a similar determination with respect to
the Exchange Offer as in such other circumstances.
Based on these interpretations by the staff of the
Commission, the Company believes that New Notes
issued pursuant to this Exchange Offer in exchange
for Old Notes may be offered for resale, resold and
otherwise transferred by a holder thereof other than
(i) a broker-dealer who purchase such Old Notes
directly from the Company to resell pursuant to Rule
144A or any other available exemption under the
Securities Act or (ii) a person that is an
"affiliate" (as defined in Rule 405 of the Securities
Act) of the Company without compliance with the
registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holder's
business and that such holder is not participating,
and has no arrangement or understanding with any
person to participate, in the distribution of such
New Notes. Holders of Old Notes accepting the
Exchange Offer will represent to the Company in the
Letter of Transmittal that such conditions have been
met. Any holder who participates in the Exchange
Offer for the purpose of participating in a
distribution of the New Notes may not rely on the
position of the staff of the Commission as set forth
in these no-action letters and would have to comply
with the registration and prospectus delivery
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requirements of the Securities Act in connection with
any secondary resale transaction. A secondary resale
transaction in the United States by a holder who is
using the Exchange Offer to participate in the
distribution of New Notes must be covered by a
registration statement containing the selling
securityholder information required by Item 507 of
Regulation S-K of the Securities Act. Each
broker-dealer (other than an "affiliate" of the
Company) that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that
it acquired the Old Notes as the result of
market-making activities or other trading activities
and will deliver a prospectus in connection with any
resale of such New Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning
of the Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of
New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as
a result of market-making activities or other trading
activities. In addition, pursuant to Section 4(3)
under the Securities Act, until , 1997,
all dealers effecting transactions in the New Notes,
whether or not participating in the Exchange Offer,
may be required to deliver a Prospectus. The Company
has agreed that, for a period of 180 days after the
date of this Prospectus, it will make this Prospectus
available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution". Any
broker-dealer who is an affiliate of the Company may
not rely on such no-action letters and must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection with
any secondary resale transaction. See "The Exchange
Offer-- Purpose of the Exchange Offer."
Remaining Old Notes................. Holders of Old Notes who do not tender their Old
Notes in the Exchange Offer or whose Old Notes are
not accepted for exchange will continue to hold such
Old Notes and will be entitled to all the rights and
preferences, and will be subject to the limitations,
applicable thereto under the Indenture. All
untendered and tendered but unaccepted Old Notes
(collectively, the "Remaining Old Notes") will
continue to bear legends restricting their transfer.
In general, the Old Notes may not be offered or sold,
unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable
state securities laws. To the extent that the
Exchange Offer is
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effected, the trading market, if any, for Remaining
Old Notes could be adversely affected. See "Risk
Factors--Factors Relating to the Company and the
Notes--Consequences of Failure to Properly Tender Old
Notes Pursuant to the Exchange Offer" and "The
Exchange Offer--Terms of the Exchange."
Exchange Agent...................... The exchange agent with respect to The Exchange Offer
is The Chase Manhattan Bank (the "Exchange Agent").
The address and telephone number of the Exchange
Agent are set forth in "The Exchange Offer--Exchange
Agent."
Use of Proceeds..................... There will be no proceeds to the Company from the
exchange pursuant to the Exchange Offer. See "Use of
Proceeds."
THE NEW NOTES
Issuer.............................. Paging Network do Brasil S.A., a Brazilian
corporation.
Maturity Date....................... June 6, 2005.
Interest Payment Dates.............. Interest on the New Notes will be payable
semiannually on each June 6 and December 6,
commencing December 6, 1997.
Ranking............................. The New Notes will be senior unsecured obligations of
the Company ranking PARI PASSU in right of payment
with all existing and future unsecured and
unsubordinated indebtedness of the Company. As of
, 1997 there was no outstanding indebtedness
of the Company ranking PARI PASSU with or junior in
right of payment to the Notes. See "Capitalization."
Escrow Account...................... At the closing of the offering of the Old Notes, the
Company used approximately US$46 million of the net
proceeds of the Offering to purchase a portfolio of
U.S. Government Securities (the "Pledged Securities")
which was pledged by the Company to the Trustee for
the benefit of the holders of Notes and will be held
in the United States by the Trustee in the Escrow
Account (as defined herein). Such U.S. Government
Securities are expected to represent funds sufficient
to cover the first six payments of interest
(exclusive of any Additional Amounts or Additional
Interest which may become payable) on the Notes
through June 6, 2000. Such pledge will also secure
repayment of the principal amount of the Notes to the
extent of such security. See "Description of the
Notes."
Change of Control................... Following the occurrence of a Change of Control, the
Company will be required to make an offer to purchase
all of the outstanding Notes at a purchase price
equal to 101% of
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the principal amount thereof plus accrued interest,
if any, to the date of purchase and purchase all
Notes validly tendered pursuant thereto. In the event
of a Change of Control, there can be no assurance
that the Company (i) will obtain necessary approval
from the Brazilian Central Bank (the "Central Bank")
to permit such purchase, in whole or in part, or (ii)
will have available funds sufficient to pay for all
of the Notes that might be delivered by holders. See
"Risk Factors-- Risk Factors Relating to
Brazil--Controls and Restrictions on U.S. Dollar
Remittances" and "Description of the Notes."
Withholding Taxes;
Additional Amounts................ Under a temporary rate reduction from withholding tax
under current Brazilian tax rules, interest in
respect of the Notes during 1997 will not be subject
to withholding tax. However, if the Notes are
redeemed for any reason prior to the fifth year
following their issuance, then the Company will be
required to pay an additional withholding tax
retroactively on interest, fees and commissions paid
in connection with the Notes from the date of
issuance through the date of such earlier redemption.
Withholding taxes of up to 15% will be payable in
respect of the Notes if the temporary rate reduction
is not extended to years after 1997. The Company has
agreed to pay such Additional Amounts as will result
in receipt by the holders of Notes of such amounts as
would have been received by them had no such
withholding or deduction been required, except as set
forth under "Description of the Notes--Additional
Amounts." See "Tax Considerations."
Optional Redemption................. The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after
June 6, 2001 at the redemption prices set forth
herein, plus accrued and unpaid interest, if any,
thereon to the applicable redemption date.
Notwithstanding the foregoing, on or prior to June 6,
2000, the Company may, at its option, use the net
proceeds of one or more Significant Equity Offerings
yielding gross cash proceeds of not less than US$35.0
million to redeem up to an aggregate of 35% of the
principal amount of the Notes originally issued from
the holders of Notes on a pro rata basis (or as
nearly pro rata as practicable), at a redemption
price of 113 1/2% of the principal amount thereof,
plus accrued and unpaid interest to the date of
redemption; PROVIDED that no less than US$81.25
million aggregate principal amount of Notes would
remain outstanding immediately after such redemption.
See "Description of the Notes--Redemption."
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Tax Redemption...................... In the event of certain changes affecting withholding
taxes applicable to payments on the Notes, the Notes
will be redeemable, in whole but not in part, at the
option of the Company, at 100% of the principal
amount thereof, plus accrued and unpaid interest, if
any, to the date of redemption.
Asset Sale Offer.................... The Company will be required in certain circumstances
to make an offer to purchase Notes with a portion of
the net cash proceeds of certain asset sales at a
purchase price equal to 100% of the principal amount
thereof plus accrued interest, if any, to the date of
purchase. See "Description of the Notes--Certain
Covenants." The Company's ability to consummate such
offer will be subject to prior approval from the
Central Bank. See "Risk Factors--Risk Factors
Relating to Brazil--Controls and Restrictions on U.S.
Dollar Remittances."
Certain Covenants................... The indenture under which the Old Notes were issued
(the "Indenture") contains certain covenants that,
among other things, limits the ability of the Company
to (i) incur additional indebtedness or issue certain
preferred stock, (ii) pay dividends or make
distributions in respect of the capital stock of the
Company or make certain other restricted payments,
(iii) conduct a business other than a Permitted
Business (as defined herein), (iv) create certain
liens and (v) enter into certain transactions with
affiliates or other interested persons. In addition,
the Indenture limits the ability of the Company to
consolidate, merge or sell all or substantially all
of its assets. These covenants are subject to
important exceptions and qualifications. See
"Description of the Notes--Certain Covenants."
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RISK FACTORS
See "Risk Factors" for a discussion of certain factors relating to Brazil,
the Company and the Notes that should be considered by prospective investors.
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RISK FACTORS
BEFORE MAKING AN INVESTMENT DECISION, PROSPECTIVE PURCHASERS SHOULD CONSIDER
CAREFULLY, IN LIGHT OF THEIR OWN FINANCIAL CIRCUMSTANCES AND INVESTMENT
OBJECTIVES, ALL THE INFORMATION SET FORTH HEREIN AND, IN PARTICULAR, THE SPECIAL
FACTORS APPLICABLE TO AN INVESTMENT IN BRAZIL AND APPLICABLE TO AN INVESTMENT IN
THE COMPANY, INCLUDING THOSE SET FORTH BELOW. IN GENERAL, INVESTING IN THE
SECURITIES OF ISSUERS IN DEVELOPING COUNTRIES, SUCH AS BRAZIL, INVOLVES A HIGHER
DEGREE OF RISK THAN INVESTING IN THE SECURITIES OF ISSUERS IN THE UNITED STATES
AND CERTAIN OTHER JURISDICTIONS. A NUMBER OF THE MATTERS DISCUSSED IN THIS
PROSPECTUS ARE NOT HISTORICAL OR CURRENT FACTS BUT RATHER ADDRESS POTENTIAL
FUTURE CIRCUMSTANCES AND DEVELOPMENTS. THE DISCUSSION OF SUCH MATTERS AND
SUBJECT AREAS IS QUALIFIED BY THE RISKS AND UNCERTAINTIES SURROUNDING FUTURE
EXPECTATIONS GENERALLY, AND ALSO MAY MATERIALLY DIFFER FROM THE COMPANY'S ACTUAL
EXPERIENCE INVOLVING ANY ONE OF THE FUTURE MATTERS OR SUBJECT AREAS. THE COMPANY
HAS ATTEMPTED TO IDENTIFY CERTAIN OF THE FACTORS THAT IT CURRENTLY BELIEVES WILL
CAUSE ACTUAL EXPERIENCE TO DIFFER FROM ITS EXPECTATIONS, PARTICULARLY THOSE RISK
FACTORS SET FORTH BELOW; HOWEVER, THERE CAN BE NO ASSURANCE THAT OTHER RISKS AND
UNCERTAINTIES MAY NOT MATERIALLY ADVERSELY IMPACT THE COMPANY'S ABILITY TO MEET
ITS BUSINESS OBJECTIVES.
RISK FACTORS RELATING TO BRAZIL
GENERAL. Social, economic or political instability, among other
developments in Brazil, could adversely affect the financial condition and
results of operations of the Company, the ability of the Company to repay the
Notes. In the past, Brazil has suffered from high levels of inflation, low real
growth rates and political uncertainty. Brazil is generally considered by
investors to be an "emerging market" and thus political, economic, social or
other developments in other such markets may adversely affect the market value
and liquidity of the Notes. For example, in December 1994, the Mexican
government sharply devalued the PESO, resulting in an economic crisis in Mexico.
The Mexican PESO crisis adversely affected the market value and liquidity of
securities issued by companies in many of the "emerging markets," including
Brazil. There can be no assurance that events in other such markets will not
adversely affect the market value and liquidity of the Notes.
ECONOMIC UNCERTAINTY; EFFECTS OF EXCHANGE RATE FLUCTUATIONS. Brazil has
experienced extremely high rates of inflation for many years. Inflation, as
measured by the Getulio Vargas Foundation's General Index of Market Prices (the
"IGPM Index"), was approximately 458% in 1991, 1,175% in 1992, 2,567% in 1993,
870% in 1994, 15% in 1995 and was an estimated 10% in 1996. Inflation,
government actions to combat inflation and public speculation about future
actions have had significant negative effects on the Brazilian economy in
general and have also contributed materially to economic uncertainty in Brazil.
In periods of inflation, many of the Company's expenses will tend to increase.
Generally, in periods of inflation, a company is able to raise its prices to
offset the rise in its expenses and may set its prices without government
regulation. However, under Brazilian law designed to reduce inflation, the rates
which the Company may charge to a particular subscriber may not be increased
until the next anniversary of the subscriber's initial subscription date. Thus,
the Company is less able to offset expense increases with revenue increases.
Accordingly, inflation may have a material adverse effect on the Company's
results of operations and financial condition.
Beginning in 1994, the Brazilian Government commenced the "Real Plan," an
economic stabilization plan designed to reduce inflation by, among other things,
reducing certain public expenditures, collecting debts owed to the Brazilian
Government, increasing tax revenues and continuing the privatization of certain
state-owned enterprises. On July 1, 1994, as part of the Real Plan, the
Brazilian Government introduced a new currency, the REAL. There can be no
assurance that the Real Plan will continue to be successful in controlling the
level of inflation, that future governmental actions will not trigger an
increase in inflation or that inflation will not have a material adverse effect
on the Company's results of operations and financial condition.
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Brazil's rate of inflation and the government's actions to combat inflation
have also affected the relationship of the value of Brazil's currency to the
value of the U.S. dollar. Historically, Brazil's currency frequently had been
devalued in relation to the U.S. dollar. However, after its introduction, the
REAL initially appreciated against the U.S. dollar. In an effort to address
concerns about the possible overvaluation of the REAL relative to the U.S.
dollar, and in light of the economic upheaval in Mexico that resulted from the
rapid devaluation of the Mexican PESO, the Brazilian government in March 1995
introduced new exchange rate policies which established a trading band for the
REAL against the U.S. dollar. From April 30, 1996 to April 30, 1997 the REAL
declined in value relative to the U.S. dollar by approximately 7.18%. There can
be no assurance that the REAL will not again be devalued relative to the U.S.
dollar, or that the REAL will not fluctuate significantly relative to the U.S.
dollar.
Substantially all of the Company's revenues are expected to be denominated
in REAIS. A substantial portion of the Company's indebtedness, including the
Notes, may be expected to be denominated in U.S. dollars. In addition, certain
of the Company's operating expenses, including a significant portion of its
equipment costs and reimbursement obligations under the Technical Services
Agreement, are denominated in U.S. dollars. Any devaluation of the Brazilian
currency relative to any foreign currency in which debt or other obligations of
the Company are denominated could result in a foreign exchange loss with respect
to such indebtedness or obligations, if such devaluation were in excess of
inflation and the rate at which the Company raises prices. Any devaluation could
also force the Company to seek additional financing although the Company's
ability to obtain such financing may be impaired by such event. As a result, the
relationship of Brazil's currency to the value of the U.S. dollar and other
currencies, and the rates of devaluation of Brazil's currency relative to the
prevailing rates of inflation, may adversely affect the Company's financial
condition and results of operations, as well as its ability to meet its debt
service obligations (including payment of principal of, premium, if any, and
interest on the Notes) and operating expenses. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Inflation and
Exchange Rates." Moreover, if the Company cannot increase its prices to match
the rate of inflation, even if the rate of inflation matches the rate of
devaluation, the Company's ability to meet its debt service obligations and
operating expenses may be impaired.
The Company may experience economic loss with respect to its investments and
fluctuations in its reported results of operations solely as a result of
currency rate fluctuations, which may have a material adverse effect on the
Company's financial condition. The Company intends to explore various
alternatives that may be available to hedge exchange rate risks, although there
can be no assurance that any such alternatives will be available on terms
acceptable to the Company.
CONTROLS AND RESTRICTIONS ON U.S. DOLLAR REMITTANCES. Brazilian law
provides that whenever there is a material imbalance, or a serious risk of a
material imbalance, in Brazil's balance of payments, the Brazilian Government
may, for a limited period of time, impose restrictions on the remittance to
foreign investors of the proceeds of their investments in Brazil, as it did for
approximately six months in 1989 and early 1990. The Brazilian Government may
also impose restrictions on the conversion of the Brazilian currency into
foreign currencies. Such restrictions may hinder or prevent the Company from
purchasing equipment required to be paid for in any currency other than REAIS,
paying scheduled interest and principal payments under the Notes in U.S. dollars
and making payment on judgments obtained in a court in Brazil. Such restrictions
could adversely affect the Company. The Company could also be adversely affected
by delays in, or a refusal to grant, any required Brazilian governmental
approval for conversion of REAL payments and remittances abroad in respect of
such dividends, distributions, interest and principal payments.
The Brazilian Government currently restricts the ability of Brazilian or
foreign persons or entities to convert Brazilian currency into U.S. dollars or
other currencies other than in connection with certain authorized transactions.
The Central Bank has authorized the issuance of the Notes and, although there
can be no assurance, is expected, in due course to issue a certificate of
registration authorizing each of the scheduled payments of principal of, premium
on, and interest on the Notes or for payments of principal of,
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premium on and interest on the Notes upon any early redemption of the Notes at
the option of a holder of Notes. However, consent from the Central Bank is
needed for the payment of principal of, premium, if any, on and interest on the
Notes upon acceleration of the Notes following an Event of Default. In addition,
consent from the Central Bank is needed for (i) payments in respect of the Notes
upon redemption by the Company in the event of certain changes in Brazilian law
relating to tax withholding, as described under "Description of the
Notes--Redemption--Redemption for Changes in Withholding Taxes," (ii) payments
in respect of the Notes in the event of redemption of the Notes by the Company,
as described under "Description of the Notes--Redemption--Optional Redemption by
the Company," (iii) payments in respect of the Notes in the event of an Asset
Sale Offer, as described under "Description of the Notes--Certain
Covenants--Disposition of Proceeds of Asset Sales," and (iv) payments in respect
of the Notes in the event of a Change of Control Offer, as described under
"Description of the Notes-- Redemption--Mandatory Redemption--Offers to Purchase
upon Change of Control and Certain Asset Sales." There can be no assurance that
any required consent from the Central Bank will be obtained.
There can be no assurance that the Brazilian Government will not in the
future impose more restrictive foreign exchange regulations that would have the
effect of eliminating or restricting the Company's access to foreign currency
that would be required to meet its foreign currency obligations, including the
Notes. The likelihood of the imposition of such restrictions by the Brazilian
Government may be affected by, among other factors, the extent of Brazil's
foreign currency reserves, the availability of sufficient foreign currency on
the date a payment is due, the size of Brazil's debt service burden relative to
the economy as a whole, Brazil's policy toward the International Monetary Fund
and political constraints to which Brazil may be subject.
POLITICAL UNCERTAINTY. Historically, the Brazilian Government has often
changed monetary, credit, tariff and other policies to influence the course of
Brazil's economy. Such government actions have included wage and price controls
as well as other measures, such as freezing bank accounts, imposing capital
controls and inhibiting imports and exports. A primary objective of the
Brazilian Government in recent years has been to control government spending.
Some progress has been made, but fiscal deficits remain high. Reducing the
deficit is made more difficult by Brazil's Constitution, which requires the
Brazilian Government to make substantial funds available to the state
administrations, while limiting the Brazilian Government's ability to raise
sufficient funds from taxes. Changes in policy involving, among other things,
tariffs, exchange controls, regulatory policy and taxation, as well as events
such as inflation, devaluation, social instability or other political, economic
or diplomatic developments, could adversely affect the Brazilian economy and
have a material adverse effect on the Company's results of operations and
financial condition.
The Brazilian political environment has been marked by high levels of
uncertainty since Brazil returned to civilian rule in 1985 after 20 years of
military government. The death of a President-elect in 1985 and the resignation
of another President in 1992 in the midst of his impeachment trial, as well as
frequent turnover at and immediately below the cabinet level, have contributed
to delays in the adoption of coherent and sustained policies to confront the
country's economic issues. Mr. Fernando Henrique Cardoso, Brazil's Finance
Minister at the time of implementation of the Real Plan, became President of
Brazil in January 1995. President Cardoso was elected by a coalition of
political parties and, as a result, his administration is required, from time to
time, to accept certain compromises. Even though the Brazilian Constitution
currently prohibits re-election of the President, presently a Constitutional
Amendment is being examined by the Brazilian Congress, which, if approved, will
make re-election possible. President Cardoso has supported the Real Plan, the
reduction of inflation, privatization measures and certain free-market policies;
however, the Real Plan has not been definitively approved by the Brazilian
Congress although the provisional measures which instituted the Real Plan have
been successively reenacted. There can be no assurance that any of the
administration's policies, including the Real Plan will be approved without
modifications by the legislature.
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ENFORCEABILITY OF JUDGMENTS. The Company has been advised by its Brazilian
counsel, Xavier, Bernardes, Braganca, Sociedade de Advogados, that judgments for
monetary claims obtained in U.S. courts arising of or in relation to the
obligations of PageNet do Brasil in respect of the Indenture or the Notes will
be enforceable in Brazil without reconsideration of the merits upon ratification
by the Brazilian Federal Supreme Court. The ratification generally will occur if
the foreign judgment (a) fulfills all formalities required for its
enforceability under the laws of the country where the foreign judgment is
granted, (b) is issued following personal service of process on the Company or
on a properly appointed agent for service of process, (c) is issued by a
competent court after proper service of process, (d) is not subject to appeal,
(e) is authenticated by a Brazilian consular office in the country where the
foreign judgment is issued and is accompanied by a sworn translation into
Portuguese and (f) is not contrary to Brazilian law, national sovereignty or
public policy or "good morals" (as set forth in Brazilian law) and does not
contain any provision which is or would for any reason not be upheld by the
courts of Brazil. Notwithstanding the foregoing, no assurance can be given that
ratification would be obtained, that the process described above can be
conducted in a timely manner or that a Brazilian court would enforce such a
monetary judgment for violation of the United States securities laws with
respect to the Notes.
Any judgment obtained against the Company in a court in Brazil in respect of
the Indenture or the Notes will be expressed in the Brazilian currency
equivalent of the U.S. dollar judgment amount at the commercial exchange rate on
the date on which such judgment is obtained, and such Brazilian currency amount
will be corrected in accordance with the exchange variation until the judgment
holder receives effective payment. See "Enforceability of Civil Liabilities."
RISK FACTORS RELATING TO THE COMPANY AND THE NOTES
CONSEQUENCES OF FAILURE TO PROPERLY TENDER OLD NOTES PURSUANT TO THE
EXCHANGE OFFER. Holders of Old Notes who do not exchange their Old Notes for
New Notes pursuant to the Exchange Offer will continue to be subject to the
following restrictions on transfer with respect to their Old Notes: (i) the
Remaining Old Notes may be resold only if registered pursuant to the Securities
Act, if any exemption from registration is available thereunder, or if neither
such registration nor such exemption is required by law, and (ii) the Remaining
Old Notes will bear a legend restricting transfer in the absence of registration
or an exemption therefrom. The Company does not currently anticipate that it
will register the Old Notes under the Securities Act. To the extent that Old
Notes are tendered and accepted in connection with the Exchange Offer, any
trading market for Remaining Old Notes could be adversely affected.
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
such Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for New Notes should allow sufficient time to
ensure timely delivery. The Company is under no duty to give notification of
defects or irregularities with respect to tenders of Old Notes for exchange. Old
Notes that are not tendered or that are tendered but not accepted by the Company
for exchange, will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof under the Securities
Act and, upon consummation of the Exchange Offer, certain registration rights
under the Notes Registration Rights Agreement will terminate.
LIMITED OPERATING HISTORY; FUTURE OPERATING LOSSES AND NEGATIVE CASH
FLOW. The Company was recently formed and has only recently commenced
operations. Prospective investors, therefore, have no meaningful historical
financial or operating information about the Company upon which to base an
evaluation of an investment in the Notes. Businesses which are in their initial
stages of development present substantial business and financial risks and may
suffer significant losses. Such early stage businesses must develop business
relationships, establish operating procedures, hire staff and complete other
tasks appropriate for the conduct of their intended business activities. The
Company's prospects must be considered in light of
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the uncertainties associated with the formation of a new business in a
developing market with limited comparable competitor experience and under a
regulatory framework which may change substantially as the Brazilian paging
industry develops.
The Company currently is deploying a paging network in the Initial Markets,
plans to have substantially completed the buildout of its paging networks in the
Expansion Markets by the first quarter of 1999 and has recently launched
commercial services in Sao Paulo. The continuing development, construction and
operation of the Company's paging network is expected to place significant
demands on the Company's management and operational and financial resources and
there can be no assurance that delays in completing the planned buildout and
launching service will not occur and adversely affect the Company's liquidity
and results of operations. The Company's future performance will depend, in
part, on the Company's ability to implement its operational and financial
systems successfully and on a timely basis (including certain of its management
information systems), to expand substantially its employee base and to train and
manage its employees, including customer service, marketing and sales personnel.
The Company first generated revenues in March 1997 and has experienced
cumulative negative cash flow of approximately US$18 million from inception
through March 31, 1997. The Company expects to continue to experience
substantial negative cash flow and operating losses as it develops its paging
infrastructure and rolls out its services. The Company anticipates that its
negative cash flow and operating losses will increase significantly in the
foreseeable future, and there can be no assurance that the Company will ever be
profitable or will generate positive cash flow in future years. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
NEED FOR ADDITIONAL FINANCING AND LIQUIDITY. The net proceeds from the sale
of the Old Notes available for use by the Company (together with cash expected
to be on hand as of the closing of the offering of the Old Notes of
approximately US$9 million) will be used to fund operating losses, capital
expenditures, and working capital needs in the development of the Initial
Markets. While the Company believes that these funds will be sufficient for the
planned development of the Initial Markets, there can be no assurance that
operating losses will not exceed expectations or that unanticipated expenditures
will not be necessary or desirable. In addition, the Company will require
additional licenses in order to achieve the capacity necessary to fully
implement its strategy for the Initial Markets. The Company is expected to
require additional financing to fund the buildout of paging infrastructure in
the Expansion Markets and to fund operating losses associated with the rollout
of services in such markets. The Company has no committed sources of financing
and there can be no assurance that additional financing will be available to the
Company on acceptable terms when required. Such additional financing may take
the form of additional debt, thereby further substantially increasing the total
leverage of the Company and the risks to holders of the Notes associated
therewith. If adequate sources of additional financing are not available, the
Company may be forced to delay, scale back or eliminate any portion of its plans
and may be unable to meet its obligations in respect of the Notes and other
liabilities as they become due. Any additional financing may take the form of
debt or equity; however, it is presently expected that a substantial portion of
the additional financing required will take the form of debt. In addition, it
should be noted that, for so long as the Company would constitute a PFIC for
U.S. federal income tax purposes (which is expected to continue through 1998),
it may be difficult for the Company to pursue a public equity offering to U.S.
persons. See "Tax Considerations--United States," "--Substantial Indebtedness;
Effect of Financial Leverage" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
SUBSTANTIAL INDEBTEDNESS; EFFECT OF FINANCIAL LEVERAGE. Following the
issuance of the Old Notes, the Company has indebtedness that is substantial in
relation to its shareholders' equity and cash flow. As of March 31, 1997, after
giving effect to the offering of the Old Notes, the Company would have had an
aggregate of approximately US$125.0 million of indebtedness outstanding,
representing the Old Notes, or 80% of total invested capital. The Company is
expected to incur substantial additional indebtedness following the offering of
the Old Notes in the future to pursue its business strategy. See "--Need for
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Additional Financing and Liquidity" and "Capitalization." As a result of the
substantial indebtedness of the Company following the offering of the Old Notes,
fixed charges of the Company are expected to exceed its earnings for the
foreseeable future and there can be no assurance that the Company's operating
cash flow will be sufficient to pay interest on the Notes following the
termination of the escrow arrangement for the Notes or to pay Additional Amounts
or Additional Interest at any time. In addition, the Indenture imposes, and
other agreements governing future indebtedness may contain, significant
operating and financial restrictions on the Company. Such restrictions will
affect, and in many respects significantly limit or prohibit, among other
things, the ability of the Company to incur additional indebtedness and pay
dividends. These restrictions, in combination with the leveraged nature of the
Company, could limit the ability of the Company to effect future financings or
otherwise may restrict the Company's activities. Substantial leverage poses the
risk that the Company may not be able to generate sufficient cash flow to
service its indebtedness, including the Notes, and to adequately fund its
operations. The Indenture permits the Company to incur additional indebtedness
under certain conditions, and the Company expects to incur substantial
additional indebtedness as so permitted. See "Description of the Notes."
The Company's leverage could have important consequences to the holders of
the Notes, including the following: (i) the Company's ability to obtain
additional financing for working capital, capital expenditures, acquisitions,
general corporate purposes or other purposes may be impaired in the future; (ii)
a substantial portion of the Company's cash flow from operations must be
dedicated to the payment of principal of and interest on its indebtedness,
thereby reducing the funds available to the Company for other purposes; (iii)
the Company's leverage may hinder its ability to adjust rapidly to changing
market conditions; and (iv) the leverage could make the Company more vulnerable
in the event of a downturn in general economic conditions or its business.
UNCERTAINTIES ASSOCIATED WITH A NEW INDUSTRY; CUSTOMER ACCEPTANCE AND MARKET
DEMAND. The success of the Company's operating strategies is subject to factors
that are beyond the control of the Company and impossible to predict due, in
part, to the limited history of paging services in Brazil. Consequently, the
size of the Brazilian market for paging services, the rates of penetration of
that market, the acceptance of paging by subscribers and commercial advertisers,
the sensitivity of potential subscribers to the price of equipment and monthly
fees, the extent and nature of the competitive environment and the immediate and
long-term viability of paging services in Brazil are uncertain.
DEPENDENCE ON PAGENET TECHNICAL SERVICES AND SUPPORT. The Company has
entered into the Technical Services Agreement with PageNet for the provision of
technical services and support. The initial term of the Technical Services
Agreement is five years (through December 1, 2001). The term may be extended for
successive three-year terms unless either party provides notice of termination
at least one year prior to expiration. PageNet may, however, terminate the
agreement (a) six months after it ceases to beneficially own five percent of the
shares of Common Stock of the Company (the "Common Stock") on a fully diluted
basis or (b) if any person other than Warburg Pincus owns 50% or more of the
Common Stock on a fully diluted basis. The license to use the PageNet name in
Brazil will survive any termination of the Technical Services Agreement absent a
breach by the Company of its obligations thereunder or if Brazilian governmental
action requires a termination of the license. If PageNet were to fail to perform
its obligations thereunder or the Technical Services Agreement were terminated
or expired without renewal, there can be no assurance that the Company would
find another provider of such services and support, which could have a material
adverse effect on the Company's results of operations and financial condition.
See "Certain Transactions--Formation Transactions."
REGULATION AND OWNERSHIP OF LICENSES. Substantially all of the Company's
business activities are regulated by the Brazilian Ministry of Communications
(the "Ministry of Communications"). Such regulation relates to the licensing of
paging services, the construction of paging infrastructure and foreign
investment
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in paging license holders, among other things. Changes in these regulations or
in the interpretation of existing regulations and the authorization of competing
technologies on an advantageous basis may materially adversely affect the
Company. Under applicable provisions of Brazilian law currently in effect, a
license to operate a paging system in Brazil may not be transferred for a period
of three years following the date on which such license is built out by its
initial license holder and without prior approval of the Ministry of
Communications. Applicable paging regulations allow license holders to enter
into mutual operating agreements which permit third parties to resell paging
services. The licenses pursuant to which the Company will conduct its business
are held by certain license holders (the "Licenseholders") and the Company has
entered into operating agreements with the Licenseholders. The Company also has
entered into transfer agreements with the Licenseholders for the transfer of the
licenses to the Company after such three-year period subject to necessary
approvals or such earlier date as permissible by the Ministry of Communications.
There also can be no assurance that the Ministry of Communications will approve
the transfer of the licenses upon the expiration of the three-year period during
which such transfer is prohibited. See "Certain Transactions--Formation
Transactions."
The agreements with the Licenseholders are also subject to the risk that the
Licenseholders may undergo bankruptcy or "concordata" proceedings which may
result in the rejection or termination of the operating agreements. Further,
there is a risk that acts or omissions by a Licenseholder could result in the
revocation of its paging license or the unavailability of such license to the
Company. While certain covenants have been included in the operating agreements
to limit such risk, there can be no assurance that such covenants will not be
violated or rendered ineffective. See "Certain Transactions--Formation
Transactions."
In addition, the Company's ability to use paging licenses, to cause them to
be renewed when they expire and to secure the use of new licenses in the future
is essential to the Company's operations. However, these licenses are granted by
the Ministry of Communications, and there can be no assurance that this
governmental agency will not seek to unilaterally limit, revoke or otherwise
adversely modify the terms of these licenses or the Company's ability to use
such licenses in the future, any of which could have a material adverse effect
on the Company; and in such event the Company may have limited or no legal
recourse. Furthermore, there can be no assurance that renewals of these licenses
will be granted or, if renewed, that the renewal terms will not be on
substantially less favorable terms, any of which could have a material adverse
effect on the Company. See "Business--Government Regulation."
DEPENDENCE ON KEY PERSONNEL. The success of the Company and its growth
strategy depends in large part on the ability of the Company to attract and
retain key management, marketing and operating personnel and, in particular the
Company's current President and Vice President of Operations. There can be no
assurance the Company will continue to attract and retain the qualified
personnel needed for its business. The failure of the Company to retain the
services of such officers and other key personnel could have a material adverse
effect on the Company's results of operations and financial condition. The
Company has entered into employment agreements, containing non-competition and
non-solicitation provisions, with its President and Vice President of
Operations. The Company believes that its future success will depend, in part,
on its ability to attract and retain highly talented managerial personnel. There
can be no assurance that it will be able to attract and retain the personnel it
requires on acceptable terms. See "Management--Employment Agreements."
DEPENDENCE ON SATELLITES. The Company's business is dependent upon the
operation of satellites by third parties. In order to service its paging
business, the Company utilizes BrasilSat One, a Brazilian satellite, under a
five-year contract with Embratel Sistema Telebras, the Brazilian state-owned
satellite and long distance telephone company. Although the Company has not
experienced nor does it expect to experience any significant disruption of its
transmissions, satellites are subject to significant risks that may prevent or
impair proper commercial operations, including satellite defects, destruction
and damage,
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incorrect orbital placement and transmission interference from various causes,
including poor weather. See "Business--Paging Systems Equipment."
COMPETITIVE INDUSTRY. The wireless communications industry in Brazil has
been and is expected to be highly competitive. The Company competes with
providers of paging services utilizing 35 MHz band and 931 MHz band delivery
systems and any new wireless telecommunications technology systems which may be
introduced, as well as telephone and cellular services generally. A number of
the Company's potential competitors have greater experience in the Brazilian
paging industry than the Company and certain of its competitors may have access
to significant debt or equity capital to pursue aggressive business plans. The
Company presently expects that it will compete with, among others, paging
networks operated by Vicom Servicos de Radiochamada Ltda. ("Teletrim"), Mobitel
S.A. Telecomunicacoes ("Mobitel"), Promptel e Comunicacoes S.A. ("Conectel"),
Ino Servicos Especializados de Telecomunicacoes Ltda. ("Powernet"), a company
partially owned by Motorola International Development Corporation, and Intelco
S.A. ("Intelco"). In addition, future technological advances in the
telecommunications industry could create new services or products competitive
with the paging services currently provided by the Company. There can be no
assurance that the Company would not be adversely affected by such new services
or products. See "Business--Competition."
INVESTMENT COMPANY ACT OF 1940. The Investment Company Act of 1940, as
amended, subjects "investment companies" to registration and regulation.
Generally, an investment company is an issuer that is or is deemed to be
primarily engaged in the business of investing, reinvesting or trading in
certain securities. The Company intends to invest the net proceeds of the
offering of the Old Notes (after acquiring the Pledged Securities) in cash
equivalents pending utilization as set forth in "Use of Proceeds." The Company
will invest the net proceeds of the Offering in such a manner as will cause it
not to be an "investment company" for purposes of the Investment Company Act of
1940.
In addition, as Holding LLC's sole business is to hold Common Stock of the
Company and certain cash assets, under certain circumstances Holding LLC might
be deemed to be an investment company subject to registration and regulation by
reason of its activities. Holding LLC has been advised by its counsel that so
long as the Company is a "majority-owned subsidiary" (as defined under the
Investment Company Act of 1940) of Holding LLC, Holding LLC will not be deemed
to be an investment company. The Company has agreed not to become an "investment
company" in the Indenture and Holding LLC has agreed not to become an investment
company in certain agreements to which it is a party. However, due to actions
beyond the control of the Company and Holding LLC, there can be no assurance
that the Company or Holding LLC will not be deemed to be an investment company
in the future. Potential investors in the New Notes should consult with their
own legal advisors with respect to the consequences, if any, to them as a result
of acquiring or holding such New Notes if either the Company or Holding LLC were
deemed to be an investment company, or a company owned or controlled by an
investment company.
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE. This Prospectus contains
certain forward-looking statements and information relating to the Company that
are based on the beliefs of the Company's management as well as assumptions made
by and information currently available to the Company's management. When used in
this Prospectus, the words "anticipate," "believe," "estimate" and "expect" and
similar expressions, as they relate to the Company or the Company's management,
are intended to identify forward-looking statements. Such statements reflect the
current views of the Company with respect to future events and are subject to
certain risks, uncertainties and assumptions, including the risk factors
described in this Prospectus. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described herein as anticipated, believed,
estimated or expected. The Company does not intend to update these
forward-looking statements.
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ABSENCE OF PUBLIC MARKET. There is no existing trading market for the New
Notes and there can be no assurance regarding the future development of a market
for the New Notes, the ability of holders of any of the New Notes to sell such
New Notes or the price at which such holders may be able to sell their New
Notes. If such a market were to develop, the New Notes could trade at prices
that may be higher or lower than the initial offering price depending on many
factors, including prevailing interest rates, the Company's operating results,
the market for similar New Notes and general macroeconomic and market conditions
in Brazil. The Company does not presently intend to apply for listing of any of
the New Notes on any national Securities exchange or on the NASDAQ system.
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THE COMPANY
The Company is a corporation (SOCIEDADE ANONIMA) organized in December 1996
under the laws of Brazil. The Company's predecessor was formed in April 1996 by
Warburg Pincus and members of the Company's senior management. The Company's
principal executive offices are located at Rua Alexandre Dumas, 1,711, Chacara
Santo Antonio, Sao Paulo, 04717-004, Brazil, and its telephone number is
011-55-11-538-3800.
Holding LLC is a limited liability company organized in March 1997 under the
laws of Delaware. Holding LLC's principal executive offices are located at c/o
Warburg, Pincus Ventures, L.P., 466 Lexington Avenue, New York, New York 10017.
Holding LLC's sole assets will be Common Stock of the Company and cash which
will be used to fund expenses of Holding LLC. See "Certain
Transactions--Restructuring Transactions."
The following chart sets forth the Company's ownership structure:
[GRAPHIC]
- ------------------------
(1) Includes subscription bonds of PageNet NV, TVA and Multiponto, which are
currently exercisable. Does not include approximately 1.72% of Common Stock
held by management.
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USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes as described in
this Prospectus, the Company will receive in exchange Old Notes in like
principal amount, the terms of which are identical in all material respects to
those of the New Notes, except that the New Notes have been registered under the
Securities Act and are issued free of any covenant regarding transfer
restrictions. The Old Notes surrendered in exchange for the New Notes will be
retired and cancelled and cannot be reissued. Accordingly, the issuance of the
New Notes will not result in any change in the indebtedness of the Company.
The net proceeds received by the Company from the sale of the Old Notes were
approximately US$120.0 million. Of these net proceeds, approximately US$46
million were used to purchase the Pledged Securities. The scheduled interest and
principal payments on Pledged Securities will be in an amount sufficient to
provide for payment in full when due of the first six scheduled interest
payments (exclusive of any Additional Amounts or Additional Interest which may
become payable) on the Notes through June 6, 2000.
The Company intends to use the net proceeds (after purchasing the Pledged
Securities), together with the cash expected to be on hand as of June 6, 1997 of
approximately US$9 million, primarily to fund operating losses, capital
expenditures and working capital needs in the development and operations of the
Initial Markets. Capital expenditures will include the purchase of pagers for
leasing, transmitters and other equipment and additional licenses in the Initial
Markets. The remaining proceeds are expected to be used for working capital and
general corporate purposes in the Initial Markets and, to the extent available,
for the buildout of the Expansion Markets. The Company believes that the net
proceeds, together with the cash on hand, will be sufficient to fund the
buildout of the Initial Markets.
The Pledged Securities have been pledged as security for payment of interest
and, under certain circumstances, repayment of principal of, the Notes. See
"Description of the Notes--Escrow Account." The Trustee holds the Pledged
Securities pursuant to a Pledge Agreement pending disbursement.
Because of the number of factors that will determine when and how the
Company funds its capital expenditures and operations, management will retain a
significant amount of discretion over the application of the net proceeds of the
sale of the Old Notes. Pending application of the available net proceeds, the
Company will invest these net proceeds (exclusive of the Escrow Account) in cash
equivalents.
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EXCHANGE RATE DATA
There are two legal foreign exchange markets in Brazil: the Commercial
Market and the Floating Market. The Commercial Market is reserved primarily for
foreign trade transactions and transactions that generally require prior
approval from Brazilian monetary authorities, including the purchase and sale of
registered investments by foreign persons and related remittances of funds
abroad. Purchases of foreign exchange in the Commercial Market may be carried
out only through a financial institution in Brazil authorized to buy and sell
currency in that market. The "Commercial Market Rate" is the commercial selling
rate for Brazilian currency into U.S. dollars, as reported by the Central Bank.
The "Floating Market Rate" generally applies to transactions to which the
Commercial Market Rate does not apply. Prior to the implementation of the Real
Plan, the Commercial Market Rate and the Floating Market Rate differed
significantly at times. Since the introduction of the REAL, the two rates have
not differed significantly, although there can be no assurance that there will
not be significant differences between the two rates in the future. Both the
Commercial Market Rate and the Floating Market Rate are reported by the Central
Bank on a daily basis.
Both the Commercial Market Rate and the Floating Market Rate are freely
negotiated but are strongly influenced by the Central Bank, which typically
intervened in the Commercial Market, prior to the implementation of the Real
Plan, in order to control fluctuations and to regulate disparities between the
Commercial Market Rate and the Floating Market Rate. After implementation of the
Real Plan, the Central Bank allowed the REAL to float with minimal intervention.
However, as described below, on March 6, 1995, the Central Bank announced its
intention to intervene in the foreign exchange markets and has subsequently
intervened in the markets and taken other actions affecting such markets.
On August 1, 1993, the CRUZEIRO REAL replaced the CRUZEIRO as the unit of
Brazilian currency, with each CRUZEIRO REAL being equal to 1,000 CRUZEIROS.
Beginning in 1994, the Brazilian Government began implementation of the Real
Plan. On July 1, 1994, the REAL replaced the CRUZEIRO REAL as the unit of
Brazilian currency, with each REAL being equal to 2,750 CRUZEIROS REAIS and
having an exchange rate of R$1.00 to US$1.00. According to Brazilian law, the
issuance of REAIS is controlled by quantitative limits backed by a corresponding
amount of U.S. dollars in reserves, but the Brazilian Government subsequently
expanded those quantitative limits and allowed the REAL to float, with parity
between the REAL and the U.S. dollar (R$1.00 to US$1.00) as a ceiling.
On March 6, 1995, the Central Bank announced that it would intervene in the
market and buy or sell U.S. dollars, establishing a band (FAIXA DE FLUTUACAO) in
which the exchange rate between the REAL and the U.S. dollar could fluctuate.
The Central Bank initially set the band with a floor of R$0.86 per US$1.00 and a
ceiling of R$0.90 per US$1.00 and provided that, from and after May 2, 1995, the
band would fluctuate between R$0.86 and R$0.98 per US$1.00. Shortly thereafter,
the Central Bank issued a new directive providing that the band would be between
R$0.88 and R$0.93 per US$1.00. On June 22, 1995, the Central Bank issued another
directive providing that the band would be between R$0.91 and R$0.99 per US$1.00
and subsequently reset the band on January 30, 1996 to between R$0.97 and R$1.06
per US$1.00. There can be no assurance that the band will not be altered in the
future. See "Risk Factors--Factors Relating to Brazil--Economic Uncertainty;
Effects of Exchange Rate Fluctuations" and "--Factors Relating to
Brazil--Controls and Restrictions on U.S. Dollar Remittances." On June 7, 1996,
the Commercial Market rate as reported by the Central Bank was R$0.99910 per
US$1.00. On February 18, 1997, the Central Bank again reset the band to between
R$1.05 and R$1.14 per US$1.00.
26
<PAGE>
The following table sets forth the Commercial Market Rate for U.S. dollars
for the periods and dates indicated. Amounts are expressed in REAIS and have
been translated from the predecessor currencies in effect during the relevant
period at the rates of exchange at the time the successor currency took effect.
<TABLE>
<CAPTION>
EXCHANGE RATES PER US$1.00(1)
-----------------------------------------------
<S> <C> <C> <C> <C>
PERIOD LOW HIGH AVERAGE(2) PERIOD-END
- --------------------------------------------------------------- ---------- ---------- ---------- -----------
1990........................................................... 0.000004 0.000062 0.000025 0.000062
1991........................................................... 0.000062 0.000389 0.000149 0.000389
1992........................................................... 0.000393 0.004505 0.001655 0.004505
1993........................................................... 0.004557 0.118584 0.032809 0.118584
1994........................................................... 0.120444 0.940000 0.645000 0.846000
1995........................................................... 0.834000 0.972600 0.917742 0.972500
1996........................................................... 0.971800 1.041400 1.004000 1.039100
1997 (through May 28).......................................... 1.039500 1.073100 1.055344 1.073100
</TABLE>
- ------------------------
(1) The information set forth above is based on information published by the
Central Bank. The Federal Reserve Bank of New York does not publish a
noon-buying rate for REAIS.
(2) Weighted average of the exchange rates on business days for the period.
Brazilian law provides that whenever there is a material imbalance, or a
serious risk of a material imbalance, in Brazil's balance of payments, the
Brazilian Government may, for a limited period of time, impose restrictions on
the remittance to foreign investors of the proceeds of their investments in
Brazil, as it did for approximately six months in 1989 and early 1990, as well
as on the conversion of the Brazilian currency into foreign currencies.
The Brazilian Government currently restricts the ability of Brazilian or
foreign persons or entities to convert Brazilian currency into U.S. dollars or
other currencies other than in connection with certain authorized transactions.
The Central Bank has authorized the issuance of the Notes and, although there
can be no assurance, is expected, in due course, after the Closing Date, to
issue a certificate of registration authorizing each of the scheduled payments
of principal of, premium on, and interest on the Notes or for payments of
principal of, premium on and interest on the Notes upon any early redemption of
the Notes at the option of a holder of Notes. However, consent from the Central
Bank is needed for the payment of principal of, premium, if any, on and interest
on the Notes upon acceleration of the Notes following an Event of Default or for
certain late payments of the Notes (I.E., payments made 181 days or more after a
scheduled payment date). In addition, consent from the Central Bank is needed
for (i) payments in respect of the Notes upon redemption by the Company in the
event of certain changes in Brazilian law relating to tax withholding, as
described under "Description of the Notes--Redemption--Redemption for Changes in
Withholding Taxes," (ii) payments in respect of the Notes in the event of
redemption of the Notes by the Company, as described under "Description of the
Notes--Redemption--Optional Redemption by the Company," (iii) payments in
respect of the Notes in the event of an Asset Sale Offer, as described under
"Description of the Notes--Certain Covenants--Disposition of Proceeds of Asset
Sales," and (iv) payments in respect of the Notes in the event of a Change of
Control Offer, as described under "Description of the
Notes--Redemption--Mandatory Redemption--Offers to Purchase upon Change of
Control and Certain Asset Sales." There can be no assurance that any required
consent from the Central Bank will be obtained.
There can be no assurance that the Brazilian Government will not in the
future impose more restrictive foreign exchange regulations that would have the
effect of eliminating or restricting the Company's access to foreign currency
that would be required to meet its foreign currency obligations, including the
Notes. The likelihood of the imposition of such restrictions by the Brazilian
Government may be affected by, among other factors, the extent of Brazil's
foreign currency reserves, the availability of sufficient foreign currency on
the date a payment is due, the size of Brazil's debt service burden relative to
the economy as a whole, Brazil's policy toward the International Monetary Fund
and political constraints to which Brazil may be subject.
27
<PAGE>
CAPITALIZATION
The following table sets forth the cash and cash equivalents and
capitalization of the Company at March 31, 1997 (i) on an actual basis and (ii)
as adjusted to give effect to the sale of an additional 8,700 shares of
redeemable preferred stock and a Common Stock split of approximately 40.75 for 1
(the "Common Stock Split"), upon consummation of the sale of the Old Notes and
the concurrent issuance of 125,000 shares of Common Stock (the "Equity
Issuance") and the use of a portion of the net proceeds therefrom to purchase
the Pledged Securities. This table should be read in conjunction with the
Financial Statements and notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
----------------------
<S> <C> <C>
ACTUAL AS ADJUSTED
--------- -----------
(U.S. DOLLARS IN
THOUSANDS)
Cash and cash equivalents................................................................. $ 3,302 $ 86,002
Pledged Securities........................................................................ -- 46,000
--------- -----------
--------- -----------
Long-term debt:
Notes offered hereby.................................................................... $ -- $ 125,000
--------- -----------
Total long-term debt................................................................ -- 125,000
--------- -----------
Redeemable preferred stock, no par value, authorized 63,000; actual issued and outstanding
21,300, as adjusted 30,000(1)(2)........................................................ 21,939 30,639
--------- -----------
Shareholders' equity (deficit):
Common Stock, no par value, authorized 50,000 and 2,037,387, as adjusted
issued and outstanding 30,760 and 1,378,401, as adjusted(2)(3)........................ 31 31(4)
Accumulated deficit..................................................................... (9,009) (9,009)
--------- -----------
Total shareholders' equity (deficit)................................................ (8,978) (8,978)
--------- -----------
Total capitalization............................................................ $ 12,961 $ 146,661
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) The redeemable preferred stock has an accruing dividend with an effective
annual rate of 12% compounding quarterly for the first five years from its
issuance. On the fifth anniversary of its issuance, the dividend increases
to an effective annual rate of 14% compounding quarterly. On the sixth
anniversary of its issuance, all previously accrued dividends will be paid
in kind. The annual dividend rate will increase to 16% in the seventh year,
18% in the eighth year, and 20% in the ninth and tenth years. After the
sixth anniversary, subject to the covenants contained in the Indenture, all
dividends will be payable in cash. The Company is required, subject to the
terms of the Indenture, to redeem the redeemable preferred stock at US$1,000
per share plus accrued and unpaid dividends on the tenth anniversary of its
issuance. In the event no cash dividends are paid on the redeemable
preferred stock, the aggregate redemption price would be US$108.2 million in
year ten.
(2) Redeemable preferred stock includes accrued dividends of US$639,000.
(3) Excludes 9,996 (407,314, as adjusted) shares of Common Stock reserved for
issuance to certain shareholders under subscription bonds outstanding at an
exercise price of US$1.00 per share (US$.025 per share, as adjusted).
(4) The shares of Common Stock issued in the Equity Issuance will have a nominal
value.
28
<PAGE>
SELECTED FINANCIAL DATA
The selected financial information for the Company set forth below for the
period ended December 31, 1996 have been derived from the Consolidated Financial
Statements of the Company, which have been audited by Ernst & Young, Auditores
Independentes S.C. The selected financial information for the Company for the
three months ended March 31, 1997 have been derived from the unaudited
Consolidated Financial Statements of the Company. The information set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Financial Statements
of the Company included elsewhere in this Prospectus. The Financial Statements
have been prepared in accordance with U.S. GAAP. The Company was a development
stage company in 1996. The Company began earning revenue from operations in
March 1997 and, therefore, is no longer a development stage company.
<TABLE>
<CAPTION>
INCEPTION TO THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 31, 1997
----------------- -------------------
(U.S. DOLLARS IN THOUSANDS)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue............................................................ $-- $42
Operating costs and expenses:
Cost of sales........................................................ -- 18
Selling, general and administrative.................................. 4,962 3,461
------ ------
Operating loss......................................................... 4,962 3,437
Other income (expense)................................................. 57 (28)
------ ------
Net loss............................................................... $4,905 $3,465
------ ------
------ ------
Ratio of earnings to fixed charges (1)................................. -- --
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1997
----------------------
<S> <C> <C>
AS
ACTUAL ADJUSTED(2)
--------- -----------
(U.S. DOLLARS IN
THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents............................................................... $ 3,302 $ 86,002
Pledged Securities...................................................................... -- 46,000
Working capital......................................................................... 6,213 104,913
Fixed assets, net....................................................................... 6,748 6,748
Total assets............................................................................ 13,848 13,848
Total debt.............................................................................. -- 125,000
Redeemable preferred stock.............................................................. 21,939 30,639
Shareholders' equity (deficit).......................................................... $ (8,978) $ (8,978)
</TABLE>
- ------------------------
(1) For the period from inception to December 31, 1996 and the three months
ended March 31, 1997 earnings were insufficent to cover fixed charges by
$4,905,000 and $3,465,000, respectively.
(2) As adjusted to give effect to the collection of receivables for the sale of
stock prior to the sale of the Old Notes, the sale of an additional 8,700
shares of redeemable preferred stock upon consummation of the sale of the
Old Notes and the Equity Issuance and the use of a portion of the net
proceeds to purchase the Pledged Securities. See "Use of Proceeds."
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE
FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, INCLUDED ELSEWHERE IN THIS
PROSPECTUS, AND IN CONJUNCTION WITH THE DISCUSSION OF THE METHOD OF PRESENTATION
OF FINANCIAL INFORMATION UNDER "SELECTED FINANCIAL DATA." AS A NEW BUSINESS, THE
COMPANY IS SUBJECT TO ALL OF THE SUBSTANTIAL RISKS INHERENT IN THE COMMENCEMENT
OF A NEW BUSINESS ENTERPRISE WITH NEW MANAGEMENT. ALTHOUGH THE COMPANY BEGAN
GENERATING REVENUES IN MARCH 1997, THERE CAN BE NO ASSURANCE THAT THE COMPANY
WILL BE PROFITABLE. ADDITIONALLY, THE COMPANY HAS A LIMITED BUSINESS HISTORY
THAT INVESTORS CAN ANALYZE TO AID THEM IN MAKING AN INFORMED JUDGMENT AS TO THE
MERITS OF AN INVESTMENT IN THE COMPANY.
OVERVIEW
The Company commenced the buildout of its paging service in May 1996 and
began offering paging service in Sao Paulo in January 1997. The Company has also
substantially completed the buildout of its paging system in Rio de Janeiro,
where the Company expects to begin offering paging service in the first quarter
of 1998, and has installed transmitters in eight additional cities in Brazil.
Revenues are expected to increase as the Company adds subscribers and
receives monthly fees from a growing subscriber base. As the Company continues
to develop systems, positive EBITDA(1) from more developed systems is expected
to be offset partially or completely by corporate overhead, negative EBITDA from
less developed systems and from development costs associated with establishing
new systems. This trend is expected to continue until the Company has a
sufficiently large subscriber base to absorb operating and development costs of
new systems or no longer develops or invests in new systems.
The Company both leases and sells pagers to customers. Average monthly
revenue and customer acquisition costs differ depending on whether the customer
leases or purchases the pager.
LEASED PAGER CUSTOMERS. In addition to the initial capital investment, each
new subscriber requires an incremental investment which will vary based on the
type of product and service purchased. In the Sao Paulo market, for example, the
Company expects the acquisition cost for a customer who leases a pager to
consist primarily of the cost of the pager, the cost of terminal capacity,
certain other equipment and supplies, marketing and selling costs. The Company
capitalizes pager costs and depreciates these costs over 2 1/2 years. The
Company expenses marketing and selling costs. The Company does not anticipate
charging its subscribers a service initiation fee, although it may decide to
charge such a fee in the future in certain markets. Monthly revenue per
subscriber is expected to be approximately US$40 on average in 1997 (which
includes the monthly leasing charge), and is expected to fall moderately over
time.
PURCHASED PAGER CUSTOMERS. In the Sao Paulo market, the Company expects the
acquisition cost for a customer who purchases a pager to consist primarily of
the cost of terminal capacity, certain other equipment and supplies, marketing
and selling costs. The Company expenses the cost of the pager, marketing and
selling costs. Monthly revenue per subscriber is expected to be approximately
US$28 on average in 1997 and is expected to fall moderately over time.
- ------------------------
(1) EBITDA is defined as operating income (loss) plus depreciation, amortization
and non-cash charges. EBITDA is a commonly used measure of performance in
the paging industry. While EBITDA should not be construed as a substitute
for operating income (loss) or a better measure of liquidity than cash flow
from operating activities, each of which is determined in accordance with
U.S. GAAP, it is included herein to provide additional information regarding
the ability of the Company to meet its capital expenditures, working capital
requirements and any future debt service. EBITDA, however, is not
necessarily a measure of the Company's ability to fund its cash needs,
because it does not include capital expenditures, which the Company expects
to continue to be significant.
30
<PAGE>
The Company's operating revenues consist primarily of monthly fees paid by
subscribers for paging service and leasing costs. System operating expenses
include a portion of costs of compensation and benefits for the Company's
employees, transmitter site rentals, telephone line costs, pager costs,
transmission costs, vehicle rental costs, repair and maintenance expenditures
and service call costs. Depreciation and amortization expenses consist primarily
of depreciation of leased pagers, transmitters, paging terminals, telephone
lines and cost of network installation.
The development of a new system requires significant expenditures, a
substantial portion of which are incurred before the realization of revenues.
These expenditures, together with the associated early operating expenses,
result in negative cash flow until an adequate revenue generating subscriber
base is established. As the subscriber base increases, revenues, as well as some
costs, generally increase while other costs remain constant or increase at
proportionately lower levels. Accordingly, although costs increase in the
aggregate as the subscriber base grows, the average costs per subscriber
generally decrease and operating margins generally increase.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997
During the three months ended March 31, 1997, the Company began to market
its paging services in Sao Paulo. During such three-month period, the Company
generated US$42,106 in operating revenues, had cost of sales of US$18,128 and
incurred selling and general administrative expenses of US$3,460,810 in
connection with the marketing of its services and the continued buildout of its
paging network. These expenses consisted primarily of payroll expenses,
professional fees, advertising expenses and rent.
The Company earned interest income in the three months ended March 31, 1997
of US$205,143 and had exchange translation losses of US$233,634.
As a result, the Company incurred a net loss in the three month period ended
March 31, 1997 of US$3,465,323. The loss is primarily attributable to the
expenses incurred during the period in connection with the continued development
of the Company's business.
PERIOD FROM INCEPTION THROUGH DECEMBER 31, 1996
During the period from inception through December 31, 1996, the Company did
not generate any operating revenues. The Company incurred expenses of
US$4,961,639 in connection with the commencement of operations and the buildout
of its service. These expenses primarily consisted of payroll expenses,
professional fees and rent.
The Company earned interest income in such period of US$117,210 and had
exchange and translation losses of US$60,179.
As a result, the Company incurred a net loss in such period of US$4,904,608.
This loss is primarily attributable to the expenses incurred during the period
in connection with the development of the Company's business.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations and expansion into new markets and products lines
will require substantial capital investment for the development and installation
of paging systems and for the procurement of pagers and paging equipment.
The Company commenced the buildout of systems for its paging services in May
1996 and plans to substantially complete the buildout of the Initial Markets by
the first quarter of 1998 and the Expansion
31
<PAGE>
Markets by the first quarter of 1999. As of June 6, 1997, the Company has (1)
completed the buildout of its Sao Paulo system, which is currently serving
approximately 3,500 subscribers, (2) installed transmitters in the Existing
Coverage Area, including Rio de Janeiro, where the system buildout is
substantially complete, and (3) hired the personnel and infrastructure necessary
to support the Company's Sao Paulo operations. The Company expects that the
available net proceeds of the Offering of the Old Notes, together with cash on
hand, will be sufficient to complete the planned buildout of the Initial Markets
and that it will need to secure additional financing to complete the planned
buildout of the Expansion Markets. See "Use of Proceeds."
The principal capital expenditure requirements to construct a paging system
involve the acquisition of pagers for leasing and the acquisition and
installation of transmission facilities, both of which are directly related to
the demand for paging service. Additional capital is required to fund operating
losses incurred during the initial stages of constructing and rolling out
services. The Company currently anticipates that its cash requirements
(comprised of capital expenditures, working capital requirements, debt service
requirements and anticipated operating losses) from inception in May 1996
through December 2000, will be approximately US$150 million, including
approximately US$100 million in capital expenditures, of which approximately
US$55 million is attributable to the purchase of pagers for leasing. The Company
estimates that, of the US$150 million, approximately US$80 million will be
required to fund the capital requirements for the Initial Markets through 2000.
The actual amounts required by the Company will vary based upon the time and
success of the Company's rollout of services in its markets as well as the mix
between leased and purchased pagers. If demand for the Company's services is
less than expected, the Company should be able to reduce certain costs that are
to a large extent demand driven and/or delay the rollout of its services in the
Expansion Markets.
The Company also from time to time may selectively pursue the acquisition of
existing paging systems, although it currently has no pending acquisitions. The
Company may implement alternative technologies in the future. If such new
systems are launched, acquisitions are consummated or alternative technologies
implemented, substantial additional funds may be required. The Company intends
to fund such future cash requirements through the issuance of additional debt
and/or equity capital, joint ventures or other arrangements. There can be no
assurance that the Company will be able to obtain such debt or equity capital on
satisfactory terms, or at all, to meet its future financing needs.
The Company has raised approximately US$155 million from issuance of the
Company's redeemable preferred stock and the Old Notes. While the Company
believes that the available portion of these funds will be sufficient for the
planned development of the Initial Markets, there can be no assurance that
operating losses will not exceed expectations or that unanticipated expenditures
will not be necessary or desirable. In addition, commencing in December 2002,
subject to restrictions on the Company's ability to pay dividends contained in
the Indenture, dividends on the Company's Preferred Stock will be payable
quarterly in cash out of earnings and profits of the Company. The Company's
liquidity may also be adversely affected by statutory minimum dividend
requirements that require the distribution of 25% of net income of a company, as
determined under applicable Brazilian law. Moreover, if growth exceeds
expectations, additional funds may be required to finance the Company's
expansion. The Company will also require additional financing to buildout and
commence services in the Expansion Markets. The Company has no committed sources
of financing and there can be no assurance that additional financing will be
available to the Company on acceptable terms when required. If adequate sources
of additional financing are not available, the Company may be forced to delay,
scale back or eliminate any portion of its plans. See "Risk Factors--Risk
Factors Relating to the Company and the Offering--Need for Additional Financing
and Liquidity."
The Company has used approximately US$46 million of the net proceeds to
purchase a portfolio of securities, to be held in the United States, consisting
of U.S. Government Securities, that are pledged as
32
<PAGE>
security sufficient to cover the first six payments of interest on the Notes
through June 6, 2000 and, under certain circumstances, as security for repayment
of principal of the Notes. See "Use of Proceeds."
INFLATION AND EXCHANGE RATES
Inflation and exchange rate variations may have substantial effects on the
Company's results of operations and financial condition. In periods of
inflation, many of the Company's expenses will tend to increase. Generally, in
periods of inflation, a company is able to raise its prices to offset the rise
in its expenses and may set its prices without government regulation. However,
under Brazilian law designed to reduce inflation, the rates which the Company
may charge to a particular subscriber may not be increased until the next
anniversary of the subscriber's initial subscription date. Thus, the Company is
less able to offset expense increases with revenue increases.
Generally, the effects of inflation in Brazil have been offset in part by
devaluation of the Brazilian currency relative to the U.S. dollar. Devaluation
of the REAL may also have an adverse effect on the Company. The Company collects
substantially all of its revenues in REAIS, but pays certain of its expenses,
including interest on the Notes and a significant portion of its equipment
costs, in U.S. dollars. To the extent the REAL depreciates at a rate greater
than the rate at which the Company raises prices, the value of the Company's
revenues (as expressed in U.S. dollars) may be adversely affected. This effect
on the Company's revenues may negatively impact the Company's ability to fund
U.S. dollar-based expenditures. The Company may experience economic loss with
respect to its investments and fluctuations in its reported results of
operations solely as a result of currency rate fluctuations, which may have a
material adverse effect on the Company's financial condition. The Company
intends to explore various alternatives that may be available to hedge exchange
rate risks, although there can be no assurance that any such alternatives will
be available on terms acceptable to the Company. Accordingly, devaluation of the
REAL may have a material adverse effect on the Company's results of operations
and financial condition.
33
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
In connection with the sale of the Old Notes, the Company entered into the
Notes Registration Rights Agreement with the Initial Purchasers, pursuant to
which the Company agreed to use its best efforts to file with the Commission a
registration statement with respect to the exchange of the Old Notes for a
series of registered debt securities with terms identical in all material
respects to the terms of the Old Notes, except that the New Notes are issued
free from any covenant regarding transfer restrictions, and except that if the
Exchange Offer is not consummated by November 3, 1997, the interest rate borne
by the Old Notes will increase by 0.50% per annum for the first 90-day period
following November 3, 1997 and will increase by an additional 0.50% per annum
with respect to each subsequent 45-day period up to a maximum amount of 2.00%
per annum.
The Company is making the Exchange Offer in reliance on the position of the
staff of the Commission as set forth in certain no-action letters addressed to
other parties in other transactions. However, the Company has not sought its own
no-action letter and there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer as in such
other circumstances. Based upon these interpretations by the staff of the
Commission, the Company believes that New Notes issued pursuant to this Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by a holder thereof other than (i) a broker-dealer who purchased
such Old Notes directly from the Company to resell pursuant to Rule 144A or any
other available exemption under the Securities Act or (ii) a person that is an
"affiliate" (as defined in Rule 405 of the Securities Act) of the Company
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and that such holder is not participating, and
has no arrangement or understanding with any person to participate, in the
distribution of such New Notes. Holders of Old Notes accepting the Exchange
Offer will represent to the Company in the Letter of Transmittal that such
conditions have been met. Any holder who participates in the Exchange Offer for
the purpose of participating in a distribution of the New Notes may not rely on
the position of the staff of the Commission as set forth in these no-action
letters and would have to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. A secondary resale transaction in the United States by a holder who
is using the Exchange Offer to participate in the distribution of New Notes must
be covered by a registration statement containing the selling securityholder
information required by Item 507 of Regulation S-K of the Securities Act.
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it acquired the Old Notes as a result
of market-making activities or other trading activities and will deliver a
prospectus in connection with any resale of such New Notes. This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Letter of
Transmittal states that by acknowledging and delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. The Company has agreed that for a period of 180
days after the Expiration Date, it will make this Prospectus available to
broker-dealers for use in connection with any such resale. See "Plan of
Distribution."
Except as aforesaid, this Prospectus may not be used for an offer to resell,
resale or other retransfer of New Notes.
The Exchange Offer is not being made to, nor will the Company accept tenders
for exchange from, holders of Old Notes in any jurisdiction in which the
Exchange Offer or the acceptance thereof would not be in compliance with the
securities or blue sky laws of such jurisdiction.
34
<PAGE>
TERMS OF THE EXCHANGE
Upon the terms and subject to the conditions of the Exchange Offer, the
Company will, unless such Old Notes are withdrawn in accordance with the
withdrawal rights specified in "--Withdrawal of Tenders" below, accept any and
all Old Notes validly tendered prior to 5:00 p.m., New York City time, on the
Expiration Date. The date of acceptance for exchange of the Old Notes, and
consummation of the Exchange Offer, is the Exchange Date, which will be the
first business day following the Expiration Date (unless extended as described
herein). The Company will issue, on or promptly after the Exchange Date, an
aggregate principal amount of up to US$125,000,000 of New Notes in exchange for
a like principal amount of outstanding Old Notes tendered and accepted in
connection with the Exchange Offer. The New Notes issued in connection with the
Exchange Offer will be delivered on the earliest practicable date following the
Exchange Date. Holders may tender some or all of their Old Notes in connection
with the Exchange Offer. However, Old Notes may be tendered only in integral
multiples of US$1,000.
The terms of the New Notes are identical in all material respects to the
terms of the Old Notes, except that the New Notes have been registered under the
Securities Act and are issued free from any covenant regarding transfer
restrictions, and except that if the Exchange Offer is not consummated by
November 3, 1997, the interest rate borne by the Old Notes will increase by
0.50% per annum for the first 90-day period following November 3, 1997 and will
increase by an additional 0.50% per annum with respect to each subsequent 45-day
period up to a maximum amount of 2.00% per annum. The New Notes will evidence
the same debt as the Old Notes and will be issued under and be entitled to the
same benefits under the Indenture as the Old Notes. As of the date of this
Prospectus, US$125,000,000 aggregate principal amount of the Old Notes is
outstanding.
In connection with the issuance of the Old Notes, the Company arranged for
the Old Notes originally purchased by qualified institutional buyers to be
issued and transferable in book-entry form through the facilities of The
Depository Trust Company ("DTC"), acting as depository. Except as described in
"Book-Entry; Delivery and Form," the New Notes will be issued in the form of a
global note registered in the name of DTC or its nominee and each holder's
interest therein will be transferable in book-entry form through DTC. See
"Book-Entry; Delivery and Form."
Holders of Old Notes do not have any appraisal or dissenters' rights in
connection with the Exchange Offer. Old Notes which are not tendered for
exchange or are tendered but not accepted in connection with the Exchange Offer
will remain outstanding and be entitled to the benefits of the Indenture, but
will not be entitled to any registration rights under the Notes Registration
Rights Agreement.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purposes of receiving the New Notes from the Company.
If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in connection with the Exchange Offer will not
be required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of Old
Notes in connection with the Exchange Offer. The Company will pay all charges
and expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "-- Fees and Expenses."
35
<PAGE>
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, 1997, unless extended by the Company in its sold discretion, in
which case the term "Expiration Date" shall mean the latest date and time to
which the Exchange Offer is extended.
The Company reserves the right, in its sole discretion (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer and to refuse to accept Old Notes not previously accepted, if any
of the conditions set forth below under "--Conditions to the Exchange Offer"
shall not have been satisfied and shall not have been waived by the Company (if
permitted to be waived by the Company) and (ii) to amend the terms of the
Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral or
written notice thereof to the registered holders. If the Exchange Offer is
amended in a manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders of the Old Notes,
and the Company will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the amendment and the manner
of disclosure to the registered holder, if the Exchange Offer would otherwise
expire during such five to ten business day period.
If the Company determines to make a public announcement of any delay,
extension, amendment or termination of the Exchange Offer, the Company shall
have no obligation to publish, advertise or otherwise communicate any such
public announcement, other than by making a timely release to an appropriate
news agency.
INTEREST ON THE NEW NOTES
The New Notes will bear interest at the rate of 13 1/2% per annum. Interest
on the New Notes shall accrue from the last Interest Payment Date (June 6 or
December 6) on which interest was paid on the Old Notes surrendered or, if no
interest has been paid on the Old Notes, from June 6, 1996.
Interest on the New Notes will be payable semiannually on June 6 and
December 6 of each year, commencing on the first Interest Payment Date following
the issuance thereof.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive interest on such Old Notes for any period subsequent to the last
interest payment date to occur prior to the issue date of the New Notes, and
will be deemed to have waived the right to receive any interest payment on the
Old Notes accrued from and after such interest payment date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or to exchange, any Old Notes for any New
Notes, and may terminate or amend the Exchange Offer before the acceptance of
any Old Notes for exchange if:
(a) any action or proceeding is instituted or threatened in any
court or by or before any governmental agency relating to the Exchange
Offer which, in the Company's reasonable good faith judgment, would be
expected to impair the ability of the Company to proceed with the
Exchange Offer, or
(b) any law, statute, rule or regulation is adopted or enacted, or
any existing law, statute, rule or regulation is interpreted by the
Commission or its staff, which, in the Company's reasonable good faith
judgment, would be expected to impair the ability of the Company to
proceed with the Exchange Offer.
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If the Company determines in its reasonable good faith judgment that any of
the foregoing conditions exist, the Company may (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering holders, (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the expiration of
the Exchange Offer, subject, however, to the rights of holders who tendered such
Old Notes to withdraw their tendered Old Notes which have not been withdrawn. If
such waiver constitutes a material change to the Exchange Offer, the Company
will promptly disclose such waiver by means of a prospectus supplement that will
be distributed to the registered holders, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such five to ten
business days.
PROCEDURES FOR TENDERING
Only a holder of record of Old Notes on , 1997 may tender such
Old Notes in connection with the Exchange Offer. To tender in connection with
the Exchange Offer, a holder must complete, sign and date the Letter of
Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if
required by the Letter of Transmittal and mail or otherwise deliver such Letter
of Transmittal or such facsimile, together with the Old Notes (unless such
tender is being effected pursuant to the procedure for book-entry transfer
described below) and any other required documents, to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date.
Any financial institution that is a participant in DTC's Book-Entry Transfer
Facility system may make book-entry delivery of the Old Notes by causing DTC to
transfer such Old Notes into the Exchange Agent's account in accordance with
DTC's procedure for such transfer. Although delivery of Old Notes may be
effected through book-entry transfer into the Exchange Agent's Account at DTC,
the Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received or confirmed by the Exchange Agent at its addresses set forth
under the caption "Exchange Agent," below, prior to 5:00 p.m., New York City
time, on the Expiration Date. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH
ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder of Old Notes will constitute an agreement between
such holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
The method of delivery of Old Notes and the Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the holders. Instead of delivery by mail, it is recommended that holders use an
overnight or hand delivery service. In all cases, sufficient time should be
allowed to assure deliver to the Exchange Agent before the Expiration Date. No
Letter of Transmittal or Old Notes should be sent to the Company. Holders may
request their respective brokers, dealers, commercial banks, trust companies or
nominees to effect the tenders for such holders.
Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder to tender on such beneficial owner's behalf. If such beneficial owner
wishes to tender on such owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal and delivery of such owner's
Old Notes, either make appropriate arrangements to register ownership of the Old
Notes in such owner's name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership may take considerable
time.
Signature on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below) unless
the Old Notes tendered pursuant thereto are tendered (i) by a registered holder
who has not completed the box entitled "Special Payment Instructions" or
"Special Delivery Instructions" on the Letter of Transmittal, or (ii) for the
account of an Eligible
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Institution. In the event that signatures on a Letter of Transmittal or a notice
of withdrawal, as the case may be, are required to be guaranteed, such guarantee
must be by a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (an "Eligible
Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed by such
registered holder or accompanied by a properly completed bond power, in each
case signed or endorsed in blank by such registered holder as such registered
holder's name appears on such Old Notes.
If the Letter of Transmittal or any Old Notes or bond powers are signed or
endorsed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act must
be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance and withdrawal of tendered Old Notes will be determined
by the Company in its sole discretion, which determination will be final and
binding. The Company reserves the absolute right to reject any and all Old Notes
not properly tendered or any Old Notes whose acceptance by the Company would, in
the opinion of U.S. counsel for the Company, be unlawful. The Company also
reserves the right to waive any defects, irregularities or conditions of tender
as to any particular Old Notes either before or after the Expiration Date. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Notes must be accrued within such time as the
Company shall determine. Although the Company intends to request the Exchange
Agent to notify holders of defects or irregularities with respect to tenders of
Old Notes, neither the Company, the Exchange Agent nor any other person shall
have any duty or incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Old Notes received by the Exchange
Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration date.
In addition, the Company reserves the right, as set forth above under
caption "--Conditions to the Exchange Offer," to terminate the Exchange Offer.
By tendering, each holder represents to the Company that, among other
things, the New Notes acquired in connection with the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder, that neither the holder nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes and that neither the holder
nor any such other person is an "affiliate" (as defined in rule 405 under the
Securities Act) of the Company. If the holder is a broker-dealer which will
receive New Notes for its own account in exchange of Old Notes, it will
acknowledge that it acquired such Old Notes as the result of market making
activities or other trading activities and it will deliver a prospectus in
connection with any resale of such New Notes. See "Plan of Distribution."
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and (i) whose Old Notes are not
immediately available, or (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the
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Exchange Agent, or cannot complete the procedure for book-entry transfer, prior
to the Expiration Date, may effect a tender of their Old Notes if:
(a) the tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent received from
such Eligible Institution a properly completed and duly executed Notice
of Guaranteed Deliver (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate
number(s) of such Old Notes and the principal amount of Old Notes
tendered, stating that the tender is being made thereby and guaranteeing
that with five business days after the Expiration Date, the Letter of
Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes to be tendered in proper form for transfer (or
confirmation of a book-entry transfer into the Exchange Agent's account
at DTC of Old Notes delivered electronically) and any other documents
required by the Letter of Transmittal will be deposited by the Eligible
Institution with the Exchange Agent; and
(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof) as well as the certificate(s) representing all
tendered Old Notes in proper form for transfer (or confirmation of a
book-entry transfer into the Exchange Agent's account at DTC of Old Notes
delivered electronically) and all other documents required by the Letter
of Transmittal are received by the Exchange Agent within five business
days after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00p.m, New York City time, on the Expiration Date.
To withdraw a tender of Old Notes in connection with the Exchange Offer, a
written or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. Any such notice of withdrawal must (i) specify the
name of the person who deposited the Old Notes to be withdrawn (the
"Depositor"), (ii) identify the Old Notes to be withdrawn (including the
certificate number or numbers and principal amount of such Old Notes), (iii) be
signed by the Depositor in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee register the transfer of such Old Notes into the
name of the person withdrawing the tender, and (iv) specify the name in which
any such Old Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Company,
whose determination shall be final and binding on all parties. Any Old Notes so
withdrawn will be deemed not be have been validly tendered for purposes of the
Exchange Offer and no New Notes will be issued with respect thereto unless the
Old Notes so withdrawn are validly re-tendered. Any Old Notes which have been
tendered but which are not accepted for exchange or which are withdrawn will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be re-tendered by following one of the
procedures described above under the caption "-- Procedures for Tendering" at
any time prior to the Expiration Date.
EXCHANGE AGENT
The Chase Manhattan Bank has been appointed as Exchange Agent in connection
with the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent, at its offices at 450 West 33rd Street, 15th
Floor, New York New York 10001. The Exchange Agent's telephone number is (212)
946-3014 and facsimile number is (212) 946-8177.
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FEES AND EXPENSES
The Company will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer.
The Company will pay certain other expenses to be incurred in connection
with the Exchange Offer, including the fees and expenses of the Trustee,
accounting and certain legal fees.
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith. If, however, New Notes are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the Old Notes tendered, or if tendered Old Notes are
registered in the name of any person other than the person signing the Letter of
Transmittal, or if a transfer tax is imposed for any reason other than the
exchange of Old Notes in connection with the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendered holder.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the consummation of the Exchange Offer. Any expenses of the
Exchange Offer that are paid by the Company will be amortized by the Company
over the term of the New Notes under generally accepted accounting principles.
CONSEQUENCES OF FAILURE TO PROPERLY TENDER OLD NOTES IN THE EXCHANGE
Issuance of the New Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after timely receipt by the Exchange Agent of
such Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for New Notes should allow sufficient time to
ensure timely delivery. The Company is under no duty to give notification of
defects or irregularities with respect to tenders of Old Notes for exchange. Old
Notes that are not tendered or that are tendered but not accepted by the Company
for exchange, will, following consummation of the Exchange Offer, continue to be
subject to the existing restrictions upon transfer thereof under the Securities
Act and, upon consummation of the Exchange Offer, certain registration rights
under the Notes Registration Rights Agreement will terminate.
In the event the Exchange Offer is consummated, the Company will not be
required to register the Remaining Old Notes. Remaining Old Notes will continue
to be subject to the following restrictions on transfer: (i) the Remaining Old
Notes may be resold only if registered pursuant to the Securities Act, if any
exemption from registration is available thereunder, or if neither such
registration nor such exemption is required by law, and (ii) the Remaining Old
Notes will bear a legend restricting transfer in the absence of registration or
an exemption therefrom. The Company does not currently anticipate that it will
register the Old Notes under the Securities Act. To the extent that Old Notes
are tendered and accepted in connection with the Exchange Offer, any trading
market for Remaining Old Notes could be adversely affected.
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INDUSTRY
OVERVIEW
Paging provides a communications link to a paging service subscriber
throughout the paging service area. Each transmission point is comprised of a
radio transmitter which sits atop a building or tower and services the area
within an approximate 25 mile radius from its location, depending upon signal
power and the surrounding terrain. Typically, a series of transmitters are
linked together and broadcast messages simultaneously (known as simulcasting) to
cover a relatively large and densely populated region. Transmitters are also
linked together to provide national coverage for a paging service subscriber.
Generally, the cost of paging services to the subscriber increases as the area
covered by such paging services increases.
The paging service subscriber carries a pager which is a radio receiver
tuned to a specific frequency and which only accepts messages sent out on that
specific frequency based on a special frequency-unique code. An individual
accesses a paging subscriber's pager by calling a paging terminal and leaving
information. Once the information is left, the paging terminal encodes the
information and sends it to each of the transmitters, which then, in turn and
simultaneously, broadcast the information in the paging service area. Typically,
a paging subscriber receives the information within less than one minute after
the information is left with the paging terminal. Transmitters can be connected
to the paging terminal by dedicated telephone lines, microwave links or
satellites. The most sophisticated paging systems use satellites to link their
transmitters. This allows for the easiest and most reliable transmission of
messages. In a satellite-linked system, the information received by the paging
terminal is encoded and sent via satellite to receivers which are attached to
each of the transmitters in the service area. The receivers then transform the
satellite signal into a signal that is simulcast in the service area for receipt
by the paging unit.
The type of information left by an individual and accepted by a pager is
dependent on the type of service the subscriber has chosen. The "tone only"
pager is one of the oldest and simplest types of service, allowing the sender to
signal to the subscriber that there is a message waiting: the pager is equipped
with a beeper that, when triggered, indicates that the subscriber must call a
pre-determined telephone number, typically an answering service or the
subscriber's office, to gain additional information. The "numeric" display pager
is the most popular type of pager in the United States. A numeric pager allows a
person to send a message consisting of up to 20 numeric characters (typically a
telephone number), using a touch tone telephone, which is then displayed on the
subscriber's pager. The "alphanumeric" pager currently provides the subscriber
with the ability to receive and store the most information, allowing a person to
send a textual message containing from 40 (which is typical) up to 1,990
characters, by calling a dispatch center or by using a computer to
electronically transmit the message which is then displayed on the subscriber's
pager. In many cases, the information-rich alphanumeric message eliminates the
need to make another call or alters the timing of another call.
Additional services may be combined with some of the above services for an
additional cost to the subscriber including a customized greeting to the sender,
voice mail attached to the pager which allows the sender to leave a voice
message (which must be accessed by telephone), and an extended subscriber
service area which allows a subscriber to be paged in a larger geographic area.
Typically, a subscriber is assigned a unique telephone number identifying
that subscriber to the paging terminal when a call is placed to his or her
pager. However, in areas where access to direct dial telephone numbers are
limited, paging companies have employed a personal identification number ("PIN")
system whereby a sender calls a dispatch center and gives the operator the
subscriber's PIN followed by the message. The transmission of messages through
transmitters and the subsequent receipt of those messages by the pager has been
accomplished by using a number of different paging protocols that allow messages
to be broadcast at faster and faster speeds. Transmitter manufacturers have
created technology that substantially increases transmission speed, which in
turn increases frequency capacity. The most recent technological innovation,
known as FLEX-Registered Trademark-, allows for the broadcast of messages at
three times the speed and capacity of the traditional paging protocol.
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THE UNITED STATES PAGING INDUSTRY
The United States paging industry has been in existence since 1949 when the
Federal Communications Commission allocated a group of radio frequencies for use
in providing one-way and two-way types of mobile communications services. The
industry grew slowly at first as the quality and reliability of equipment was
developed and the market began to perceive the benefits of mobile
communications. Equipment reliability improved dramatically in the 1970s and
potential customers gained a better understanding of the time savings and
efficiencies that paging services could provide. The 1980s saw significant
developments in the paging industry. New companies began offering monthly
numeric paging service at affordable rates, thereby stimulating demand and
developing the paging industry. This development led to industry consolidation
and transformed the business from a local into a national business. Although
alphanumeric paging was available in the 1980s, it was not until the mid 1990s
with the development of the FLEX-Registered Trademark- transmission protocol
that alphanumeric service became economically viable. In addition to the growth
of alphanumeric paging, the 1990s have been characterized by three other
significant changes: the introduction of national paging at reasonable prices
allowing customers to access national coverage for less than US$30 per month,
the substantial consolidation of medium-sized paging companies and the rapid
growth in the consumer market through the development of the reseller
distribution channel.
In the United States, customers utilizing numeric pagers typically pay
approximately US$65 for the pager and US$10 per month for local service, while
those who take advantage of the more sophisticated alphanumeric pagers typically
pay approximately US$150 for the pager and US$15 per month for local service and
up to US$55 per month for enhanced services, including approximately US$30 per
month for nationwide service. Depending on the credit rating of a business or an
individual, these products may be leased rather than purchased, for an
additional monthly charge of US$1 to US$3, included in the price. Each of these
services is subject to call limits and also may be augmented with additional
revenue enhancing services such as customized greetings, voice mail or extended
coverage. As prices have decreased in the United States, customers have chosen
to pay for the ability to get pages in wider geographic areas, and consequently
nationwide paging has been an increasingly important product in the United
States during the last three years.
PAGENET
PageNet is the largest provider of paging services in the United States,
with approximately 9.5 million pagers in service in the United States as of
December 31, 1996, more than the combined number of pagers in service of the
second and third largest U.S. providers of paging services. PageNet was formed
in 1981, aggressively entered the U.S. paging market, and rapidly gained market
share to become a dominant paging service provider. In 1983, PageNet began to
build new paging systems in geographic markets not previously served by PageNet
and since then has established 49 new independent paging operations in major
metropolitan markets and regional clusters. PageNet has employed a low price and
high quality aggressive marketing strategy which has proved successful in making
it the largest paging company in the United States.
PageNet, an equity owner of PageNet do Brasil, has entered into the
Technical Services Agreement which provides the Company with access to PageNet's
products, paging expertise, intellectual property (including the exclusive use
of PageNet's tradename in Brazil), volume supplier discounts and other
capabilities.
BRAZILIAN PAGING INDUSTRY
OVERVIEW. The paging industry in Brazil is in its formative stage. Although
paging services were first offered in 1968, the industry remained undeveloped
until the early 1990s when, following the Brazilian Government's codification of
a regulatory framework for paging services in 1991, several paging companies
entered the Sao Paulo market. In contrast to the United States, where the wide
availability of touch tone
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telephones has made numeric pagers the service of choice, in Brazil touch tone
telephones are far less common and as a result alphanumeric paging service
accounts for approximately 95% of the paging market. Moreover, the
information-rich messages transmitted to alphanumeric pagers often eliminate the
need for a return telephone call by delivering a complete message.
Paging is one of the areas within the Brazilian telecommunications sector
that is open to private investment and, over the last three years, the Brazilian
paging market has experienced rapid growth. The Company estimates that, as of
December 1996, there were approximately 800,000 pagers in operation in Brazil
(up from approximately 400,000 in 1995 and 200,000 in 1994), representing a
market penetration of less than one-half of one percent of the population and an
annual growth rate of 100% since 1994.
The Company believes that the demand for paging services in Brazil is high
as a result of the convergence of three factors: Brazil's large population, its
growing and stable economy and a state-owned telephone infrastructure that is
insufficient and expensive. The waiting list to obtain ordinary telephone lines
from the local service providers is approximately one to three years and
although there has developed a private market for the immediate purchase of
telephone lines, the cost of a telephone line in the private market is
approximately US$3,000, which is often too expensive for the average wage
earner. For those who desire reliable portable communications, paging service
offers an economical alternative to cellular telephone service, which is far
more expensive and currently subject to long waiting lists to obtain service.
EXISTING MARKETING STRATEGIES. Prior to 1996, there was very little
marketing by Brazilian paging operators. Most advertising was limited to small
announcements in newspapers and in a few magazines. Paging companies had limited
financial resources and, due to significant concurrent demand for pagers,
expended few resources on promotional activities. This trend began to change in
the second half of 1995 with the entrance of new competitors into the paging
market. Operators began to focus on the need to quickly capture market share.
Consequently, several paging companies have expanded their advertising campaigns
to include radio, outdoors and full color announcements in major magazines.
Currently, the Company estimates that corporate customers account for
approximately 30% of industry sales. Management believes that most major paging
operators have focused on the consumer market as opposed to the business market
which tends to be more oriented towards leasing, due to limited access to
working capital. While all major paging operators in Brazil maintain direct
sales personnel and stores, the tendency recently has been to emphasize the
development of alternative distribution channels allowing retailers to sell
pagers and paging services on behalf of the paging company to individual
customers for a fee. Generally, the paging company provides retailers with
pagers at wholesale prices and the retailer then sells the pagers to the
customer. The Brazilian reseller market, unlike the U.S. market, is in its most
formative stages. Resellers typically receive both pagers and bulk paging
service from the paging company, and provide both the pager and the paging
service to the customer, while maintaining responsibility for various
administrative costs over the life of the subscriber.
Although the Sao Paulo and Rio de Janeiro metropolitan areas together
account for approximately 67% of the existing paging market in Brazil, their
paging penetration rates are only approximately 2.2% and 1.8%, respectively. As
of December 31, 1996, two companies, Teletrim and Mobitel, together accounted
for an aggregate of approximately 330,000 pagers in service including
approximately 45% of the Sao Paulo market and approximately 62% of the Rio de
Janiero market.
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BUSINESS
COMPANY OVERVIEW
PageNet do Brasil's objective is to become a leading provider of paging and
wireless messaging services in Brazil. The Company has secured licenses which
enable it to broadcast paging services throughout the country and currently
serves approximately 3,500 subscribers. The Company has installed 44 paging
transmitters in the Existing Coverage Area, commenced offering paging services
in greater Sao Paulo in January 1997, and plans to begin marketing paging
services in greater Rio de Janeiro in the first quarter of 1998 and in three
additional cities in the first quarter of 1999. PageNet do Brasil was formed by
PageNet NV, a wholly owned subsidiary of PageNet, the largest paging company in
the United States, Warburg Pincus, a private equity fund, TVA, a leading pay
television company in Brazil, and a wholly owned subsidiary of Abril S.A., Latin
America's largest publishing enterprise, IVP Cayman, the general partner of
which is IVP, a private investment fund focused on Brazil, and Multiponto, an
equity investor focused on the Brazilian telecommunications sector. Management
believes that a number of factors create a favorable environment for the paging
industry in Brazil, including: (i) Brazil's large population, (ii) its growing
and stable economy, (iii) the paging market's relatively low penetration rate
and high historical growth rate, and (iv) the relatively high demand for
reliable communications services. The Company believes it will be well
positioned to be a leading provider of paging services in Brazil because of its
state-of-the-art infrastructure, high quality services, low cost structure and
strategic relationships.
The Company has completed the buildout of the Sao Paulo system, installed
the infrastructure necessary to support its Sao Paulo operations and
substantially built out its paging system in Rio de Janeiro. The Company is
currently focused on the Initial Markets (Sao Paulo and Rio de Janeiro) and
expects to offer paging services in the Expansion Markets (Brasilia, Curitiba
and Belo Horizonte) by the first quarter of 1999. The Company currently offers
its Sao Paulo subscribers extended paging service in the other cities in the
Existing Coverage Area.
BUSINESS STRATEGY
The Company's strategy is to become a leading provider of paging services in
Brazil. The principal elements of the Company's business strategy are to: (i)
provide high quality paging services at a low cost, (ii) leverage the PageNet
relationship, (iii) gain rapid market penetration, and (iv) provide superior
customer service.
PROVIDE HIGH QUALITY PAGING SERVICES AT A LOW COST. The Company has
employed state-of-the-art FLEX-Registered Trademark- technology developed by
Motorola, Inc. and is using equipment similar to that used by PageNet in the
United States. Furthermore, the Company utilizes a fully redundant paging system
that is linked by satellite. Management believes that as the number of
subscribers grows, this advanced technology will allow the Company to be a
provider of high quality paging services at a low cost per subscriber.
LEVERAGE THE PAGENET RELATIONSHIP. The Company is implementing a marketing
strategy and operating procedures similar to those of PageNet in the United
States, and several members of the Company's senior management have had
significant experience managing PageNet operations in the United States.
Moreover, pursuant to the Technical Services Agreement, PageNet provides the
Company with access to PageNet's products, paging expertise, intellectual
property (including the exclusive use of PageNet's tradename in Brazil), volume
supplier discounts and other capabilities. The Company also expects to benefit
from the favorable relationships that PageNet has established with suppliers of
paging equipment and from its use of the PageNet brand name, which is well
established among multinational corporations. PageNet do Brasil is PageNet's
first venture in the Latin American paging market, and PageNet's only enterprise
in Brazil. See "--Trademarks."
GAIN RAPID MARKET PENETRATION. The Company seeks to gain subscribers in its
markets rapidly through extensive marketing and advertising and competitive
pricing. Unlike competitors whose primary
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focus has been the consumer market, the Company focuses on both business and
consumer paging customers. The Company targets business customers through a
commissioned direct sales force and through telemarketing, and will target
individual customers through advertising and through retail distribution
channels including the use of "retail showrooms" located strategically
throughout the Company's markets.
PROVIDE SUPERIOR CUSTOMER SERVICE. Management believes that its competitors
have not made customer service a primary focus of their business strategy and do
not provide the customer with service standards that are prevalent in the United
States. By focusing on key elements of customer satisfaction during the sales
process and over the life of the subscriber, the Company will provide high
levels of customer service similar to those provided by PageNet in the United
States. Moreover, similar to PageNet's practice in the United States, the
Company is introducing customer service account representatives to the paging
industry in Brazil, as a complement to sales representatives. The primary
function of customer service account representatives is to serve existing
account. In addition, customer service account representatives act as a
secondary sales force, targeting existing customers for additional services and
paging units. The Company believes this innovation will allow it to ensure
superior customer satisfaction, thereby minimizing customer turnover and
increasing subscriber base growth.
THE COMPANY'S MARKETS
The Company has secured two licenses which enable it to broadcast paging
services on specified frequencies throughout Brazil. In addition, the Company
has secured local licenses which serve to enhance the Company's capacity in
certain cities in the Existing Coverage Area. The Company is actively marketing
paging services in Sao Paulo, plans to begin marketing paging services in Rio de
Janeiro by the first quarter of 1998 and currently offers extended paging
coverage in the remainder of the Existing Coverage Area.
<TABLE>
<CAPTION>
ESTIMATED
EXISTING COVERAGE AREA(1) POPULATION
- -------------------------------------------------------------- ---------------
<S> <C>
(IN MILLIONS)
INITIAL MARKETS:
Sao Paulo..................................................... 22.7
Rio de Janeiro................................................ 10.9
EXPANSION MARKETS:
Brasilia...................................................... 1.7
Curitiba...................................................... 2.0
Belo Horizonte................................................ 3.4
EXTENDED COVERAGE:
Porto Alegre.................................................. 2.7
Salvador...................................................... 2.6
Recife........................................................ 2.8
Belem......................................................... 1.7
Goiania....................................................... 1.3
-----
Total................................................... 51.8
</TABLE>
- ------------------------
(1) Includes, in each case, the city identified as well as the regions
surrounding such city in which the Company expects to provide its services.
Source: Instituto Brasileiro de Geografia e Estatistica--IBGE (Brazilian
Institute for Geographics and Statistics) (1995)
INITIAL MARKETS. The Company has installed 44 paging transmitters in 10
cities and has recently commenced offering paging services in greater Sao Paulo,
the largest metropolitan area in the country with
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a population of approximately 22.7 million. The Company occupies 43,000 square
feet of office space in Sao Paulo and has (i) approximately 3,500 subscribers;
(ii) installed paging transmitters in each of the nine additional cities where
it has secured licenses to broadcast paging services, including Rio de Janeiro,
(iii) hired the personnel and other infrastructure to support the Company's
operations (including its dispatch center and sales force); (iv) customized and
installed its proprietary billing/collection/inventory/ customer service
information system; (v) linked all of its paging transmitters via satellite; and
(vi) leased and designed a retail location at the Company's headquarters in the
center of Sao Paulo's business district which is scheduled to open in the second
quarter of 1997.
In Rio de Janeiro, the Company has installed 12 transmitters and linked them
via satellite for immediate sale of extended coverage to Sao Paulo customers.
The Company plans to hire key local personnel, lease facilities and acquire
telephone lines from TELERJ, the state-owned telephone company in Rio de
Janeiro, beginning in the second quarter of 1997.
EXPANSION MARKETS. The Company has installed transmitters in Brasilia,
Curitiba and Belo Horizonte, and plans to develop local offices in these and
other cities as opportunities arise. The extent to which the Company will
develop local offices in any city will depend upon a number of factors,
including business and consumer demand, general economic conditions, the
presence of competing businesses and telephone infrastructure. Moreover, the
Company will consider attractive opportunities to enter other markets on an
ongoing basis.
EXTENDED COVERAGE. Extended coverage allows a paging customer to receive
pages in cities other than the customer's base city. Through the
satellite-linked transmission system, customers can choose to receive pages only
in their base city or to extend their paging service to include additional
cities. For example, a customer in Sao Paulo can still receive pages when
traveling to a city in the Extended Coverage Area. The Company has installed
transmitters in Porto Alegre, Salvador, Recife, Belem and Goiania and intends to
offer its customers in the Initial Markets and the Expansion Markets extended
paging coverage in all of these cities.
Management expects that the ability to offer nationwide coverage will
increase the Company's marketability and ultimately its subscriber base. While
there is no immediate additional capital expenditure required for the provision
of nationwide service, should the Company decide to offer extended coverage in
additional cities, the Company would incur additional capital expenses in the
future for the installation of transmitters in other cities in Brazil in order
to develop a nationwide paging network. The Company expects that the incremental
cost to build a nationwide network would quickly be offset by the revenue
generated from sales of nationwide paging service in Brazil.
OPERATIONS AND SYSTEMS
OVERVIEW. The Company's day-to-day operations for the provision of paging
service to its subscribers are substantially similar to those of PageNet in the
United States. Pagers and other paging equipment are received by the Company and
placed in inventory, where they are appropriately labeled and coded for proper
tracking after sale, and programmed to respond only to a particular code. These
pagers are then supplied to the Company's direct sales representatives, the
Company's stores or to other sellers of the Company's service, who are
responsible for the initial sales process including up-front payment collection,
the completion of an application for service, and the delivery of a functioning
pager. The Company's billing department enters the appropriate customer
information to begin the billing process, and the collections department begins
tracking the customer's payment history to ensure timely payment. Customer
service representatives address calls from customers regarding the functions of
the pager, service details and payment policies. The dispatch center, which
receives the calls from individuals sending pages to subscribers and enters the
message into the paging terminal, dispatches messages 24 hours per day, seven
days per week. The systems department monitors daily all of the Company's
equipment including transmitters, paging terminals and supporting software and
hardware.
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<PAGE>
DISPATCH CENTER. The Company operates a state-of-the-art dispatch center,
utilizing customized dispatch software and analytic staffing software designed
to enhance productivity. The Company currently has sufficient telephone capacity
to conduct its business for the foreseeable future and expects that it will be
able to obtain additional telephone capacity as the demands of its business
require. The Company emphasizes both productivity and quality performance to its
dispatch center staff through training, monthly monitoring and incentive based
performance measures.
ADVANCED INFORMATION SYSTEMS. The Company uses an advanced proprietary
management information system, customized to accommodate the Brazilian market.
This system is used primarily to support three principal areas of the Company's
business: (i) customer service, including billing systems; (ii) network
management and operational support systems; and (iii) general business support
systems including financial management. The Company's information systems have
been designed to accommodate efficiently the increased volumes of data that the
Company expects to process in the future as the Company's subscriber base
continues to grow.
CUSTOMER SERVICE. The Company's customer information and billing system
incorporates all aspects of billing and customer preferences, which are intended
to produce a high level of customer satisfaction and to minimize customer
turnover levels. The Company's customer information and billing system provides
management with readily accessible information regarding subscribers' pager
usage, coordinates customer account information among the various departments
and ensures that customers receive all requested products and technical and
support services. This access to information facilitates the provision of
attentive customer service. The Company's account representatives, who are
responsible for customer service, respond to a customer's telephonic inquiry
within 24 hours. The Company believes that customer service is an important
factor in developing customer loyalty and differentiating its service from that
of its competitors.
BILLING AND COLLECTIONS. The Company utilizes the Brazilian custom of
invoicing customers through the banking system. Billing information is
electronically transmitted to the Company's bank which then sends the invoices
and collects the Company's receivables at its branches or affiliates. The
Company has implemented a collections policy to contact delinquent customers,
charge a late fee and finally suspend service until the account is made current.
The Company will monitor customer payment patterns and is further developing a
subscriber credit criteria policy.
NETWORK MAINTENANCE. The Company has two separate but coordinated network
maintenance systems. The first is dedicated to the proper maintenance of the
paging system which includes daily dial-in to each of the Company's paging
transmitters, monthly preventative maintenance reviews of each site, periodic
review of the satellite uplink and constant monitoring of the paging terminals
that reside in the Company's local offices. This department is also responsible
for updating and upgrading the hardware and software so that the system is
operating at the highest possible level. The second system is responsible for
the maintenance and interconnectivity of all other computer systems, including
the dispatch department's systems, the Company's LAN and related productivity
software and the telephone system. In addition, this department is responsible
for the Company's relationship with local and long distance telephone companies
including the acquisition of additional telephone lines.
SALES AND MARKETING
The Company's current marketing strategy is to differentiate its service
from that which is available in the Brazilian market today. The Company expects
to provide service at a lower cost and with higher quality than its competitors
through the use of its advanced FLEX-Registered Trademark- technology and
satellite-linked network, customized information systems, and focus on customer
service. In its marketing and advertising, the Company will also highlight the
PageNet brand name which is associated with worldwide leadership and quality in
the paging business. The Company expects to price its high quality service
competitively and utilize various sales channels to distribute its product. The
Company will focus on both the business market and the consumer market.
47
<PAGE>
BUSINESS MARKET
CUSTOMER SEGMENTATION. The Company plans to target businesses whose
employees are highly mobile or work at several locations. Such customers include
companies in service industries, hospitals and medical professionals,
construction and manufacturing companies, governmental agencies and retail and
financial institutions. In addition, the Company expects that the PageNet name
will be recognized by U.S.-based multinational companies giving it a competitive
advantage over other paging companies in acquiring multinational accounts.
Management believes that most major paging operators have focused on the
consumer market as opposed to the business market due to limited access to
working capital and an inability to offer the higher standard of service
demanded by business customers. The Company believes that the business market
segment will offer stronger recurring revenues and will experience a higher
subscriber retention rate than the consumer market segment. The Company
estimates that, as of December 31, 1996, businesses accounted for approximately
30% of total pagers in service in Brazil.
Subject to appropriate credit policies, the Company plans to lease pagers to
businesses, thereby reducing the business customer's capital outlay and
increasing the Company's revenue per unit. The Company has identified more than
20,000 business targets for sales in its early months and generally expects that
businesses will account for approximately 40% to 50% of the total units in
service in Brazil.
DISTRIBUTION. The Company employs a direct sales force to target specific
businesses. Sales representatives receive leads through a number of sources,
including the Company's telemarketing department, referrals and advertising. In
addition, unlike its competitors, the Company employs a separate team of account
representatives, whose primary function is to serve existing accounts. In
addition, the account representatives act as a secondary sales force, targeting
existing customers for additional services and paging units. The Company
believes that by shifting the customer service function from the sales
representative to an account representative, the sales representative is more
productive and the customer is better served.
CONSUMER MARKET
CUSTOMER SEGMENTATION. The Company estimates that, as of December 31, 1996,
individuals accounted for approximately 70% of total pagers in service in
Brazil. Management believes that consumer demand for paging service arises from
four factors: (i) the increased consumer purchasing power due to Brazil's stable
and growing economy; (ii) the need for reliable, portable communications
services; (iii) delayed access to telephone service or the prohibitive cost of
immediate access; and (iv) the higher cost and lower reliability of cellular
telephone service.
Advertising is a key component of the Company's consumer marketing strategy.
To that end, management has hired P/P Asociados, an advertising firm with
extensive experience in consumer products, which was awarded the TOP Marketing
in Retail Award in 1995. The Company's initial advertising campaign will be
followed by an advertising maintenance program, both of which will include the
use of newspapers, magazines, billboards and radio.
DISTRIBUTION. In Sao Paulo, the Company's advertising campaign will direct
consumers to the Company's retail showrooms that will be located strategically
throughout the area. Additionally, the Company is developing a retail outlet
distribution channel through which the Company may provide pagers to the
retailer at wholesale prices. Once purchased by a subscriber, the pager is
activated on the Company's standard retail contract as a subscriber-owned pager.
The Company may also distribute indirectly under marketing agreements with
unrelated marketing organizations, or "resellers," as developed by PageNet in
the United States. Typically, in the United States, the paging company offers
resellers paging services in bulk quantities at a wholesale monthly rate that is
lower than the regular retail rates, and the resellers endeavor to resell the
paging services to subscribers for a higher price. In the United States, because
resellers bear the economic burden of pager capital investment, direct selling
expense and certain administrative costs including billing for paging service,
collections and customer service, the reseller network has been a very
attractive distribution channel. Management is in discussions with retailers and
48
<PAGE>
resellers regarding adapting these methods for the Brazilian market; however,
there can be no assurance that either of these distribution channels will ever
be used.
PRODUCTS
INITIAL PRODUCTS. Initially, the Company will offer PIN-based alphanumeric
paging with dispatch service included, at a competitive price. Additional
product enhancements will be available to subscribers, including extended
coverage in Rio de Janeiro, pager protection against loss or theft and pager
maintenance.
SUBSEQUENT PRODUCTS. Within the first year of operation, the Company
expects to offer additional products, many of which will be new products to the
Brazilian paging market. These products are expected to include: (i)
page-by-name, which allows the caller to eliminate the use of a PIN and send a
page using only the subscriber's name; (ii) direct dial paging, which allows the
caller to dispense with the use of a PIN and send a page using a subscriber's
direct telephone number; (iii) customized greeting, which allows a subscriber to
customize service and have a dispatch center operator answer using the
subscriber's name and other information as designated by the subscriber; (iv)
numeric paging; (v) PageMail, which adds voice mail service to an existing
subscriber account; (vi) click detection, which enables Brazil's prevalent pulse
telephones to send pages where tone telephones would otherwise be required; and
(vii) self dispatch, which allows subscribers to send pages directly from their
personal computers, without accessing the dispatch center. Although the
Company's current principal focus is offering its initial products at
competitive prices and achieving rapid market penetration, the Company
anticipates that these additional products may enhance revenues and attract more
technologically demanding customers when and if such subscriber products are
implemented and offered.
FUTURE PRODUCTS. In the future, the Company may deploy new paging or
paging-related products. One such product in an advanced development stage is
VoiceNow. Developed jointly by PageNet and Motorola, Inc., VoiceNow subscribers
would carry a portable receiver, approximately the same size as an alphanumeric
pager, that is capable of receiving, storing and playing brief voice messages.
Although the Company has access to this and additional technologies through its
relationship with PageNet, there can be no assurance that the Company will offer
any of these products or services in the future.
PAGING SYSTEMS EQUIPMENT
The Company's paging system equipment consists of call distribution
telephone connectors, dispatch systems, paging terminals, satellite uplinks,
satellite receivers, paging transmitters and pagers. Additional supporting
equipment includes fully redundant telephone switches, dispatch systems and
paging terminals, uninterrupted power supplies, backup generators, dedicated
land lines redundant to the microwave and satellite-linked systems and land
lines to each transmitter for daily diagnostic review and maintenance. The
Company, with the technical support of PageNet, has supervised the entire paging
infrastructure buildout from transmitter site selection to transmitter
installation alignment to programming of the paging terminal.
49
<PAGE>
The Company has secured satellite access from Embratel Sistema Telebras, the
Brazilian state-owned satellite and long distance telephone company, to access
BrasilSat One, a Brazilian satellite, and link its paging transmitters. The
Company leases its satellite access under a five-year contract. A "backbone"
network of satellite paths with microwave and conventional radio links will
connect the operators, telephone lines, terminals and control equipment to
various cities to be served.
The equipment used in the Company's paging operations is available for
purchase from more than one source and the Company anticipates that equipment
and pagers will continue to be available to the Company in the foreseeable
future, consistent with normal manufacturing and delivery lead times. Because of
the high degree of compatibility among different models of transmitters,
computers and other paging equipment manufactured by suppliers, the Company has
designed its systems without being dependent upon any single source of such
equipment.
The Company does not and will not manufacture any of the pagers or related
transmitting and computerized paging terminal equipment used in the Company's
paging operations. The Company's relationship with PageNet provides it with
access to volume discounts on all of its supplies. PageNet has arranged with its
U.S. suppliers to ensure that the Company will receive favorable prices on all
supplies, including pagers. There can be no assurance that PageNet's arrangement
with its suppliers will continue or that the Company will be able to receive all
of its supplies at prices comparable to those obtained by PageNet.
COMPETITION
The Company does experience and will continue to experience direct
competition from one or more competitors in all the locations in which it plans
to operate. Competition for subscribers to the Company's paging services in most
geographic markets will be based primarily on price, quality of services offered
and the geographic area covered. The Company believes that its price, quality of
its services and its geographic coverage areas will generally compare favorably
with those of its competitors.
Although some of the Company's competitors are small privately owned
companies serving only one market area, others are subsidiaries or divisions of
larger companies that provide paging services in multiple market areas. Among
the Company's competitors are Teletrim, Mobitel, Conectel, Powernet and Intelco.
In the Sao Paulo and Rio de Janeiro metropolitan areas, which together are
estimated to represent approximately 67% of the current paging market in Brazil,
more than eight competitors share a market of approximately 540,000 pagers.
While there is healthy competition in the paging market, no single competitor
dominates the market. The current industry leaders, Teletrim and Mobitel, each
service fewer than 200,000 subscribers. In Sao Paulo, the Company's main
competitors will be Teletrim, which holds approximately 25% of the market, and
Mobitel, which holds approximately 20% of the market. In Rio de Janeiro,
Teletrim holds approximately 44% of the market while Mobitel and Powernet hold
approximately 18% and 14%, respectively. In the regions of Brazil outside of Sao
Paulo and Rio de Janeiro, which account for approximately 33% of the existing
paging market in Brazil, Mobitel leads the major operators, primarily due to its
strong presence in Brasilia. Approximately 65% of the market outside of Sao
Paulo and Rio de Janeiro is held by smaller paging operators.
The primary focus of the Company's competitors in the Brazilian paging
market has been the consumer market, rather than the business market. Management
believes that the corporate customer in the business markets will be more likely
to maintain service, remit payments on a timely basis, purchase enhanced
services and have a better appreciation for the paging service. The Company
believes that it will be able to maintain a lower than average churn rate due to
the high quality of its service and its emphasis on the corporate customer and
business accounts.
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EMPLOYEES
As of April 30, 1997, the Company had a total of 138 employees. The
Company's employees are not currently subject to collective bargaining
agreements, although under the Brazilian Constitution the employees have a right
to organize a union. The Company considers its employee relations to be good.
The Company anticipates that it will employ approximately 300 people by the end
of 1997 as a result of the launch of Sao Paulo operations.
GOVERNMENT REGULATION
TELECOMMUNICATIONS. Under Brazilian law, the provision of public services
requires a concession, license or authorization granted by the relevant
governmental authority. Under the Brazilian Constitution, the Federal Government
is required to provide, directly or through concession, license or
authorization, telecommunication services in accordance with the applicable
regulations. According to this Constitutional provision, the Federal Government
may freely grant concessions to private sector companies to provide telephone
and telecommunications services and data transmission services. On July 19,
1996, Law 9,295 was enacted to regulate telecommunication services, which
includes a provision establishing that the Federal Government may impose
restrictions in the composition of the capital stock of the companies holding
concessions for the provision of mobile cellular telephone services and
satellite signal transportation services for the period of three years following
the enactment of such law. Such restriction will be imposed when required by
national interest and shall require that at least 51% of the voting capital of
such companies is held by Brazilian citizens. It is also provided by such law
that the concessions can only be granted to companies organized under Brazilian
law and having their head offices in Brazil. Decree 2,056 of November 4, 1996,
which approved the regulations applicable to cellular telephone services,
delegated to the Ministry of Communications the authority to establish limits to
foreign participation with respect to such services. The Ministry of
Communication has issued the call for a public bid (Concorrencia 001/96-SFO/MC)
for the purchase of concessions to provide cellular telephone services, with the
requirement that at least 51% of the voting capital of the proposed owners of
the concessions be held by Brazilian citizens. Brazil was divided into 10
concession areas and the interested companies presented their bids on April 7,
1997. The awarding of the concessions will be made in stages of two concession
areas at a time, with all concessions expected to be granted by early 1998. The
city of Sao Paulo and surrounding municipalities are included in the first group
of concessions.
A bill of the General Telecommunications Law was submitted to Congress by
the Federal Government in December 1996, and is designed to eventually replace
the current Telecommunications Code enacted in 1962. The bill focuses on the
following matters: (i) creation of a telecommunication regulatory agency, (ii)
privatization of the Telebras System, and (iii) organization of the
telecommunications system, including the grant of licenses. The bill as
currently drafted permits the Federal Government, under certain conditions, to
impose foreign ownership restrictions relating to the capital stock of companies
providing telecommunications services.
DEVELOPMENT OF PAGING REGULATIONS. The Ministry of Communications is the
governmental body responsible for the granting of paging licenses in Brazil and
is also the body in charge of regulating the exploitation of such services in
Brazil. Currently, there are four Ordinances, the first of which was enacted by
the Ministry of Infrastructure and the other three of which were enacted by the
Ministry of Communications, that regulate paging services: (i) Ordinance No.
232, of October 23, 1991, which establishes the principles applicable to the
exploitation of paging services; (ii) Ordinance No. 257, of October 23, 1991,
which establishes complementary conditions and procedures applicable to the
exploitation of paging services, as well as the guidelines for public bids and
analysis of related proposals; (iii) Ordinance No. 579, of August 2, 1994, which
created the modality of restricted national exploitation; and (iv) Ordinance No.
1306, of November 29, 1996, which establishes the conditions for the use of the
frequencies by paging services.
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Pursuant to paging regulations, a paging operator must first obtain a paging
license from the Ministry of Communications in order to provide paging services
in Brazil. All licenses are non-exclusive licenses to provide paging services in
a service area.
The paging regulations distinguish between local, national and nationwide
restricted paging licenses. Local paging licenses allow the license holder to
provide separate paging services in one or more localities, in accordance with
the service area indicated therein. National licenses require the license holder
to, within the first year from the date of issuance of the license, provide
service in three states and within ten years, provide services in a minimum of
10 states. Pursuant to the terms of Ordinance No. 579, a license holder may
request that the Ministry of Communications transform its local licenses into a
nationwide restricted license, which allows for the provision of integrated
services, if such license holder is providing services in at least 12 localities
in at least six different Brazilian States and its system is capable of
simultaneous or sequential operation. Once the license holder has been granted a
nationwide restricted license, it may utilize its frequency nationwide, except
in localities where the frequency was previously given to a local license
holder.
On April 8, 1997, the President enacted Decree No. 2196, approving the
Regulation for Special Telecommunication Services, within which paging services
are included. Such Decree provides the guidelines for the granting of licenses
with respect to such services by the Ministry of Communications. Such Decree
confirmed the competence of the Ministry of Communications to establish specific
complementary rules, to grant licenses, to allocate frequencies and to supervise
the exploitation of such special services.
Decree No. 2196/7 regulates the procedure for the granting of new licenses
for exploitation of special services, which include the possibility of a prior
public consultation by the Ministry of Communications with respect to the
granting of such licenses, as well as the applicable terms and conditions of
such grants. The Decree also regulates the requirements of the call for public
bid, the rules for pre qualification of the interested parties, the criteria for
judgment of the proposals and for the granting of the licenses. The granting of
new licenses shall be formalized by means of the execution of a contract between
the Ministry of Communications and the awarded party.
Regarding the exploitation of the services the Decree expressly assures the
licensees the right to use equipment not owned by the licensee and to contract
with third parties the development of activities inherent, accessory or
complementary to the licensed services, provided that: (a) the licensee shall
remain responsible before the Ministry of Communications and the users for the
execution and exploitation of the services; and (b) the licensee shall be
contractually bound to the users.
Furthermore, Decree No. 2196/97 specifically provides that the Ministry of
Communications shall issue complementary regulations regarding each of the
modalities of Special Telecommunication Services, which shall regulate the
specific conditions for the exploitation of the services, including: technical
characteristics, rights and obligations of the licensee and of the users,
conditions for interconnection of networks, expansion of the services and use of
the public network, as well as conditions regarding the use of frequencies,
prices and tariffs.
Decree No. 2196/97 assures the transfer of the licenses, provided the
transferee complies with the qualification requirements imposed by the Ministry
of Communications and undertakes to comply with all of the conditions of the
contract, assuming all rights and obligations of the transferor. However the
minimum term for transfer of the licenses shall be established by the
complementary regulations referred above.
The number of requests for paging licenses presented to the Ministry of
Communications increased in 1994 and 1995 and, as of March 14, 1997,
approximately 855 local licenses had been issued. The Ministry of Communications
has estimated that another 1,000 local licenses will be issued in the near
future. In April 1997, two of the Licenseholders (TVA and Multiponto) were
granted nationwide restricted licenses by the Ministry of Communications. As of
May 1997, only twelve national licenses were issued by the Ministry of
Communications.
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PAGING LICENSES. Under Ordinance No. 232/91, paging licenses are granted by
the Ministry of Communications for a period of 15 years and are renewable for
successive 15 year periods. The nationwide restricted licenses which, under the
terms of Ordinance No. 579/94 result from the aggregation of local licenses are
granted by the Ministry of Communications for a period of ten years, regardless
of the remaining term of the original local licenses. Under Decree No. 2196/97,
the original license terms are assured, but renewal terms may vary from 10 to 15
years as established in complementary regulations still to be issued. Renewal of
the license by the Ministry of Communications is expected provided the paging
operator has complied with the terms of the operating license and has requested
the renewal at least 18 months prior to the expiration date of the license.
Under the Decree a fee may be charged for the renewal of the license in an
amount to be agreed between the Ministry of Communications and the licensee, at
least 12 months prior to the expiration of original term. The license
establishes the terms and conditions under which the paging service should be
provided. Those conditions include, among others: (i) lack of exclusivity of the
service, (ii) a prohibition on the transfer of the license during the first
three years, commencing from the date of issuance of the operating license,
(iii) prior authorization from the Ministry of Communications for any transfer
of the license, (iv) the licensee's compliance with certain terms and conditions
specified by the Ministry of Communications such as price schedules, and (v) the
licensee's performance under the license. Any transfer of a paging license is
subject to the prior approval of the Ministry of Communications. A license may
not be directly transferred by a license holder to a third party until after the
expiration of the three year waiting period. Transfers of shares which cause a
change in the control of the licensee or entity which controls the licensee must
also receive prior approval of the Ministry of Communications. Licenses may be
revoked prior to their expiration by the Ministry of Communications for a number
of reasons, including: (i) the public interest as determined by the Ministry of
Communications, (ii) the failure of the licensee to meet the terms and
conditions of the license, (iii) the transfer of the license without the consent
of the Ministry of Communications, or (iv) the failure of the licensee to pay
the required license fees. To initiate paging services, the paging operator must
be granted three different permits or approvals by the Ministry of
Communications: (i) the initial license, granted in the form of a ministerial
ordinance which entitles the license holder to develop paging services under a
certain frequency and in certain localities; (ii) the Project Approval
Certificate which permits installation of equipment necessary for the
development of the paging service in accordance with the installation project of
the license holder and, once the installation period is complete, (iii) the
paging operating license. Under applicable regulations, the Licenseholders
received paging licenses from the Ministry of Communications and pursuant to the
Operating Agreements and other covenants (the "Operating Agreements"), the
Company is required to construct and start the operation of its service within
12 months of the issuance of the paging license. To meet the requirements of
operating within the meaning of the paging license, a licensee is required to
construct a single site from which a radio signal can be directed. The Company
has complied with this condition in each of the cities for which a local paging
license and a Project Approval Certificate have been obtained and, as a result,
the corresponding paging operating permit for each of such cities has been
issued by the Ministry of Communications. Under the recently obtained nationwide
restricted licenses, it will be necessary for the Company to present and obtain
approval from the Ministry of Communications of the installation project, as
well as, the subsequent issuance of the paging operating license for the
relevant station. The fee for an operating license totals one-half of one
percent of the fixed assets of the licensee (deemed to be the transmitters,
paging terminal and initial supply of pagers). In addition, licensees must pay a
fee of approximately US$57 per transmitter installed.
Subject to certain exceptions, generally any paging licenses not already
issued are to be granted pursuant to a public auction administered by the
Ministry of Communications. The rules of the auction are expected to be open to
public comment before the actual process is initiated. The Company is planning
to participate in this auction although there can be no assurance that the
Company will acquire any licenses at the auction.
Additional frequencies have been awarded to Mobitel in Sao Paulo and Rio de
Janeiro, and to Teletrim in Rio de Janeiro. The Company believes that as the
market for pagers grows, the Ministry of
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<PAGE>
Communications will amend current regulations allowing the Company to receive
additional frequency allocations if needed. The Company anticipates needing
additional licenses in the Initial Markets only. There can be no assurance that
the Company will receive the additional licenses, which may materially alter the
Company's market projections.
PAGING LICENSE OWNERSHIP; OPERATING AGREEMENTS; AGREEMENTS TO TRANSFER
LICENSES. The licenses presently operated by the Company were granted to and
are owned by TVA, Multiponto and San Francisco Comunicacoes Ltda., an affiliate
of IVP (the "Licenseholders"). The Company has entered into Operating Agreements
with each of the Licenseholders pursuant to which the Company has the right to
operate the paging licenses held by the Licenseholders. The Company has also
entered into Agreements of Promise of Assignment and Transfer of Permissions
(the "Transfer Agreement") with each Licenseholder pursuant to which the
Licenseholders have agreed, subject to the necessary approvals, to transfer
their paging licenses to the Company after the three year period established by
Brazilian law, during which such licenses are not allowed to be transferred, or
on such earlier date as may be permitted by Brazilian law. Under the applicable
paging legislation, operating agreements are permitted and do not amount to a
transfer of the license. See "Risk Factors--Risk Factors Relating to the Company
and the Notes--Government Regulations" and "Certain Transactions--Formation
Transactions."
TRADEMARKS
The Company markets its paging and related services under various names and
marks, including PageNet and PageMail. The Company's use of each of these marks
is granted by the terms of the Technical Services Agreement with PageNet. Under
the Technical Services Agreement, the Company has use of the PageNet trademarks
and service marks in Brazil for so long as PageNet holds such properties absent
breach by the Company of its obligations thereunder or Brazilian governmental
action requiring its termination. PageNet has applied to register the mark
PageNet in Brazil. PageNet has advised the Company that certain third parties
also have applied to register the PageNet name in Brazil. PageNet intends to
pursue vigorously its registration of the PageNet mark. However, there can be no
assurance that PageNet will be successful in which case the Company may not have
the right to use the PageNet mark. See "Certain Transactions--Formation
Transactions."
LEGAL PROCEEDINGS
The Company is not a party to any legal proceedings that would have a
material adverse effect on its results of operations and financial condition.
PROPERTIES
The Company currently leases 43,000 square feet of office space in Sao Paulo
under a five-year lease. This space houses the Company's corporate headquarters
as well as its Sao Paulo operation, including its dispatch center, systems room
and a retail showroom. In addition, the Company expects to lease an additional
retail showroom in downtown Sao Paulo.
In each of the cities in which the Company has secured paging licenses, the
Company has entered into and will continue to enter into agreements for the
placement, construction and maintenance of paging transmitter antennas.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
The following section sets forth certain information as of the date of this
Prospectus with respect to each person who is an executive officer or director
of the Company:
<TABLE>
<CAPTION>
NAME POSITION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Thomas C. Trynin........................................ President, Chief Executive Officer and Director
Marco A. Fregenal....................................... Vice President of Operations
Wilson Olivieri......................................... Treasurer and Chief Financial Officer
Maria Regina Mangabeira Albernaz Lynch.................. Director
Horacio Bernardes Neto.................................. Director
Renato Abucham.......................................... Director
Helena de Araujo Lopes Xavier........................... Director
</TABLE>
THOMAS C. TRYNIN has been the President, the Chief Executive Officer and a
Director of the Company and a member of the Management Committee of Holding LLC
since the formation of each. Prior to joining the Company and since 1993, Mr.
Trynin was a Vice President of Paging Network of Philadelphia. For the three
years prior to working for Paging Network of Philadelphia, Mr. Trynin was a Vice
President of Budget Rent-a-Car of Philadelphia. Mr. Trynin is 36 years old.
MARCO A. FREGENAL has been Vice President of Operations of the Company since
its formation. For the three years prior to joining the Company, Mr. Fregenal
was a Branch Manager and then a Vice President of Paging Network of Philadelphia
and Paging Network of New York, respectively. Before joining Paging Network of
Philadelphia, Mr. Fregenal held the position of Director of Operations and
Customer Service of MorCom Inc., a direct mail and printing firm. Mr. Fregenal
is 33 years old.
WILSON OLIVIERI has been the Treasurer and Chief Financial Officer of the
Company since its formation. For the three years prior to joining the Company,
Mr. Olivieri served as a General Manager and Chief Financial Officer of PepsiCo
do Brasil Ltda., Pizza Hut Division. Mr. Olivieri has also served as a Chief
Financial Officer of Polaroid do Brasil Ltda. during the year of 1992 and as
Planning Manager and Controller of PepsiCo do Brasil Ltda., Food Division from
1989 to 1992. Mr. Olivieri is 38 years old.
MARIA REGINA MANGABEIRA ALBERNAZ LYNCH has been a Director of the Company
since its formation. Ms. Lynch has been a partner of Xavier, Bernardes,
Braganca, Sociedade de Advogados, counsel to the Company, since 1995. Prior to
joining Xavier, Bernardes, Braganca, Sociedade de Advogados, Ms. Lynch held
positions as an associate with, and a partner of, Castro, Barros, Sobral e
Xavier Advogados from 1981 to 1995. Ms. Lynch is 43 years old.
HORACIO BERNARDES NETO has been a Director of the Company since its
formation. Mr. Bernardes has been a senior partner of Xavier, Bernardes,
Braganca, Sociedade de Advogados since 1995. Prior to joining Xavier, Bernardes,
Braganca, Sociedade de Advogados, Mr. Bernardes was a partner of Castro, Barros,
Sobral e Xavier Advogados from 1979 to 1995. Mr. Bernardes is the
President-elect of the Association Internationale des Jeunes Avocats. Mr.
Bernardes is 42 years old.
RENATO ABUCHAM has been a Director of the Company since its formation. Mr.
Abucham has been a Managing Director of Ecoban do Brasil Ltda. since 1987 and
has served as a Director of the Commerce Association of Sao Paulo and
Coordinator of its Chamber of International Financial Operations since 1992. Mr.
Abucham is 54 years old.
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<PAGE>
HELENA DE ARAUJO LOPES XAVIER has been a Director of the Company since its
formation. Ms. Xavier has been a partner of Xavier, Bernardes, Braganca,
Sociedade de Advogados since 1995. Prior to joining Xavier, Bernardes, Braganca
Sociedade de Advogados, Ms. Xavier was an associate of Castro, Barros, Sobral e
Xavier Advogados from 1991 to 1995, and served as a Professor of Administrative
Law and Administrative Procedural Law at the Autonomous University Luis de
Camoes-Lisbon, during the year of 1991. Ms. Xavier is 45 years old.
At present, the Board of Directors of the Company (the "Board of Directors")
is composed of five directors. The Company, Warburg Pincus, PageNet NV, IVP
Cayman, Multiponto, TVA and each other shareholder of the Company are parties to
the Shareholders Agreement, pursuant to which, among other things, Warburg
Pincus has the right to designate a majority of the members of the Board of
Directors for so long as Warburg Pincus beneficially owns more shares of Common
Stock outstanding on a fully diluted basis than any other shareholder of the
Company. See "Principal Shareholders--Shareholders Agreement."
MANAGEMENT COMMITTEE OF HOLDING LLC
Holding LLC is managed by a Management Committee appointed solely by holders
of a majority of the voting member interests. Currently, the following persons
are members of the Management Committee:
<TABLE>
<CAPTION>
NAME POSITION
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Douglas M. Karp......................................... Manager, Chairman of Management Committee
David E. Libowitz....................................... Manager, Member of Management Committee
Barry A. Fromberg....................................... Member of Management Committee
H. Brian Thompson....................................... Member of Management Committee
Thomas C. Trynin........................................ Member of Management Committee
</TABLE>
DOUGLAS M. KARP has served as a Manager and Chairman of the Management
Committee of Holding LLC since its formation. Mr. Karp has been a Managing
Director of E.M. Warburg, Pincus & Co., LLC or its predecessor ("EMW LLC") since
May 1991. Prior to joining EMW LLC, Mr. Karp held several positions with Salomon
Inc, including Managing Director from January 1990 to May 1991, Director from
January 1989 to December 1989 and Vice President from October 1986 to December
1988. Mr. Karp is a director of LCI International, Inc., TV Filme, Inc., TresCom
International, Inc. and several privately held companies. Mr. Karp is 42 years
old.
DAVID E. LIBOWITZ has served as a Manager and a Member of the Management
Committee of Holding LLC since its formation. Mr. Libowitz is a Vice President
of EMW LLC and has been associated with EMW LLC since July 1991. Mr. Libowitz
serves on the board of directors of TV Filme, Inc., Caribiner International,
Inc. and certain privately held companies. Mr. Libowitz is 34 years old.
BARRY A. FROMBERG has served as a Member of the Management Committee of
Holding LLC since its formation. Mr. Fromberg has served as Senior Vice
President--International of PageNet and Chairman of the Board of Directors and
Chief Executive Officer of PageNet NV since December 1995. Mr. Fromberg served
as Senior Vice President--Finance and Administration and Chief Financial Officer
for PageNet from May 1993 to December 1995. Prior thereto, Mr. Fromberg served
as Executive Vice President and Chief Financial Officer for Simmons
Communications, Inc. from 1987 to 1993. Mr. Fromberg is 42 years old.
H. BRIAN THOMPSON has served as a Member of the Management Committee of
Holding LLC since its formation. Mr. Thompson has been Chairman of the Board of
Directors and Chief Executive Officer of
56
<PAGE>
LCI International, Inc. and its subsidiaries since July 1991. Mr. Thompson
previously served as Executive Vice President of MCI Communications Corporation
where he was responsible for all eight of MCI's operating divisions and various
other senior management capacities from 1981 to 1990. These capacities included
Executive Vice President responsible for all staff functions, Divisional
President and Senior Vice President responsible for strategic development and
corporate planning. Mr. Thompson is a director of Microdyne Corporation, Comcast
UK Cable Partners Limited and Golden Books Family Entertainment, Inc. Mr.
Thompson is 58 years old.
THOMAS C. TRYNIN has been the President, the Chief Executive Officer and a
Director of the Company and a Member of the Management Committee of Holding LLC
since the formation of each. Prior to joining the Company and since 1993, Mr.
Trynin was a Vice President of PageNet of Philadelphia. For the three years
prior to working for PageNet, Mr. Trynin was a Vice President of Budget
Rent-a-Car of Philadelphia. Mr. Trynin is 36 years old.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Messrs.
Thomas C. Trynin and Marco A. Fregenal (each, an "Executive"), pursuant to which
Mr. Trynin has agreed to serve full time as the President and Chief Executive
Officer of the Company and Mr. Fregenal has agreed to serve full time as the
Vice President of Operations of the Company. Mr. Trynin's annual base salary is
US$137,500 and Mr. Fregenal's annual base salary is US$115,000. Each Executive
will be eligible to receive an annual bonus, in an amount to be determined by
the Board of Directors (but not to exceed 50% of the base salary). As Messrs.
Trynin and Fregenal resided in the United States prior to joining the Company,
each employment agreement also provides for additional compensation as a result
of their relocation ("relocation compensation"), including a foreign service
incentive equal to 10% of the base salary, a goods and services allowance to
cover cost of living adjustments and a foreign housing allowance. If the Company
terminates the Executive without "just cause" or if the Executive resigns for
"good reason" (in each case as defined in the employment agreement), the
Executive shall be entitled to receive an additional 12 months' base salary and
the relocation compensation for a period of 45 days following the termination of
employment. The initial term of each employment agreement is two years, which
will be automatically extended for one additional period of two years, unless
the Company or the Executive provides the other with a notice of termination at
least three months prior to the expiration of the initial term. The employment
agreements also include customary non-competition and confidentiality
provisions. Also pursuant to the employment agreement, Warburg Pincus has
granted the Executive certain "tag-along" rights in the event that Warburg
Pincus sells or otherwise disposes of a majority of its shares of Common Stock.
Upon execution of their respective employment agreements, Mr. Trynin was granted
17,603 shares of Common Stock and Mr. Fregenal was granted 13,202 shares of
Common Stock. These shares of Common Stock are subject to forfeiture in the
event the Executive's employment is terminated by the Company for "just cause"
or by the Executive other than for "good reason" before such Executive has
completed five years of employment, with 100%, 80%, 60%, 40% and 20% of the
shares subject to forfeiture if the employment is terminated during the first,
second, third, fourth and fifth years of employment, respectively.
SHARES OF COMMON STOCK RESERVED FOR MANAGEMENT
In addition to the shares already issued to Messrs. Trynin and Fregenal, the
Company has reserved 101,340 shares of Common Stock for issuance to members of
the Company's management at the discretion of the Board of Directors. Such
shares may be issued pursuant to a stock option plan adopted by the Company or
directly to management members, in either case subject to vesting or forfeiture
provisions as determined by the Board of Directors.
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<PAGE>
COMPENSATION FOR EXECUTIVE OFFICERS, DIRECTORS AND MEMBERS OF THE MANAGEMENT
COMMITTEE
For the year ended December 31, 1996, the aggregate compensation, including
bonuses, of all Executive Officers of the Company was approximately US$600,000.
Neither members of the Board of Directors of the Company, nor Members of the
Management Committee of Holding LLC (the "Members") receive a salary from the
Company.
Due to the recent commencement of operations of the Company, neither the
Company nor Holding LLC has set aside funds to provide pension, retirement or
similar benefits to the Directors and Executive Officers of the Company or
Members of the Management Committee of Holding LLC.
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<PAGE>
CERTAIN TRANSACTIONS
FORMATION TRANSACTIONS
In connection with its formation, the Company has been a party to the
following transactions with its executive officers, directors and five percent
shareholders:
In December 1996, the Company entered into a Securities Subscription
Agreement with PageNet NV, Warburg Pincus, IVP Cayman, Multiponto and TVA
pursuant to which, among other things, the Company issued shares of Common
Stock, Preferred Stock and subscription bonds to purchase Common Stock. The
Company believes that the terms of the Securities Subscription Agreement were
negotiated at arm's-length by the initial investors in the Company. In
connection with the formation of the Company, the Company granted registration
rights to Warburg Pincus, IVP Cayman, PageNet NV, Multiponto and TVA with
respect to all shares of Common Stock and Preferred Stock owned by them. See
"Principal Shareholders-- Registration Rights Agreement."
In December 1996, the Company and PageNet entered into a Technical Services
Agreement pursuant to which PageNet will provide technical services and support,
including (i) assistance with the conversion and construction of the Company's
paging infrastructure; (ii) access to the PageNet personnel and management
supervision to assist the Company in providing paging services; (iii) training
of key members of the Company's management; (iv) making available on an
exclusive basis in Brazil, technology, software, new product development, and
system design; and (v) interfacing with vendors to seek favorable prices and
services, comparable to those obtained by PageNet. In addition, pursuant to the
terms of the Technical Services Agreement, PageNet granted to the Company, among
other things, an exclusive, royalty-free license (the "Intellectual Property
License") to use the trademarks PageNet and VoiceNow and the tradename Paging
Network in connection with the Company's advertisement, promotion, marketing,
sale, development, and provision of telecommunications services in Brazil.
Subject to certain rights to sublicense, the Intellectual Property License is
non-transferable. In consideration of the performance of PageNet's obligations
under the Technical Services Agreement, the Company has granted PageNet NV the
right (in the form of subscription bonds) to purchase 325,982 shares of the
Common Stock at an exercise price of approximately US$.025 per share (after
giving effect to the Common Stock Split). The initial term of the Technical
Services Agreement is five years. The initial term will be extended for
successive three-year terms unless either party gives notice of its intent not
to so extend at least one year prior to the end of the then current term.
PageNet may, however, terminate the agreement (i) six months after it ceases to
beneficially own at least five percent of the Common Stock outstanding on a
fully diluted basis including the subscription bonds to purchase such Common
Stock or (ii) if any entity other than Warburg Pincus owns 50% or more of the
Common Stock outstanding on a fully diluted basis including the subscription
bonds to purchase such Common Stock. The Intellectual Property License will
survive the termination of the Technical Services Agreement absent breach by the
Company of its obligations thereunder or if Brazilian governmental action
requires a termination of the Intellectual Property License. In the event the
Intellectual Property License is terminated, PageNet will not, for a period of
two years from such termination, use the trademarks PageNet or VoiceNow in
Brazil for Licensed Services (as defined in the Intellectual Property License).
In addition, the Company is subject to certain performance standards and other
obligations, the non-compliance with which permit PageNet to terminate the
Technical Services Agreement (including the Intellectual Property License). The
Company believes that the Technical Services Agreement was negotiated at
arm's-length by the initial investors in the Company. See "Risk Factors--Risk
Factors Relating to the Company and the Offering--Dependence on PageNet
Technical Services and Support."
In December 1996, the Company entered into Operating Agreements with each of
the Licenseholders pursuant to which the Licenseholders have granted the Company
the exclusive right to resell paging services utilizing the paging licenses held
by the Licenseholders (the "Licenses"). The Company and each Licenseholder have
also entered into Transfer Agreements, pursuant to which the Licenseholders have
59
<PAGE>
agreed to transfer the Licenses to the Company following the three year waiting
period mandated by Brazilian law or on such earlier date as may be permitted by
Brazilian law. In consideration of the performance by each Licenseholder of its
obligations under such agreements and after giving effect to the Common Stock
Split, the Company has (i) issued and sold to IVP Cayman 325,982 shares of the
Common Stock for a purchase price of approximately US$.025 per share, (ii)
issued and sold to Multiponto 81,495 shares of the Common Stock for a purchase
price of approximately US$.025 per share and has granted Multiponto the right
(in the form of subscription bonds) to purchase up to 40,748 shares of Common
Stock at a price of approximately US$.025 per share and (iii) has granted TVA
the right (in the form of subscription bonds) to purchase up to 40,748 shares of
Common Stock at a price of US$.025 per share. The Company believes that the
Operating Agreements and the Transfer Agreements were negotiated at arm's-length
by the initial investors in the Company. Given that certain acts or omissions by
a Licenseholder could result in the revocation of its paging licenses or
unavailability of such licenses to the Company, the Licenseholders have agreed
to several covenants in the Operating Agreements designed to limit such risk to
the Company. See "Risk Factors--Risk Factors Relating to the Company and the
Offering--Regulation and Ownership of Licenses." and "Business--Government
Regulation--Paging License Ownership; Operating Agreements; Agreements to
Transfer Licenses."
RESTRUCTURING TRANSACTIONS
In connection with the sale of the Old Notes, Warburg Pincus contributed all
shares of Common Stock directly owned by it to Holding LLC in exchange for 100%
of the voting member interests in Holding LLC. In addition, pursuant to a
subscription agreement (the "Subscription Agreement") with the Company, Holding
LLC purchased shares of Common Stock equivalent to 7.0% of the Common Stock on a
fully diluted basis for the capital accounts of the holders of non-voting member
interests in Holding LCC (such transactions collectively referred to as the
"Restructuring").
The Subscription Agreement imposes a number of covenants on the Company for
the benefit of Holding LLC, including (i) providing certain financial
information concerning the Company and its subsidiaries that Holding LLC is
required to provide to its Members, (ii) subject to debt instruments to which
the Company is a party, distributing cash to Holding LLC in an amount that is
intended to approximate the Members' U.S. federal income tax liability on the
net income allocated to the Members for U.S. federal income tax purposes by
Holding LLC (but there can be no assurance that such amount will be sufficient
in all cases to discharge such tax liabilities), (iii) creating a sponsored
American Depositary Receipt program for the Common Stock that will be in effect
on or prior to the occurrence of a Liquidation Event (as defined in the
Subscription Agreement) and (iv) notifying Holding LLC at the appropriate time
that there is no material likelihood that PageNet do Brasil should be considered
a "passive foreign investment company" for U.S. federal income tax purposes for
its current or any future taxable year. The Company believes that the
Restructuring was negotiated at arm's-length with Holding LLC.
All future transactions between the Company and its officers, directors,
principal shareholders or their respective affiliates, will be on terms no less
favorable to the Company than can be obtained from unaffiliated third parties.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of Common Stock and Preferred Stock as determined in accordance with
Rule 13d-3 under the Exchange Act, unless otherwise stated with respect to (i)
each person known by the Company to be the beneficial owner of more than five
percent of any class of the Company's voting securities and (ii) all directors
and executive officers of the Company, as a group.
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
------------------------- --------------------------
<S> <C> <C> <C> <C>
NAME AND ADDRESS OF NUMBER NUMBER
BENEFICIAL OWNER OF SHARES PERCENTAGE(1) OF SHARES PERCENTAGE
- --------------------------------------------------------------- ---------- ------------- ----------- -------------
Paging Brazil Holding Co., LLC
c/o Warburg, Pincus Ventures, L.P.
466 Lexington Avenue
New York, New York 10017(2).................................. 939,955 68.2% -- --
Warburg, Pincus Ventures, L.P.
466 Lexington Avenue
New York, New York 10017(2)(3)............................... 939,955 68.2% 20,000 66.7%
Paging Network International N.V.
4965 Preston Park Blvd.
Plano, Texas 75093(4)........................................ 325,982 19.1% -- --
IVP Paging (Cayman) L.P.
c/o Maples and Calder
P.O. Box 309
George Town, Grand Cayman
Cayman Islands, B.W.I........................................ 325,982 23.7% 8,000 26.7%
Multiponto Telecomunicacoes Ltda.
Avenida Presidente Wilson No. 231
Rio de Janeiro, Brazil(5).................................... 122,243 8.6% 2,000 6.7%
Douglas M. Karp(6)
Warburg, Pincus Ventures, L.P.
466 Lexington Avenue
New York, New York 10017..................................... 939,955 68.2% 20,000 66.7%
All directors and executive officers as a group
(7 persons)(7)............................................... 30,805 2.2% -- --
</TABLE>
- ------------------------
(1) Calculated in accordance with Rule 13d-3 under the Exchange Act.
(2) Pursuant to the Restructuring, Warburg Pincus contributed 814,955 shares of
Common Stock held by it to Holding LLC in exchange for 100% of the Class A
Holding Shares. Pursuant to the LLC Agreement, Warburg exercises voting
control over all the shares of Common Stock held by Holding LLC. See
"Certain Transactions--Restructuring Transactions."
(3) The sole general partner of Warburg Pincus is Warburg, Pincus & Co., a New
York general partnership ("WP"). E.M. Warburg, Pincus & Co., LLC, a New York
limited liability company ("EMW LLC"), manages Warburg Pincus. The members
of EMW LLC are substantially the same as the partners of WP. Lionel I.
Pincus is the managing partner of WP and the managing member of EMW LLC. WP
has a 15% interest in the profits of Warburg Pincus as the general partner,
and also owns approximately 1.2% of the limited partnership interest in
Warburg Pincus.
(4) PageNet NV holds a subscription bond that is currently exercisable into
325,982 shares of Common Stock.
(5) Multiponto holds a subscription bond that is currently exercisable into
40,748 shares of Common Stock.
(6) All shares indicated as owned by Mr. Karp are owned by Warburg Pincus and
are included because of Mr. Karp's affiliation with Warburg Pincus. Mr.
Karp, a Manager of Holding LLC, is a Managing Director and member of EMW LLC
and a general partner of WP.
(7) Excludes directors qualifying shares.
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<PAGE>
SHAREHOLDERS AGREEMENT
The relations among the Company's shareholders, Warburg Pincus, PageNet NV,
IVP Cayman, Multiponto, TVA (together, the "Shareholders") and Messrs. Trynin
and Fregenal (together with other stockholding members of the Company's
management "Management Investors"), are governed by a Shareholders Agreement,
dated as of December 11, 1996, as amended as of March 10, 1997 (the
"Shareholders Agreement"). The following describes certain terms of the
Shareholders Agreement:
BOARD OF DIRECTORS. The Company is managed by a Board of Directors that is
currently comprised of five members. For so long as IVP Cayman beneficially owns
at least 10% of the Common Stock outstanding on a fully diluted basis, IVP
Cayman will have the right to designate one director to the Board of Directors.
For so long as (i) PageNet NV beneficially owns at least 10% of the Common Stock
outstanding on a fully diluted basis or (ii) the Technical Services Agreement is
in full force and effect, PageNet NV shall have the right to designate one
director to the Board of Directors. For so long as Warburg Pincus beneficially
owns more shares of Common Stock outstanding on a fully diluted basis than any
other shareholder of the Company, Warburg Pincus will have the right if it so
chooses to designate a majority of the directors of the Board of Directors. In
the event Warburg Pincus is not entitled to designate a majority of the Board of
Directors, but Warburg Pincus beneficially owns at least 10% of the Common Stock
outstanding on a fully diluted basis, Warburg Pincus will have the right to
designate one director to the Board of Directors.
RESTRICTIONS ON TRANSFER OF STOCK. Neither IVP Cayman nor PageNet NV will
sell, assign, transfer or otherwise dispose of ("Transfer") any capital stock of
the Company ("Capital Stock") held by it without the prior written approval of
Warburg Pincus, which approval will not be unreasonably withheld. Such
restriction applies to IVP Cayman only for a period of five years following the
issuance of any such stock. The Management Investors may not Transfer stock held
by them for a period of five years following the issuance of such stock, subject
to certain exceptions.
PAGENET NV RIGHT OF FIRST OFFER. PageNet NV has a right of first offer with
respect to either the Transfer by any Shareholder or the Transfer by the Company
of any of its assets.
TAG-ALONG RIGHTS; DRAG-ALONG RIGHTS. The Shareholders Agreement provides
tag-along rights for (i) the Management Investors in the event that the
Shareholders Transfer all their shares of Common Stock and (ii) each Investor in
the event that another Shareholder Transfers any of its Capital Stock. In the
event that Warburg Pincus chooses to Transfer all its shares of Common Stock or
Preferred Stock to a proposed transferee, the Shareholders Agreement provides
that Warburg Pincus may require each other Shareholder to Transfer all its
shares of Common Stock or Preferred Stock, as the case may be, to such
transferee.
PREEMPTIVE RIGHTS. Except in connection with an underwritten public
offering or a merger of the Company, the Shareholders Agreement provides each
Shareholder with preemptive rights in connection with any issuance of equity
securities by the Company. Each Shareholder has agreed to waive its preemptive
rights in connection with the issuance of shares of Common Stock to Holding LLC.
CONSENT RIGHTS OF PREFERRED STOCK. The consent of the holders of a majority
in interest of the outstanding Preferred Stock is required for any of the
following actions to be taken by the Company: (i) the acquisition or disposition
of significant assets outside the ordinary course of business, (ii) the
incurrence of any indebtedness or other commitment in excess of US$250,000,
(iii) the amendment of the by-laws (ESTATUTOS SOCIAIS) of the Company (the
"By-laws"), (iv) the guarantee of any third party indebtedness or the incurrence
of any lien outside the ordinary course of business, (v) transactions with
affiliates, (vi) the entry by the Company into a new business, (vii) the
issuance of any equity securities, and (viii) the winding up, liquidation or
dissolution of the Company. The consent rights of the holders of the Preferred
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Stock with respect to the matters described in clauses (i) through (vi) above
will not be required in the event that Warburg Pincus ceases to beneficially own
any shares of Preferred Stock.
REGISTRATION RIGHTS AGREEMENT
In connection with the formation of the Company, the Company entered into a
Registration Rights Agreement with the Shareholders (the "Registration Rights
Agreement"), pursuant to which the Company granted registration rights with
respect to all shares of Common Stock and Preferred Stock owned by the
Shareholders. Such registration rights also extend to any capital stock of the
Company issued as a dividend in respect of such shares. Subject to certain
customary exceptions and limitations, the Company has agreed to provide two
demand registrations to the holders of Registrable Securities (as defined in the
Registration Rights Agreement), which may be exercised by the holders of more
than 50% of the Registrable Securities. The Registration Rights Agreement also
provides for piggyback registration rights in the event the Company files a
registration statement for the sale of its securities, subject to certain
customary exceptions and limitations. In addition, once the Company is qualified
to use Form F-3 or S-3 under the Securities Act, the holders of Registrable
Securities shall have the right to request four registrations on Form F-3 or S-3
to register all or a portion of such shares under the Securities Act, subject to
certain conditions. In general, all fees, costs and expenses of such
registration (other than underwriting discounts and selling commissions
applicable to sales of the Registrable Securities) will be borne by the Company.
The Company has agreed to indemnify the holders of Registrable Securities from
any liability arising out of or relating to any untrue statement of a material
fact or any omission of a material fact in any registration statement or
prospectus filed by the Company pursuant to the Registration Rights Agreement,
subject to certain exceptions.
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DESCRIPTION OF THE NOTES
The Old Notes were issued and the New Notes are issued under an Indenture
dated as of June 1, 1997 between Paging Network do Brasil S.A. (the "Company")
and The Chase Manhattan Bank, as trustee (the "Trustee"), a copy of which is
available upon request to the Company. The terms of the New Notes are identical
in all material respects to the terms of the Old Notes, except for certain
transfer restrictions and registration rights relating to the Old Notes and
except that if the Exchange Offer is not consummated by November 3, 1997, the
interest rate borne by the Old Notes will increase by 0.50% per annum for the
first 90-day period following November 3, 1997 and will increase by an
additional 0.50% per annum with respect to each subsequent 45-day period up to a
maximum amount of 2.00% per annum. The following summary of certain provisions
of the Indenture does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Trust Indenture Act of 1939 and
to all of the provisions of the Indenture, including the definitions of certain
terms therein and those terms made a part of the Indenture by reference to the
Trust Indenture Act, as in effect on the date of the Indenture, and to the Trust
Indenture Act, in the case of the Exchange Notes, if any, or the effectiveness
of a Notes Shelf Registration Statement. Whenever particular provisions or
definitions of the Indenture, the Notes or the terms defined therein are
referred to herein, such provisions or definitions are incorporated herein by
reference. The definitions of certain capitalized terms used in the following
summary are set forth below under "--Certain Definitions."
Remaining Old Notes still outstanding after the consummation of the Exchange
Offer and New Notes issued in connection with the Exchange Offer will be treated
as a single class of securities under the Indenture.
GENERAL
The Notes will be issued only in registered form, without coupons, in
denominations of US$1,000 and integral multiples of US$1,000. See "Book-Entry;
Delivery and Form." The Company has appointed The Chase Manhattan Bank to serve
as Registrar, Co-Paying Agent and Trustee under the Indenture at its offices at
450 West 33rd Street, New York, New York 10001 and Chase Trust Company ("Chase
Japan") to serve as Principal Paying Agent under the Indenture at its offices at
2-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100, Japan. The Trustee, the
Registrar, the Company and the Principal Paying Agent are responsible for, among
other things, (i) maintaining a record of the registration of ownership,
exchange and transfer of the Notes and accepting Notes for exchange and
transfer, (ii) ensuring that payments of the principal and interest received
from the Company or any Guarantor in respect of the Notes are duly paid to the
registered holders thereof, (iii) transmitting to the Company any notices or
other communications from holders of Notes and (iv) transmitting to the holders
of Notes notice of the occurrence of any Default after obtaining knowledge
thereof. No service charge will be made for any registration of transfer or
exchange of the Notes, except for any tax or other governmental charge that may
be imposed in connection therewith.
MATURITY, INTEREST AND PRINCIPAL
The Notes are general unsecured senior obligations of the Company, limited
to US$125,000,000 aggregate principal amount, and will mature on June 6, 2005.
See "--Ranking of the Notes."
Interest on the Notes will be payable, in cash at a rate of 13 1/2% per
annum, semi-annually in arrears on each June 6 and December 6 (each, an
"Interest Payment Date"), commencing December 6, 1997, to the holders of record
of Notes at the close of business on the May 15 and November 15 immediately
preceding such Interest Payment Date. Interest will accrue from the most recent
Interest Payment Date to which interest has been paid or duly provided for or,
if no interest has been paid or duly provided for, from the Issue Date. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
Interest on overdue principal and, to the extent permitted by law, on overdue
installments of interest will accrue at the rate of interest borne by the Notes.
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Whenever in the Indenture or in this "Description of the Notes" there is
mentioned, in any context, the payment of amounts based upon the payment of
principal, premium, if any, interest or of any other amount payable under or
with respect to any Note, such mention shall be deemed to include mention of the
payment of Additional Amounts to the extent that, in such context, Additional
Amounts are, were or would be payable in respect thereof.
ADDITIONAL AMOUNTS
All payments made by the Company or any Guarantor under or with respect to
the Notes or any Guarantee will be made free and clear of and without
withholding or deduction for or on account of any present or future taxes,
duties, assessments or governmental charges of whatever nature ("Taxes") imposed
or levied by or on behalf of any taxing authority within the Federative Republic
of Brazil or Japan, unless the Company or any Guarantor is required to withhold
or deduct any amount for or on account of Taxes by law or by the interpretation
or administration thereof. If the Company or any Guarantor is required to
withhold or deduct any amount for or on account of Taxes imposed by a taxing
authority within the Federative Republic of Brazil or Japan from any payment
made under or with respect to the Notes, the Company or such Guarantor will pay
such additional amounts ("Additional Amounts") as may be necessary so that the
net amount received by each holder of Notes (including Additional Amounts) after
such withholding or deduction will not be less than the amount the holder would
have received if such Taxes had not been withheld or deducted. No such
Additional Amounts will be payable with respect to a payment made to a holder of
Notes (an "Excluded Holder") with respect to any Tax which would not have been
imposed, payable or due: (i) but for the fact that the holder (or where the
holder is an estate, nominee, trust or partnership, any fiduciary, settlor,
beneficiary or member) is a domiciliary, national or resident of, or engaging in
business, maintaining a permanent establishment or is physically present in, the
Federative Republic of Brazil or Japan; (ii) but for the failure to comply with
a request by the Company or any Guarantor to satisfy any certification,
identification or other reporting requirements, whether imposed by statute,
treaty, regulation or administrative practices, concerning nationality,
residence or connection with the Federative Republic of Brazil or Japan; or
(iii) if, where presentation is required, the presentation for payment had
occurred within 30 days after the date such payment was due and payable or was
provided for, whichever is later. The obligation to pay Taxes and Additional
Amounts in respect of Taxes shall not apply to (a) any estate, inheritance,
gift, sales, transfer, personal property or any similar Tax or (b) any Tax which
is payable otherwise than by deduction or withholding from payments made under
or with respect to the Notes. The Company or the Guarantor, as applicable, will
(i) make such withholding or deduction and (ii) remit the full amount deducted
or withheld to the relevant authority (the "Taxing Authority") in accordance
with applicable law. The Company or the Guarantor, as applicable, will obtain
certified copies of tax receipts evidencing the payment of any Taxes so deducted
or withheld from each Taxing Authority imposing such Taxes and will provide such
certified copy to the Principal Paying Agent for prompt forwarding to the
holder. The Company or the Guarantor, as applicable, will attach to each
certified copy a certificate stating (x) that the amount of withholding tax
evidenced by the certified copy was paid in connection with payments in respect
of the principal amount of Notes then outstanding and (y) the amount of such
withholding tax paid per US$1,000 of principal amount of the Notes. The
Indenture will further provide that, if the Company or any Guarantor conducts
business in any jurisdiction (the "Taxing Jurisdiction") other than the
Federative Republic of Brazil or Japan in a manner which causes Holders to be
liable for taxes on payments under the Notes or any Guarantee, as the case may
be, for which they would not have been so liable but for such conduct of
business in the Taxing Jurisdiction, the Additional Amounts provision described
above shall be considered to apply to such Holders as if references in such
provision to "Taxes" included taxes imposed by way of deduction or withholding
by such Taxing Jurisdiction. See "Tax Considerations--United States--Tax
Considerations Applicable to Holding Notes--Effect of Brazilian Withholding
Taxes."
At least 30 days prior to each date on which any payment under or with
respect to the Notes is due and payable (unless such obligation to pay
Additional Amounts arises after the 30th day prior to such date,
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in which case it shall be promptly thereafter), if the Company or any Guarantor
will be obligated to pay Additional Amounts with respect to such payment, the
Company or such Guarantor will deliver to the Trustee and each Paying Agent an
Officers' Certificate stating the fact that such Additional Amounts will be
payable and the amounts so payable and will set forth such other information
necessary to enable the Trustee and each Paying Agent to pay such Additional
Amounts to holders of Notes on the payment date. Each Officers' Certificate
shall be relied upon until receipt of a further Officers' Certificate addressing
such matters.
ESCROW ACCOUNT
The Indenture provided that upon the closing of the offering of the Old
Notes, the Company purchase and pledge to the Trustee for the benefit of holders
of the Notes the Pledged Securities in such amount as will be sufficient upon
receipt of scheduled interest and principal payments of such securities, based
on the report of an internationally recognized firm of independent public
accountants selected by the Company, to provide for payment in full of the first
six scheduled interest payments due on the Notes through June 6, 2000.
Accordingly, the Company used approximately US$46 million of the net proceeds of
the sale of the Old Notes to acquire the Pledged Securities. The Pledged
Securities are pledged by the Company to the Trustee for the benefit of the
holders of Notes pursuant to the Pledge Agreement and are held in the United
States by the Trustee in the Pledge Account (as defined herein). A failure by
the Company to pay interest on the Notes in a timely manner through June 6, 2000
will constitute an immediate Event of Default under the Indenture, with no grace
or cure period. The Pledge Account does not include collateral to secure any
Additional Amounts which might become payable with respect to the Notes. See "--
Additional Amounts."
Pursuant to the Pledge Agreement, interest earned on the Pledged Securities
will be added to the Pledge Account. In the event that the funds or Pledged
Securities held in the Pledge Account exceed the amount sufficient, based on the
report of an internationally recognized firm of independent public accountants
selected by the Company, to provide for payment in full of the first six
scheduled interest payments due on the Notes (or, in the event an interest
payment or payments have been made, an amount sufficient to provide for payments
in full or any interest payments remaining, up to and including the sixth
scheduled interest payment) the Trustee will be permitted to release to the
Company at the Company's request any such excess amount. The Notes will be
secured by a security interest in the Pledged Securities and in the Pledge
Account and, accordingly, the Pledged Securities and the Pledge Account will
also secure repayment of the principal amount of the Notes to the extent of such
security.
Pursuant to the Pledge Agreement, if the Company makes the first six
scheduled interest payments on the Notes in a timely manner, immediately after
the sixth scheduled interest payment any remaining Pledged Securities will be
released from the Pledge Account and thereafter the Notes will be unsecured.
REDEMPTION
OPTIONAL REDEMPTION
Except as set forth below, the Notes will not be redeemable at the Company's
option prior to maturity.
OPTIONAL REDEMPTION BY THE COMPANY. The Notes will be redeemable, in whole
or in part, at any time on or after June 6, 2001 at the option of the Company,
upon not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below, plus accrued and
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unpaid interest to the redemption date, if redeemed during the 12-month period
beginning June 6 of the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2001............................................................................. 106.75%
2002............................................................................. 104.50%
2003............................................................................. 102.25%
2004 and thereafter.............................................................. 100.00%
</TABLE>
Notwithstanding the foregoing, on or prior to June 6, 2000, the Company may,
at its option, use the net proceeds of one or more Significant Equity Offerings
(as defined below) yielding gross cash proceeds of not less than US$35,000,000
(or, to the extent non-U.S. dollar denominated, the U.S. Dollar Equivalent
thereof) to redeem up to an aggregate of 35% of the principal amount of the
Notes originally issued from the holders of Notes on a PRO RATA basis (or as
nearly PRO RATA as practicable), at a redemption price of 113 1/2% of the
principal amount thereof, plus accrued and unpaid interest to the redemption
date; PROVIDED that not less than US$81,250,000 aggregate principal amount of
Notes would remain outstanding immediately after such redemption. To effect the
foregoing redemption, the Company must mail a notice of redemption not later
than 60 days after the consummation of the Significant Equity Offering that
resulted in the requisite gross proceeds.
As used above, "Significant Equity Offering" means a public offering of
Capital Stock (other than Disqualified Capital Stock) of the Company (or
American Depositary Receipts or Global Depositary Receipts representing such
Capital Stock) either (x) in the United States pursuant to an offering
registered under the Securities Act or (y) in Brazil pursuant to an offering
registered with the Comissao de Valores Mobiliarios ("CVM") and listed on the
Sao Paulo Stock Exchange or Rio de Janeiro Stock Exchange and/ or (z) in the
United Kingdom pursuant to an offering that results in such Capital Stock (or
Global Depositary Receipts representing such Capital Stock) being listed on the
London Stock Exchange or the Luxembourg Stock Exchange.
REDEMPTION FOR CHANGES IN WITHHOLDING TAXES. The Notes may be redeemed at
the option of the Company, in whole but not in part, at any time prior to
maturity if (A) there is any change in or amendment to the Treaty to Avoid
Double Taxation entered into between the Federative Republic of Brazil and
Japan, approved by Legislative Decree No. 43 dated November 23, 1967, and
enacted in Brazil by Decree No. 61,899 dated December 14, 1967, as amended by
Decree No. 81,194 dated January 9, 1978, which has the effect of increasing the
rate of tax applicable under such treaty to a rate exceeding 15.0% of interest
payable; or (B) (i) as the result of any change in or amendment to the laws or
regulations of the Federative Republic of Brazil or Japan, the Company has or
will become obligated to pay, or (ii) any act is taken by a taxing authority of
the Federative Republic of Brazil or Japan after the date of issuance of the
Notes (whether or not such act is taken with respect to the Company or any
Affiliate thereof) that results in a substantial probability that the Company
will be required to pay, Additional Amounts (excluding interest and penalties)
in excess of the Additional Amounts that the Company would be obligated to pay
if Brazilian Taxes (excluding interest and penalties) were payable with respect
to such payments of interest at a rate of 15.0% and such obligation cannot be
avoided by the Company, taking reasonable measures available to it, upon not
more than 60 nor less than 30 days' notice to the holders of such Notes (with
copies to the Trustee and each Paying Agent) at a redemption price of 100% of
the principal amount thereof, plus accrued and unpaid interest to the redemption
date, plus any such Additional Amounts payable with respect to such redemption
price and interest as provided under "--Additional Amounts." Prior to the giving
of notice of redemption of the Notes as described herein and as a condition to
any such redemption, the Company will deliver to the Trustee an Officers'
Certificate (together with a copy of the written opinion of counsel to the
effect that the applicable rate has so increased, or the Company has or will
become so obligated, or that an act taken by a taxing authority of Brazil has
resulted in a substantial probability that the Company will become so obligated
to pay Additional Amounts as a result of such
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change, amendment, interpretation or act), stating that the Company is entitled
to effect such redemption and setting forth in reasonable detail a statement of
facts relating thereto. No notice of redemption shall be given earlier than 60
days prior to the earliest date on which the Company would be obligated or there
is a substantial probability that the Company would be obligated to pay such
Additional Amounts were a payment in respect of the Notes then due and, at the
time such notice of redemption is given, such obligation to pay, or such
substantial probability that the Company will be required to pay, such
Additional Amounts remains in effect.
SELECTION; EFFECT OF REDEMPTION NOTICE. Notice of an optional redemption
must be given no less than 30 nor more than 60 days prior to the applicable
redemption date. In the case of a partial redemption, selection of the Notes for
redemption will be made by lot, PRO RATA or by such other method as the Trustee
in its sole discretion deems fair and appropriate or in such manner as complies
with the requirements of the principal securities exchange, if any, on which the
Notes being redeemed are listed and DTC; PROVIDED that any redemption following
one or more Significant Equity Offerings will be made on a PRO RATA or on as
nearly a PRO RATA basis as practicable (subject to the procedures of DTC). Upon
giving of a redemption notice, interest on Notes called for redemption will
cease to accrue from and after the date fixed for redemption (unless the Company
defaults in providing the funds for such redemption) and, upon redemption on
such redemption date, such Notes will cease to be outstanding.
MANDATORY REDEMPTION
SINKING FUND. The Company will not be required to make any mandatory
sinking fund payments in respect of the Notes.
OFFERS TO PURCHASE UPON CHANGE OF CONTROL AND CERTAIN ASSET
SALES. Following the occurrence of a Change of Control, the Company will be
required to make an offer to purchase all outstanding Notes at a price of 101%
of the principal amount thereof, plus accrued and unpaid interest, if any, to
the date of purchase, and purchase all Notes validly tendered pursuant thereto.
In addition, the Company may be obligated to make an offer to purchase Notes
with a portion of the Net Cash Proceeds of certain Asset Sales at a price of
100% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the date of purchase. See "--Certain Covenants--Change of Control" and
"--Disposition of Proceeds of Asset Sales," respectively.
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BRAZILIAN CENTRAL BANK CONSENT FOR OPTIONAL AND MANDATORY REDEMPTION OF NOTES
The consent of the Brazilian Central Bank is needed for the payment of
principal of, premium on and interest on the Notes upon acceleration of the
Notes following an Event of Default. In addition, the consent of the Brazilian
Central Bank is needed for payments in respect of the Notes upon (i) a
redemption or repurchase by the Company at its option, (ii) a Change of Control
or (iii) an Asset Sale. See "Risk Factors--Risk Factors Relating to
Brazil--Controls and Restrictions on U.S. Dollar Remittances."
RANKING
The indebtedness of the Company and the Guarantors evidenced by the Notes
and the Guarantees will rank senior in right of payment to all indebtedness of
the Company or such Guarantors, as the case may be, that is subordinated to the
Notes or such Guarantees, as applicable, by its terms and will rank PARI PASSU
in right of payment with all other existing or future unsecured and
unsubordinated indebtedness of the Company or such Guarantors, as the case may
be. At the Issue Date, it is expected that there will be no outstanding
indebtedness of the Company ranking PARI PASSU with or junior in right of
payment to the Notes. As of the date of this Prospectus, the Company has no
Subsidiaries and, accordingly, there are no Guarantors. The Notes will be
effectively subordinated in right of payment to all liabilities, including trade
payables, of any Subsidiaries organized or acquired by the Company hereafter,
except to the extent such Subsidiaries are required to become Guarantors as set
forth under "--Certain Covenants--Issuance of Guarantees by Material Restricted
Subsidiaries; Release of Guarantees." See "Use of Proceeds" and
"Capitalization."
CERTAIN COVENANTS
Set forth below are certain covenants that are contained in the Indenture.
LIMITATION ON ADDITIONAL INDEBTEDNESS AND PREFERRED STOCK OF RESTRICTED
SUBSIDIARIES. The Indenture provides that (i) the Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, create, incur,
assume, issue, guarantee or in any manner become directly or indirectly liable
for or with respect to, contingently or otherwise, the payment of (collectively,
to "incur") any Indebtedness (including any Acquired Indebtedness) and (ii) the
Company will not permit any Restricted Subsidiary that is not a Guarantor to
issue any Preferred Stock, in each case, except for Permitted Indebtedness;
PROVIDED that (a) the Company and any Guarantor will be permitted to incur
Indebtedness (including Acquired Indebtedness) and (b) any Restricted Subsidiary
that is not a Guarantor will be permitted to issue Preferred Stock, if, in each
case, after giving PRO FORMA effect to such incurrence or issuance and any
concurrent financing (including the application of the net proceeds therefrom),
the ratio of (x) Total Consolidated Indebtedness and Subsidiary Preferred Stock
to (y) Annualized Pro Forma Consolidated Operating Cash Flow for the latest
fiscal quarter for which consolidated financial statements of the Company are
available preceding the date of such incurrence or issuance would be either (1)
less than or equal to 5.75 to 1.00 if such incurrence or issuance is on or prior
to December 31, 2000 or (2) less than or equal to 5.00 to 1.00 if such
incurrence or issuance is on or after January 1, 2001.
LIMITATION ON RESTRICTED PAYMENTS. The Indenture provides that the Company
will not, and will not permit any of the Restricted Subsidiaries to, make,
directly or indirectly, any Restricted Payment unless:
(i) no Default shall have occurred and be continuing at the time of or
after giving effect to such Restricted Payment;
(ii) immediately after giving effect to such Restricted Payment, the
Company would be able to incur US$1.00 of Indebtedness under the proviso of
the covenant described under "Limitation on Additional Indebtedness and
Preferred Stock of Restricted Subsidiaries"; and
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(iii) immediately after giving effect to such Restricted Payment, the
aggregate amount of all Restricted Payments declared or made on or after the
Issue Date (including any Designation Amount) does not exceed an amount
equal to the sum of (a) the difference between (x) the Cumulative Adjusted
Available Cash Flow determined at the time of such Restricted Payment and
(y) 150% of the cumulative Consolidated Interest Expense of the Company
determined for the period commencing on the Issue Date and ending on the
last day of the latest fiscal quarter for which consolidated financial
statements of the Company are available preceding the date of such
Restricted Payment PLUS (b) the aggregate net cash proceeds received by the
Company (x) as capital contributions to the Company after the Issue Date or
(y) from the issue or sale (other than to a Restricted Subsidiary) of its
Capital Stock (other than Disqualified Stock) on or after the Issue Date
(including, without duplication, upon the exercise of options, warrants or
rights) PLUS (c) the aggregate net proceeds received by the Company from the
issuance (other than to a Restricted Subsidiary) on or after the Issue Date
of its Capital Stock (other than Disqualified Stock) upon the conversion of,
or exchange for, Indebtedness of the Company or a Restricted Subsidiary PLUS
(d) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment (other than an Investment made pursuant to
clause (v) of the following paragraph) made after the Issue Date an amount
equal to the lesser of the return of capital with respect to such Investment
and the cost of such Investment, in either case, less the cost of the
disposition of such Investment PLUS (e) in the case of the Revocation of the
Designation of a Subsidiary as an Unrestricted Subsidiary, an amount equal
to the consolidated net Investment (exclusive of the net amount of any
Investment made in such Subsidiary while it was an Unrestricted Subsidiary)
in such Subsidiary on the date of Revocation but not in an amount exceeding
the sum of (1) the Designation Amount with respect to such Subsidiary and
(2) the net amount of any Investment made in such Subsidiary while it was an
Unrestricted Subsidiary, MINUS (f) 50% of the aggregate outstanding
principal amount of Indebtedness incurred pursuant to clause (e) of the
definition of "Permitted Indebtedness." For purposes of the preceding
clauses (b)(y) and (c) and without duplication, the value of the aggregate
net cash proceeds received by the Company upon the issuance of Capital Stock
either upon the conversion of convertible Indebtedness or in exchange for
outstanding Indebtedness or upon the exercise of options, warrants or rights
will be the net cash proceeds received upon the issuance of such
Indebtedness, options, warrants or rights plus the incremental amount
received by the Company upon the conversion, exchange or exercise thereof.
For purposes of determining the amount expended for Restricted Payments,
cash distributed shall be valued at the face amount thereof and property other
than cash shall be valued at its Fair Market Value.
The provisions of this covenant shall not prohibit (i) the payment of any
dividend or other distribution within 60 days after the date of declaration
thereof, if at such date of declaration such payment would comply with the
provisions of the Indenture; (ii) so long as no Default shall have occurred and
be continuing, the purchase, redemption, retirement or other acquisition of any
shares of Capital Stock of the Company (A) in exchange for or conversion into or
(B) out of the net cash proceeds of the substantially concurrent issue and sale
(other than to a Restricted Subsidiary) of shares of Capital Stock of the
Company (other than Disqualified Stock); PROVIDED that any such net cash
proceeds pursuant to the immediately preceding clause (B) are excluded from
clause (iii)(b) of the preceding paragraph; (iii) so long as no Default shall
have occurred and be continuing, the purchase, redemption, retirement,
defeasance or other acquisition of (A) Preferred Stock of any Restricted
Subsidiary that is not a Guarantor made by exchange for or conversion into, or
out of the net cash proceeds of, a substantially concurrent issue and sale
(other than to a Restricted Subsidiary) of (x) Capital Stock (other than
Disqualified Stock) of the Company or (y) other Preferred Stock of such
Restricted Subsidiary having an Average Life to Stated Maturity equal to or
greater than the Average Life to Stated Maturity of the Preferred Stock being
purchased, redeemed, retired, defeased or otherwise acquired or (B) Subordinated
Indebtedness made by exchange for or conversion into, or out of the net cash
proceeds of, a substantially concurrent issue and sale (other than to a
Restricted Subsidiary) of (x) Capital Stock (other than Disqualified Stock) of
the Company or (y) other Subordinated Indebtedness having an Average Life to
Stated Maturity equal to or
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greater than the Average Life to Stated Maturity of the Subordinated
Indebtedness being purchased, redeemed, retired, defeased or otherwise acquired
PROVIDED that any such net cash proceeds pursuant to the immediately preceding
clause (iii)(A) or (iii)(B) are excluded from clause (iii)(b) of the preceding
paragraph; (iv) from and after the date that any Shareholder Commitments shall
cease to be effective under applicable law, so long as no Default shall have
occurred and be continuing, dividends in respect of Capital Stock of the
Company, after taking account of all preceding and contemporaneous dividends and
distributions in respect of Capital Stock of the Company, in an amount not
exceeding the amount mandated by applicable law; (v) so long as no Default shall
have occurred and be continuing, any Investment constituting a Restricted
Payment by the Company or any Restricted Subsidiary in any person (including any
Unrestricted Subsidiary) in an amount not to exceed US$10,000,000 (or, to the
extent non-U.S. dollar denominated, the U.S. Dollar Equivalent thereof) in the
aggregate at any time outstanding; (vi) so long as no Default shall have
occurred and be continuing and prior to a Liquidation Event (as defined in the
LLC Agreement) with respect to Holding LLC, dividends to Holding LLC in an
amount not exceeding the amount necessary for Members of Holding LLC to pay
Taxes attributable solely to their interest in Holding LLC; (vii) the
redemption, repurchase, retirement or other acquisition of any Capital Stock of
the Company from an employee or former employee of the Company or any of its
Subsidiaries in connection with such employee's death, disability or termination
of employment; PROVIDED that the amount expended by the Company or any of its
Restricted Subsidiaries in connection with such redemption, repurchase,
retirement or other acquisition does not exceed US$500,000 (or, to the extent
non-U.S. dollar denominated, the U.S. Dollar Equivalent thereof) per year;
PROVIDED, FURTHER, that any portion of such permitted amount which is not
expended in one year may be carried forward for up to two consecutive years; or
(viii) so long as no Default shall have occurred and be continuing, the making
of a direct or indirect Investment constituting a Restricted Payment out of the
proceeds of a concurrent capital contribution in respect of existing Capital
Stock (other than Disqualified Capital Stock) of the Company or from the issue
or sale (other than to a Subsidiary) of Capital Stock (other than Disqualified
Capital Stock) of the Company; PROVIDED that any such net cash proceeds are
excluded from clause (iii)(b) of the second preceding paragraph. Restricted
Payments of the type set forth in the preceding clauses (iv), (v), (vi) and
(vii) shall be included in making the determination of available amounts under
clause (iii) of the preceding paragraph.
The Indenture provides that the Company will be required to obtain, as a
condition to the issuance of the Notes, and to thereafter maintain, enforceable
written commitments (the "Shareholder Commitments") from each shareholder of the
Company agreeing that such shareholder will not exercise its voting rights to
receive mandatory statutory dividends (without limiting such shareholder's right
otherwise to receive dividends pursuant to and in compliance with the covenant
described under "Limitation on Restricted Payments"), provided that a
Shareholder Commitment will cease to be effective on the first to occur of (w)
the date that shares of Capital Stock of the Company are issued and listed on a
Brazilian securities exchange in connection with a bona fide public offering of
such shares or the date that any shares of the Capital Stock of the Company are
otherwise effectively listed and traded on any Brazilian securities exchange;
(x) the date that none of the Notes remain outstanding; (y) June 6, 2002; or (z)
the date that such commitment is no longer effective, enforceable or legal under
applicable Brazilian laws and regulations (including without limitation any
construction or interpretation thereof by the CVM, any court or any other
governmental authority). The Indenture will provide that the Company will obtain
Shareholder Commitments in connection with any future issuances of Capital Stock
to the extent the Shareholder Commitment would then be effective, enforceable
and legal under the terms of the foregoing proviso.
LIMITATION ON LIENS SECURING CERTAIN INDEBTEDNESS. The Indenture provides
that the Company will not, and will not permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Liens of any kind against or upon
any of its property or assets, or any proceeds therefrom, which secure either
(i) Subordinated Debt Securities unless the Notes and the Guarantees, as
applicable, are secured by a Lien
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on such property, assets or proceeds that is senior in priority to the Liens
securing such Subordinated Debt Securities or (ii) Pari Passu Debt Securities
unless the Notes and the Guarantees, as applicable, are equally and ratably
secured with the Liens securing such Pari Passu Debt Securities. The Indenture
will also provide that the Company will not create, incur or suffer to exist any
Lien of any kind (other than the Lien of the Pledgee) against or upon the
Pledged Securities and will not terminate the Lien of the Pledgee on the Pledged
Securities.
ISSUANCE OF GUARANTEES BY MATERIAL RESTRICTED SUBSIDIARIES; RELEASE OF
GUARANTEES. The Indenture provides that each Material Restricted Subsidiary
will become a guarantor of the Notes (each a "Guarantor" and collectively the
"Guarantors"). Each Guarantor will fully and unconditionally guarantee
(collectively, the "Guarantees"), jointly and severally, on a senior unsecured
basis to each holder of a Note the due and punctual payment of the principal of,
premium, if any, and interest on, and all other amounts owing in respect of such
Note (and any Additional Amounts payable in respect thereof) and under the
Indenture. Each Guarantor will deliver a written instrument in the form attached
to the Indenture evidencing its Guarantee.
Pursuant to each Guarantee, if the Company defaults in payment of any amount
owing in respect of any Notes, the Guarantor will be obligated to duly and
punctually pay the same. Pursuant to the terms of the Indenture, each of the
Guarantors has agreed that its obligations under its Guarantee will be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or the Indenture, the absence of any action to enforce the same or any
other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.
If no Default exists or would exist under the Indenture, concurrently with
any sale or disposition (by merger or otherwise) of any Guarantor (other than a
transaction subject to the provisions described under "--Consolidation, Merger,
Sale of Assets, Etc.") by the Company or a Restricted Subsidiary to any person
that is not an Affiliate of the Company or any of the Restricted Subsidiaries
which is in compliance with the terms of the Indenture, such Guarantor will
automatically and unconditionally be released from all obligations under its
Guarantee.
BUSINESS OF THE COMPANY AND RESTRICTED SUBSIDIARIES. The Indenture will
provide that the Company will not, and will not permit any of the Restricted
Subsidiaries to, be principally engaged in any business or activity other than a
Permitted Business.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES. The Indenture provides that the Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, create or otherwise
enter into or cause to become effective any consensual encumbrance or consensual
restriction of any kind on the ability of any Restricted Subsidiary to (a) pay
dividends, in cash or otherwise, or make any other distributions on its Capital
Stock or any other interest or participation in, or measured by, its profits
owned by the Company or any Restricted Subsidiary, (b) pay any Indebtedness owed
to the Company or a Restricted Subsidiary, (c) make any Investment in the
Company or any Restricted Subsidiary or (d) transfer any of its property or
assets to the Company or to any Restricted Subsidiary, except for (i) any such
customary encumbrance or restriction contained in a security document creating a
Lien permitted under the Indenture to the extent such encumbrance or restriction
applies to action following a default in respect of the applicable secured
obligation, (ii) any such encumbrance or restriction pursuant to any agreement
existing on the Issue Date, (iii) any such encumbrance or restriction with
respect to a Restricted Subsidiary that is not a Restricted Subsidiary on the
Issue Date which encumbrance or restriction is in existence at the time such
person becomes a Restricted Subsidiary but not created in contemplation thereof,
(iv) any such encumbrance or restriction existing under any agreement that
refinances, replaces or amends an agreement containing a restriction permitted
by clause (iii) above, PROVIDED that the terms and conditions of any such
restrictions are not materially less favorable to the holders of Notes than
those under or pursuant to the agreement being replaced or amended or the
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agreement evidencing the indebtedness refinanced, (v) any such encumbrance or
restriction imposed pursuant to an agreement which has been entered into for the
sale or disposition of all or substantially all of the Capital Stock or assets
of such Restricted Subsidiary and (vi) customary non-assignment provisions in
leases entered into in the ordinary course of business and consistent with past
practices.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Indenture provides that the
Company will not, and will not permit, cause, or suffer any Restricted
Subsidiary to, conduct any business or enter into any transaction or series of
related transactions with or for the benefit of any of their respective
Affiliates or any beneficial holder of ten percent or more of any class of
Capital Stock of the Company or any officer or director of the Company or any
Restricted Subsidiary (each an "Affiliate Transaction"), except on terms that
are fair and reasonable to the Company or such Restricted Subsidiary, as the
case may be. Each Affiliate Transaction involving aggregate payments or other
property having a Fair Market Value in excess of US$2,000,000 (or, to the extent
non-U.S. dollar denominated, the U.S. Dollar Equivalent of such amount) shall be
approved by the Board of Directors of the Company, such approval to be evidenced
by a Resolution of the Board of Directors (delivered to the Trustee) stating
that the Board of Directors of the Company (including a majority of the
Disinterested Directors) has determined that such transaction complies with the
foregoing provisions. In addition to the foregoing, with respect to any
Affiliate Transaction involving aggregate consideration in excess of
US$5,000,000 (or, to the extent non-U.S. dollar denominated, the U.S. Dollar
Equivalent of such amount) or more, the Company must obtain a written opinion
(delivered to the Trustee) from an Independent Financial Advisor stating that
the terms of such Affiliate Transaction to the Company or the Restricted
Subsidiary, as the case may be, are fair from a financial point of view.
Notwithstanding the foregoing, the restrictions set forth in this covenant
shall not apply to (i) transactions with or among the Company and/or any of the
Restricted Subsidiaries; PROVIDED in any such case, no officer, director or
beneficial holder of 10% or more of any class of Capital Stock of the Company
shall beneficially own any Capital Stock of any such Restricted Subsidiary, (ii)
transactions between the Company and any Restricted Subsidiary that are solely
for the benefit of the Company or a Guarantor, (iii) transactions between or
among Unrestricted Subsidiaries, (iv) any dividend permitted by the covenant
"Limitation on Restricted Payments," (v) directors' fees, indemnification and
similar arrangements, officers' indemnification, employee stock option or
employee benefit plans, employee salaries and bonuses or legal fees paid or
created in the ordinary course of business, (vi) payments made to a License
Vehicle in reimbursement of expenses to the extent increased to maintain the
effectiveness of any paging licenses used by the Company or any Restricted
Subsidiary and (vii) payments pursuant to each of the following arrangements as
in effect on June 6, 1997: (A) the Technical Services Agreement, (B) the
Subscription Agreement, (C) the Paging License Operating Agreements and (D) the
Paging License Transfer Agreements.
CHANGE OF CONTROL. Following the occurrence of a Change of Control (the
date of such occurrence being the "Change of Control Date"), the Company shall
notify the holders of the Notes, in the manner prescribed by the Indenture, of
such occurrence and shall make an offer to purchase (the "Change of Control
Offer"), on a business day (the "Change of Control Payment Date") not later than
60 days following the Change of Control Date, all Notes then outstanding at a
purchase price equal to 101% of the principal amount thereof plus accrued and
unpaid interest, if any, to any Change of Control Payment Date. Notice of a
Change of Control Offer shall be given to holders of Notes, not less than 25
days nor more than 45 days before the Change of Control Payment Date. The Change
of Control Offer is required to remain open for at least 20 business days and
until the close of business on the Change of Control Payment Date. The Company's
obligations may be satisfied if a third party makes the Change of Control Offer
in the manner, at the times and otherwise in compliance with the requirements
applicable to a Change of Control Offer made by the Company and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
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If a Change of Control Offer is made, there can be no assurance that the
Company or the Guarantors will have available funds sufficient to pay for all of
the Notes that might be delivered by holders of Notes seeking to accept the
Change of Control Offer.
If the Company makes a Change of Control Offer, the Company will comply with
all applicable tender offer laws and regulations, including, to the extent
applicable, Section 14(e) and Rule 14e-1 under the Exchange Act, and any other
applicable United States or foreign securities laws and regulations and any
applicable requirements of any securities exchange on which the Notes are
listed.
DISPOSITION OF PROCEEDS OF ASSET SALES. The Indenture provides that the
Company will not, and will not permit any Restricted Subsidiary to, make any
Asset Sale, unless (a) the Company or such Restricted Subsidiary, as the case
may be, receives consideration at the time of such Asset Sale at least equal to
the Fair Market Value of the shares or assets sold or otherwise disposed of and
(b) at least 75% of such consideration consists of cash or Cash Equivalents
(provided that the following shall be deemed cash for purposes of this provision
and be treated as Net Cash Proceeds, subject to application as hereinafter
provided: the amount of (x) any liabilities (as shown on the balance sheet or in
the notes thereto of the Company or such Restricted Subsidiary) of the Company
or such Restricted Subsidiary that are assumed (and from which the Company or
such Restricted Subsidiary is unconditionally released) in connection with such
Asset Sale by the transferee or purchaser of such assets or on behalf of such
transferee or purchaser by a third party and (y) any notes or other assets
received by the Company or such Restricted Subsidiary from such transferee or
purchaser that are immediately sold or transferred (on a non-recourse basis) for
cash or Cash Equivalents). To the extent the Net Cash Proceeds of any Asset Sale
are not required to be applied to repay, and permanently reduce the commitments
under, any Specified Indebtedness or are required but are not so applied, the
Company or such Restricted Subsidiary, as the case may be, may apply such Net
Cash Proceeds within 365 days thereof, to an investment in properties and assets
that will be used in a Permitted Business (or in Capital Stock of any person
that will become a Restricted Subsidiary as a result of such investment if such
person principally owns properties and assets that will be used in a Permitted
Business) of the Company or any Restricted Subsidiary ("Replacement Assets").
Pending the final application of any such Net Cash Proceeds in accordance with
the second sentence of this paragraph or to an Asset Sale Offer, the Company or
such Restricted Subsidiary may invest such Net Cash Proceeds in any manner not
prohibited by the Indenture and may temporarily repay Specified Indebtedness.
The Pro Rata Share of Net Cash Proceeds from any Asset Sale that are neither
used to repay, and permanently reduce the commitments under, any Specified
Indebtedness nor invested in Replacement Assets within such 365-day period shall
constitute "Excess Proceeds" subject to disposition as provided below.
Within 30 days after the aggregate amount of Excess Proceeds equals or
exceeds US$10,000,000 (or, to the extent non-U.S. dollar denominated, the U.S.
Dollar Equivalent of such amount), the Company shall make an offer to purchase
(an "Asset Sale Offer"), from all holders of the Notes, Notes having an
aggregate purchase price equal to such Excess Proceeds at a price in cash equal
to 100% of the outstanding principal amount thereof plus accrued and unpaid
interest, if any, to the purchase date. Each Asset Sale Offer shall remain open
for a period of 20 business days or such longer period as may be required by
law. To the extent that the aggregate purchase price for Notes tendered pursuant
to an Asset Sale Offer is less than the Excess Proceeds available for such
offer, the Company and the Restricted Subsidiaries may use such deficiency for
general corporate purposes. If the aggregate purchase price for the Notes
validly tendered and not withdrawn by holders thereof exceeds the Excess
Proceeds available for such offer, Notes to be purchased will be selected on a
PRO RATA basis or as nearly PRO RATA as practicable. Upon completion of such
Asset Sale Offer, the amount of Excess Proceeds shall be reset to zero.
If the Company is required to make an Asset Sale Offer, the Company will
comply with all applicable tender offer laws and regulations, including, to the
extent applicable, Section 14(e) and Rule 14e-1 under
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the Exchange Act, and any other applicable United States or foreign securities
laws and regulations and any applicable requirements of any securities exchange
on which the Notes are listed.
REPORTS. The Indenture provides that, whether or not the Company has a
class of securities registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), following the Exchange Offer or the effectiveness
of any Notes Shelf Registration Statement, the Company shall furnish without
cost to each holder of Notes and file with the Commission (whether or not the
Company is a public reporting company at the time), the Trustee and the Initial
Purchasers: (i) within 120 days after the end of each fiscal year of the
Company, annual reports on Form 20-F (or any successor form) containing the
information required to be contained therein (or required in such successor
form); (ii) within 60 days after the end of each of the first three fiscal
quarters of each fiscal year, reports on Form 6-K (or any successor form)
containing substantially the same information required to be contained in Form
10-Q (or required in any successor form); and (iii) promptly from time to time
after the occurrence of an event required to be therein reported, such other
reports on Form 6-K (or any successor form) containing substantially the same
information required to be contained in Form 8-K (or required in any successor
form). Prior to the effectiveness of the Exchange Offer Registration Statement
or the filing of any Notes Shelf Registration Statement with the Commission, the
Company will file with the Trustee and provide the Initial Purchasers, all of
the information that would have been required to have been filed with the
Commission pursuant to clauses (i), (ii) and (iii) above. Each of the reports
will be prepared in accordance with U.S. GAAP consistently applied and will be
prepared in accordance with the applicable rules and regulations of the
Commission.
The Indenture also provides that, for so long as any Transfer Restricted
Notes remain outstanding, the Company will furnish to the holders of the Notes
and to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
LIMITATION ON DESIGNATIONS OF UNRESTRICTED SUBSIDIARIES. The Indenture
provides that the Company may designate any Subsidiary of the Company as an
"Unrestricted Subsidiary" under the Indenture (a "Designation") only if:
(a) no Default shall have occurred and be continuing at the time of or
after giving effect to such Designation; and
(b) the Company would be permitted under the Indenture to make an
Investment under all applicable provisions of the covenant "Limitation on
Restricted Payments" at the time of Designation (assuming the effectiveness
of such Designation) in an amount (the "Designation Amount") equal to the
Fair Market Value of the Investment of the Company and the Restricted
Subsidiaries in such Subsidiary on such date.
In the event of any such Designation, (i) the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to the
covenant "Limitation on Restricted Payments" for all purposes of the Indenture
in the Designation Amount and (ii) upon such Designation, the Subsidiary that is
the subject of such Designation shall be deemed to be released from its
Guarantee, if any. The Indenture will further provide that the Company shall not
and shall not permit any Restricted Subsidiary to, at any time (x) guarantee any
Indebtedness of any Unrestricted Subsidiary (including any undertaking,
agreement or instrument evidencing such Indebtedness); PROVIDED that the Company
or any Restricted Subsidiary may pledge Capital Stock or Indebtedness of any
Unrestricted Subsidiary on a non-recourse basis such that the pledgee has no
claim whatsoever against the pledgor other than to obtain such pledged property
or (y) become or be directly or indirectly liable for any Indebtedness of any
Unrestricted Subsidiary or (z) be directly or indirectly liable for any
Indebtedness which provides that the holder thereof may (upon notice, lapse of
time or both) declare a default thereon or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity upon the occurrence
of a default with respect to any Indebtedness of
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any Unrestricted Subsidiary (including any right to take enforcement action
against such Unrestricted Subsidiary), except in the case of clause (x) or (y)
to the extent permitted under the covenant "Limitation on Restricted Payments."
The Indenture will further provide that the Company may revoke any
Designation of a Subsidiary as an Unrestricted Subsidiary (a "Revocation") if:
(a) no Default shall have occurred and be continuing at the time of and
after giving effect to such Revocation; and
(b) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at such
time, have been permitted to be incurred for all purposes of the Indenture;
and
(c) such Subsidiary issues a Guarantee to the extent required under
"--Issuance of Guarantees by Material Restricted Subsidiaries; Release of
Guarantees."
All Designations and Revocations must be evidenced by Board Resolutions of
the Company delivered to the Trustee certifying compliance with the foregoing
provisions.
LIMITATION ON STATUS AS INVESTMENT COMPANY. The Indenture will provide that
the Company will not, and will not permit any of its Subsidiaries or controlled
Affiliates to, conduct its business in a fashion that would cause the Company to
be required to register as an "investment company" (as that term is defined in
the Investment Company Act of 1940, as amended (the "Investment Company Act")),
or otherwise become subject to regulation under the Investment Company Act. For
purposes of establishing the Company's compliance with this provision, any
exemption which is or would become available under Section 3(c)(1) or Section
3(c)(7) of the Investment Company Act will be disregarded.
CONSOLIDATION, MERGER, SALE OF ASSETS, ETC.
The Indenture provides that the Company will not, in a single transaction or
through a series of transactions, consolidate, amalgamate or combine with or
merge with or into or, directly or indirectly, sell, assign, convey, lease,
transfer or otherwise dispose of all or substantially all of its properties and
assets to any person or persons, and the Company will not permit any of the
Restricted Subsidiaries to enter into any such transaction or series of
transactions if such transaction or series of transactions, in the aggregate,
would result in the sale, assignment, conveyance, lease, transfer or disposition
of all or substantially all of the properties and assets of the Company and the
Restricted Subsidiaries, taken as a whole, to any person or persons, unless (a)
the Company shall be the continuing person or the resulting, surviving or
transferee person (in either case, the "surviving entity") shall be a company
organized and existing under the laws of the Federative Republic of Brazil or
any State or political subdivision thereof; (b) the surviving entity shall
expressly assume all of the obligations of the Company under the Notes and the
Indenture and shall execute a supplemental indenture to effect such assumption
which supplemental indenture shall be delivered to the Trustee and shall be in
form reasonably satisfactory to the Trustee; (c) immediately after giving effect
to such transaction or series of transactions on a pro forma basis (including,
without limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions),
the Company or the surviving entity (assuming such surviving entity's assumption
of the Company's obligations under the Notes and the Indenture), as the case may
be, would be able to incur US$1.00 of Indebtedness under the proviso of the
covenant "Limitation on Additional Indebtedness and Preferred Stock of
Restricted Subsidiaries"; (d) immediately after giving effect to such
transaction or series of transactions on a pro forma basis (including, without
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of transactions), no
Default shall have occurred and be continuing; (e) each Guarantor shall have
delivered a written instrument in form satisfactory to the Trustee confirming
its Guarantee; and (f) the Company or
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the surviving entity, as the case may be, shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel stating that such transaction or
series of transactions, and, if a supplemental indenture is required in
connection with such transaction or series of transactions to effectuate such
assumption, such supplemental indenture complies with this covenant and that all
conditions precedent in the Indenture relating to the transaction or series of
transactions have been satisfied. In addition to the foregoing, in the case of
any merger, consolidation or combination involving a Guarantor as a result of
which such Guarantor's Guarantee is not released as provided under "Certain
Covenants--Issuance of Guarantees by Material Restricted Subsidiaries; Release
of Guarantees," such Guarantor or the resulting, surviving or transferee person
(if other than such Guarantor) shall expressly assume all of such Guarantor's
obligations under its Guarantee and the Indenture and shall execute a
supplemental indenture to effectuate such assumption, which supplemental
indenture shall be delivered to the Trustee and shall be in form and substance
satisfactory to the Trustee.
The Indenture provides that upon any consolidation, combination or merger or
any transfer of all or substantially all of the assets of a person subject to,
and in accordance with, the foregoing, the surviving entity shall succeed to,
and be substituted for, and may exercise every right and power of the Company or
such Guarantor, as the case may be, under the Indenture and the applicable
Guarantee with the same effect as if such surviving entity had been named as
such; provided that, solely for purposes of computing Cumulative Adjusted
Available Cash Flow for purposes of clause (iii) of the first paragraph of the
covenant "Limitation on Restricted Payments" above, the Cumulative Adjusted
Available Cash Flow of any persons other than the Company and the Restricted
Subsidiaries shall only be included for periods subsequent to the effective time
of such merger, consolidation, combination or transfer of assets.
The Indenture provides that, for all purposes of the Indenture and the Notes
(including the provisions of this covenant and the covenants "Limitation on
Additional Indebtedness and Preferred Stock of Restricted Subsidiaries,"
"Limitation on Restricted Payments" and "Limitation on Liens"), Subsidiaries of
any Surviving Entity will, upon such transaction or series of transactions,
become Restricted Subsidiaries or Unrestricted Subsidiaries as provided pursuant
to the covenant described under "Limitation on Designations of Unrestricted
Subsidiaries" and all Indebtedness, and all Liens on property or assets, of the
Company and the Restricted Subsidiaries immediately prior to such transaction or
series of transactions will be deemed to have been incurred upon such
transaction or series of transactions.
The meaning of the phrase "all or substantially all" as used above varies
according to the facts and circumstances of the subject transaction, has no
clearly established meaning under relevant law and is subject to judicial
interpretation. Accordingly, in certain circumstances, there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of the Company, and
therefore it may be unclear whether the foregoing provisions are applicable.
EVENTS OF DEFAULT
The following are Events of Default under the Indenture:
(i) default in the payment of the principal of, or premium, if any, on
the Notes when due, at maturity, upon redemption or otherwise (including
pursuant to a Change of Control Offer or an Asset Sale Offer); or
(ii) default in the payment of interest on the Notes when it becomes due
and payable and continuance of such default for a period of 30 days or more;
PROVIDED, HOWEVER, that a failure to pay interest (but not Additional
Amounts) on the Notes in a timely manner through June 6, 2000 will
constitute an immediate Event of Default under the Indenture, with no grace
or cure period; or
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(iii) (a) failure to comply with the covenant described under
"Consolidation, Merger, Sale of Assets, Etc." or (b) failure to comply with
any other covenant or other term in the Indenture (other than those
specified in clause (i) or (ii)) and, such default continues for a period of
45 days after notice to the Company thereof by the Trustee or to the Company
and the Trustee by holders of at least 25% of the aggregate principal amount
of the Notes then outstanding; or
(iv) (a) failure to pay, following any applicable grace period, any
installment of principal due (whether at maturity or otherwise) under one or
more classes or issues of Indebtedness in an aggregate principal amount of
US$5,000,000 (or, to the extent non-U.S. dollar denominated, the U.S. Dollar
Equivalent of such amount) or more or (b) failure by the Company or any
Restricted Subsidiary to perform any other term, covenant, condition or
provision of one or more classes or issues of indebtedness in an aggregate
principal amount of the equivalent of US$5,000,000 (or, to the extent
non-U.S. dollar denominated, the U.S. Dollar Equivalent of such amount) or
more and, in the case of this clause (b), such failure results in an
acceleration of the maturity thereof; PROVIDED, that, in the case of a
termination or expiration of an Interest Rate Protection Obligation or
Currency Agreement requiring that the monetary liability thereunder be paid,
no Event of Default shall occur if such payment is made within 30 days after
such payment is due; or
(v) one or more judgments, orders or decrees for the payment of money
shall be entered in an amount or amounts of US$5,000,000 (or, to the extent
non-U.S. dollar denominated, the U.S. Dollar Equivalent of such amount) or
more, either individually or in the aggregate, against the Company or any
Restricted Subsidiary or any of their respective properties and shall not be
discharged or satisfied and there shall have been a period of 60 days during
which a stay of enforcement of such judgment, order or decree, by reason of
pending appeal or otherwise, shall not be in effect; or
(vi) certain events of bankruptcy, dissolution, insolvency,
reorganization, administration, sequestration or similar proceedings
involving the Company or a Material Restricted Subsidiary of the Company; or
(vii) there shall have occurred any seizure, compulsory acquisition,
expropriation or nationalization of substantially all of the assets of the
Company and the Restricted Subsidiaries, taken as a whole; or
(viii) the Company asserts or admits in writing that the Pledge Agreement
is unenforceable or is not in full force and effect; or
(ix) any Guarantee ceases to be in full force and effect or is declared
null and void or any Guarantor denies that it has any further liability
under any Guarantee or gives notice to that effect (other than by reason of
the termination of the Indenture or the release of any Guarantee in
accordance with the Indenture).
If an Event of Default (other than an Event of Default specified in clause
(vi) with respect to the Company or clause (vii)) occurs and is continuing, then
the Trustee or the holders of at least 25% in aggregate principal amount of the
outstanding Notes may by written notice, and the Trustee upon request of the
holders of not less than 25% in principal amount of the outstanding Notes shall,
declare the principal of all the outstanding Notes to be due and payable
immediately, together with all accrued and unpaid interest and premium, if any,
thereon. Upon any such declaration, such amount shall become due and payable
immediately. If an Event of Default specified in clause (vi) with respect to the
Company or clause (vii) occurs and is continuing, then such amount will IPSO
FACTO become and be immediately due and payable without any declaration or other
act on the part of the Trustee or any holder.
After a declaration of acceleration or any IPSO FACTO acceleration pursuant
to clauses (vi) or (vii), the holders of a majority in aggregate principal
amount of outstanding Notes may, by notice to the Trustee, rescind such
declaration of acceleration and its consequences if all existing Events of
Default, other than nonpayment of the principal of, and accrued and unpaid
interest on, the Notes that has become due solely
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as a result of such acceleration, have been cured or waived and if the
rescission of acceleration would not conflict with any judgment or decree. The
holders of a majority in principal amount of the outstanding Notes also have the
right to waive past defaults under the Indenture, except a default in the
payment of the principal of, or any interest on, any outstanding Note, or in
respect of a covenant or a provision that cannot be modified or amended without
the consent of all holders of Notes.
No holder of any of the Notes has any right to institute any proceeding with
respect to the Indenture or any remedy thereunder, unless the holders of at
least 25% in principal amount of the outstanding Notes have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as Trustee, the Trustee has failed to institute such proceeding
within 45 days after receipt of such notice and the Trustee has not within such
45-day period received directions inconsistent with such written request by
holders of a majority in principal amount of the outstanding Notes. Such
limitations do not apply, however, to a suit instituted by a holder of a Note
for the enforcement of the payment of the principal of, premium, if any, or any
accrued and unpaid interest on, such Note on or after the respective due dates
expressed in such Note.
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise thereof as a prudent person would
exercise under the circumstances in the conduct of such person's own affairs.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, if an Event of Default shall occur and be continuing, the Trustee is
not under any obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders unless such holders
shall have offered to such Trustee reasonable security or indemnity. Subject to
certain provisions concerning the rights of the Trustee, the holders of a
majority in principal amount of the outstanding Notes have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to the Trustee, or exercising any trust, or power conferred on the Trustee.
The Indenture provides that the Trustee will, within 30 days after the
occurrence of any Default, give to the holders of the Notes notice of such
Default known to it, unless such Default shall have been cured or waived;
PROVIDED that, except in the case of a Default in payment of principal of or
premium, if any, on any Note when due or in the case of any Default in the
payment of any interest on the Notes or in the case of any Default arising from
the occurrence of any Change of Control, the Trustee shall be protected in
withholding such notice if it determines in good faith that the withholding of
such notice is in the interest of such holders.
The Company is required to furnish to the Trustee annually a statement as to
compliance with all conditions and covenants under the Indenture.
SATISFACTION AND DISCHARGE OF THE INDENTURE; DEFEASANCE
The Company and the Guarantors may terminate their obligations under the
Indenture, when (1) either: (A) all Notes theretofore authenticated and
delivered have been delivered to the Trustee for cancellation, or (B) all such
Notes not theretofore delivered to the Trustee for cancellation will become due
and payable (a "Discharge") under irrevocable arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Company, and the Company has irrevocably deposited or
caused to be deposited with the Trustee funds in an amount sufficient to pay and
discharge the entire indebtedness on the Notes, not theretofore delivered to the
Trustee for cancellation, for principal of, premium, if any, on and interest to
the date of deposit or maturity or date of redemption; (2) the Company has paid
or caused to be paid all other sums then due and payable under the Indenture by
the Company; and (3) the Company has delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent under the Indenture relating to the satisfaction and discharge of the
Indenture have been complied with.
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The Company may elect, at its option, to have its obligations discharged
with respect to the outstanding Notes ("legal defeasance"). Such defeasance
means that the Company will be deemed to have paid and discharged the entire
indebtedness represented by the outstanding Notes, except for (1) the rights of
holders of such Notes to receive payments in respect of the principal of and any
premium and interest on such Notes when payments are due, (2) the Company's
obligations with respect to such Notes concerning issuing temporary Notes,
registration of transfer of Notes, mutilated, destroyed, lost or stolen Notes
and the maintenance of an office or agency for payment and money for security
payments held in trust, (3) the rights, powers, trusts, duties and immunities of
the Trustee, and (4) the defeasance provisions of the Indenture. In addition,
the Company may elect, at its option, to have its obligations released with
respect to certain covenants in the Indenture, including covenants relating to
Asset Sales and a Change of Control ("covenant defeasance"), and any omission to
comply with such obligation shall not constitute a Default or an Event of
Default with respect to the Notes. In the event covenant defeasance occurs,
certain events (not including non-payment, bankruptcy and insolvency events)
described under "Events of Default" will no longer constitute an Event of
Default with respect to the Notes.
In order to exercise either legal defeasance or covenant defeasance with
respect to outstanding Notes: (1) the Company must irrevocably have deposited or
caused to be deposited with the Trustee as trust funds in trust for the purpose
of making the following payments, specifically pledged as security for, and
dedicated solely to the benefits of the holders of such Notes: (A) money in an
amount, or (B) U.S. Government Obligations which through the scheduled payment
of principal and interest in respect thereof in accordance with their terms will
provide, not later than the due date of any payment, money in an amount, or (C)
a combination thereof, in each case sufficient without reinvestment, in the
opinion of an internationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee to pay and
discharge, and which shall be applied by the Trustee to pay and discharge, the
entire Indebtedness in respect of the principal of and premium, if any, and
interest on such Notes on the maturity thereof or (if the Company has made
irrevocable arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name and at the expense of the Company) the
redemption date thereof, as the case may be, in accordance with the terms of the
Indenture and such Notes; (2) in the case of legal defeasance, the Company shall
have delivered to the Trustee an opinion of U.S. counsel stating that, since the
date of the Indenture, there has been a change in the applicable U.S. federal
income tax law, and based thereon such opinion shall confirm that, under then
applicable U.S. federal income tax law, the holders of such Notes will not
recognize gain or loss for U.S. federal income tax purposes as a result of the
deposit, defeasance and discharge to be effected with respect to such Notes and
will be subject to federal income tax on the same amount, in the same manner and
at the same times as would be the case if such deposit, defeasance and discharge
were not to occur; (3) in the case of covenant defeasance, the Company shall
have delivered to the Trustee an opinion of U.S. counsel to the effect that the
holders of such outstanding Notes will not recognize gain or loss for U.S.
federal income tax purposes as a result of the deposit and covenant defeasance
to be effected with respect to such Notes and will be subject to U.S. federal
income tax on the same amount, in the same manner and at the same times as would
be the case if such deposit and covenant defeasance were not to occur; (4) the
Company shall have delivered to the Trustee an opinion of Brazilian counsel to
the effect that the holders of such Notes will not be subject to taxes as a
result of the deposit and defeasance to be effectuated with respect to such
Notes; (5) no Default with respect to the outstanding Notes shall have occurred
and be continuing at the time of such deposit after giving effect thereto or, in
the case of legal defeasance, no Default relating to bankruptcy or insolvency
shall have occurred and be continuing at any time on or prior to the 91st day
after the date of such deposit (it being understood that this condition shall
not be deemed satisfied until after such 91st day); (6) such legal defeasance or
covenant defeasance shall not cause the Trustee to have a conflicting interest
within the meaning of the Trust Indenture Act (assuming all Notes were in
default within the meaning of such Act); (7) such defeasance or covenant
defeasance shall not result in a breach or violation of, or constitute a default
under, any other agreement or instrument to which the Company or any Guarantor
is a party or by which it is bound; (8) such legal defeasance or covenant
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defeasance shall not result in the trust arising from such deposit constituting
an investment company within the meaning of the Investment Company Act unless
such trust shall be registered under such Act or exempt from registration
thereunder; and (9) the Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel stating that all conditions precedent with
respect to such defeasance or covenant defeasance have been complied with.
AMENDMENT AND WAIVERS
From time to time the Company and the Guarantors when authorized by
resolutions of their respective Boards, and the Trustee, without the consent of
the holders of the Notes, may amend, waive or supplement the Indenture, the
Notes or the Guarantees for certain specified purposes, including, among other
things, curing ambiguities, defects or inconsistencies, to provide for the
assumption of the Company's obligations to holders of the Notes in the case of a
merger or consolidation, to make any change that would provide any additional
rights or benefits to the holders of the Notes, to add Guarantors with respect
to the Notes, to secure the Notes, maintaining the qualification of the
Indenture under the Trust Indenture Act or making any change that does not
adversely affect the rights of any holder. Other amendments and modifications of
the Indenture, the Notes or the Guarantees may be made by the Company and the
Guarantors and the Trustee with the consent of the holders of not less than a
majority of the aggregate principal amount of the outstanding Notes; PROVIDED
that no such modification or amendment may, without the consent of the holder of
each outstanding Note affected thereby, (i) reduce the principal amount of,
extend the fixed maturity of the Notes, or alter or waive the redemption
provisions of the Notes (other than, subject to clause (vii) below, provisions
relating to repurchase of Notes upon the occurrence of an Asset Sale or a Change
of Control), (ii) change the currency in which any Notes or the Guarantees or
any premium or the accrued interest thereon is payable, (iii) reduce the
percentage in principal amount outstanding of Notes who must consent to an
amendment, supplement or waiver or consent to take any action under the
Indenture, the Notes or the Guarantees, (iv) impair the right to institute suit
for the enforcement of any payment on or with respect to the Notes or the
Guarantees, (v) waive a default in payment with respect to the Notes or any
Guarantee, (vi) reduce the rate or extend the time for payment of interest on
the Notes, (vii) following the occurrence of an Asset Sale or a Change of
Control, alter the obligation to purchase Notes as a result thereof in
accordance with the Indenture or waive any default in the performance thereof,
(viii) adversely affect the ranking of the Notes or the Guarantees, (ix) amend
or modify the provisions described under "--Additional Amounts", (x) permit the
creation of any Lien (other than the Lien of the Pledgee) on the Pledged
Securities or terminate the Lien of the pledgee on the Pledged Securities or
(xi) release any Guarantor from any of its obligations under its Guarantee or
the Indenture, except in compliance with the terms of the Indenture.
FOREIGN EXCHANGE RESTRICTIONS; CURRENCY INDEMNITY
Payments in respect of the Notes or any Guarantee shall be made in United
States dollars as at the time of payment shall be legal tender for the payment
of public and private debts in that currency. In the event that on any payment
date in respect of the Notes or any Guarantee, any restrictions or prohibition
of access to the Brazilian foreign exchange market exists, the Company and each
Guarantor agree to pay all amounts payable under the Notes in U.S. dollars by
means of any legal procedure existing in Brazil (except commencing legal
proceedings against the Brazilian Central Bank), on any due date for payment
under the Notes. All costs and taxes payable in connection with the procedures
referred to in this covenant shall be borne by the Company and each Guarantor.
U.S. dollars are the sole currency of account and payment for all sums
payable by the Company and the Guarantors under or in connection with the Notes,
including damages. Any amount received or recovered in a currency other than
U.S. dollars (whether as a result of, or of the enforcement of, a judgment or
order of a court of any jurisdiction, in the winding-up or dissolution of the
Company or any Guarantor or otherwise) by any holder of a Note in respect of any
sum expressed to be due to it from the
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Company and the Guarantors shall only constitute a discharge to the Company and
the Guarantors to the extent of the U.S. dollar amount which the recipient is
able to purchase with the amount so received or recovered in that other currency
on the date of that receipt or recovery (or, if it is not practicable to make
that purchase on that date, on the first date on which it is practicable to do
so). If that U.S. dollar amount is less than the U.S. dollar amount expressed to
be due to the recipient under any Note, the Company and the Guarantors, jointly
and severally, shall indemnify it against any loss sustained by it as a result.
In any event, the Company and the Guarantors, jointly and severally, shall
indemnify the recipient against the cost of making any such purchase. For the
purposes of this paragraph, it will be sufficient for the holder of a Note to
certify in a satisfactory manner (indicating sources of information used) that
it would have suffered a loss had an actual purchase of U.S. dollars been made
with the amount so received in that other currency on the date of receipt or
recovery (or, if a purchase of U.S. dollars on such date had not been
practicable, on the first date on which it would have been practicable, it being
required that the need for a change of date be certified in the manner mentioned
above). This indemnity constitutes a separate and independent obligation from
other obligations of the Company and each Guarantor, shall give rise to a
separate and independent cause of action, shall apply irrespective of any
indulgence granted by any holder of a Note and shall continue in full force and
effect despite any other judgment, order, claim or proof for a liquidated amount
in respect of any sum due under any Note.
DISCHARGE AND INDEMNIFICATION
Any payment to be made in respect of the Notes or the Guarantees by the
Company or any Guarantor to or to the order of a Paying Agent shall be in
satisfaction PRO TANTO of the obligations of the Company under the Notes. The
Company will indemnify the Holders against any failure on the part of any Paying
Agent to pay any sum due in respect of the Notes and will pay such sum to the
Trustee on demand. This indemnity constitutes a separate and independent
obligation from the other obligations of the Company under the Notes, will give
rise to a separate and independent cause of action, will apply irrespective of
any waiver granted by the Trustee and/or any holder of Notes and will continue
in full force and effect despite any judgment, order, claim, or proof for a
liquidated amount in respect of any sum due under the Indenture, the Notes or
any judgment or order.
REGARDING THE TRUSTEE AND PAYING AGENTS
The Chase Manhattan Bank serves as Trustee and Co-Paying Agent under the
Indenture and as Pledgee under the Pledge Agreement. Chase Japan will serve as
Principal Paying Agent. The Indenture provides that, except during the
continuance of an Event of Default, the Trustee thereunder will perform only
such duties as are specifically set forth in the Indenture. If an Event of
Default has occurred and is continuing, the Trustee will exercise such rights
and powers vested in it under the Indenture and use the same degree of care and
skill in its exercise as a prudent person would exercise under the circumstances
in the conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee thereunder,
should it become a creditor of the Company or a Guarantor, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The Trustee is permitted
to engage in other transactions; PROVIDED that if it acquires any conflicting
interest (as defined herein) it must eliminate such conflict or resign.
GOVERNING LAW
The Indenture, the Pledge Agreement, the Notes and the Guarantees will each
provide that such agreements will be governed by and construed in accordance
with laws of the State of New York without giving effect to principles of
conflicts of law, except that matters relating to the authorization by the
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Company or any Guarantor of the Indenture, the Pledge Agreement, the Notes and
the Guarantees shall be governed by the applicable laws of the Federative
Republic of Brazil.
ENFORCEABILITY OF JUDGMENTS
Service of process upon the Company or any Guarantor in an action (other
than an insolvency, liquidation or bankruptcy proceeding or any other proceeding
in the nature of an in rem or quasi in rem proceeding) to enforce their
obligations under the Indenture, the Notes and the Guarantees may be obtained
within the United States by service upon CT Corporation System. See "Risk
Factors--Factors Relating to Brazil--Enforceability of Judgments." Since
substantially all of the assets of the Company, the Guarantors and their
respective subsidiaries are outside the United States, any judgment obtained in
the United States against the Company or any Guarantor, including judgments with
respect to the payment of amounts owing with respect to the Notes or the
Guarantees, may not be collectible within the United States.
Judgments for monetary claims obtained in U.S. courts arising out of or in
relation to the obligations of the Company and the Guarantors under the
Indenture and the Notes will be enforceable in Brazil, provided that such
judgment has been previously confirmed by the Brazilian Federal Supreme Court.
In order to be confirmed by the Brazilian Federal Supreme Court, such foreign
judgment must meet the following conditions: (a) it must comply with all
formalities required for its enforceability under the laws of the country where
it was issued; (b) it must have been given by a competent court after the proper
service of process on the parties; (c) it must not be subject to appeal; (d) it
must not offend Brazilian national sovereignty, public policy or good morals;
and (e) it must be duly authenticated by a competent Brazilian consulate and be
accompanied by a sworn translation thereof into Portuguese. Notwithstanding
foregoing, no assurance can be given that such confirmation will be obtained,
that process described above can be conducted in a timely manner or that a
Brazilian court will enforce such monetary judgment. See "Enforceability of
Civil Liabilities."
Any judgment obtained against the Company or any Guarantor in a court in
Brazil under any Note or under the Indenture will be expressed in the Brazilian
currency equivalent to the U.S. dollar amount of such sum at the commercial
exchange rate of the date at which such judgment is obtained, and such Brazilian
currency amount will be corrected in accordance with the exchange variation
until the judgment holder receives effective payment.
CERTAIN BANKRUPTCY LAW CONSIDERATIONS
Brazilian bankruptcy laws grant extensive powers to the courts. Brazilian
Bankruptcy Law (Decree-law No. 7,661, of June 21, 1945, the "Brazilian
Bankruptcy Law") establishes two different proceedings for the resolution of
debts of commercial companies which are insolvent or do not pay their
obligations when due: the bankruptcy proceeding ("falencia") and the
reorganization proceeding ("concordata"). Both proceedings apply to all
unsecured creditors of a company which is declared bankrupt or which is under a
reorganization proceeding. In the event that the Company or any Guarantor is
declared bankrupt or enters into a concordata, the Notes will be considered
general unsecured indebtedness of the Company or such Guarantor and therefore
will be subject to such proceedings.
Under a bankruptcy proceeding (essentially a liquidation proceeding),
payments in respect of the Notes or the Guarantees will be subject to an order
of priority. Generally, Brazilian Bankruptcy Law and other applicable rules
establish that claims of employees for wages or indemnity and tax claims have
priority over other claims against the bankrupt estate. Other claims are subject
to the following order of priority: (a) secured credits, (b) credits with
special privileges over certain assets, (c) credits with general privilege and
(d) unsecured credits. Credits in foreign currency are converted into Brazilian
currency on the date the Company is declared bankrupt and are not subject to
adjustment in accordance with the
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exchange variation. Such amount in Brazilian currency must be monetarily
adjusted to account for inflation (in accordance with the rules applicable from
time to time) and bears no interest.
The general rule under Brazilian Bankruptcy Law is that all of the assets of
a company in bankruptcy proceedings, including those in the possession of third
parties under a deposit or pledge must be collected to the bankrupt estate. In
the event the Company is declared bankrupt or enters into a concordata,
Brazilian Bankruptcy Law provides that the Pledged Securities be collected along
with the other assets of the Company. The credits due in connection with the
Pledged Securities shall be considered secured credits and shall have priority
in the payments made under the bankruptcy proceedings.
Under a concordata proceeding, which is a protection available under the
Brazilian Bankruptcy Law for commercial companies experiencing financial
distress to avoid the declaration of bankruptcy, the Company's or Guarantors'
unsecured credits existing at the time the concordata is declared are
rescheduled for one of the periods defined in the law which in virtually all
cases is 24 months (in which event 40% of the debt must be paid in the first
year). The benefit may be given by the court without any prior consultation with
or manifestation by the creditors, so long as the beneficiary demonstrates,
INTER ALIA, that its assets are worth at least 50% of its unsecured
indebtedness. The concordata proceeding has the following basic characteristics:
(i) it only affects unsecured creditors; (ii) it does not affect the day-to-day
management of the Company, the other commercial obligations of the Company and
the obligations assumed after the date on which the concordata is declared;
(iii) amounts due in foreign currency subject to the concordata are converted
into local currency on the date on which the concordata is accepted by the court
and are not subject to adjustment in accordance with the exchange variation;
(iv) amounts due under the concordata, either in local currency or converted
into local currency, must be monetarily adjusted to account for inflation (in
accordance with the rules applicable from time to time) and bear interest at the
rate of 12% per annum; and (v) a company under concordata which fails to meet
its rescheduled obligations will be declared bankrupt.
CONSENT TO JURISDICTION AND SERVICE
The Indenture provides that the Company and each Guarantor will appoint CT
Corporation System as its agent for service of process in any suit, action or
proceeding with respect to the Indenture, the Notes and the Guarantees and for
actions brought under federal or state securities laws brought in any Federal or
state court located in the City of New York and will submit to such
jurisdiction. See "Enforceability of Civil Liabilities."
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for any other capitalized terms used herein for which
no definition is provided.
"Acquired Indebtedness" means Indebtedness of a person existing at the time
such person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition by such person and not incurred in connection with, or in
anticipation of, such person becoming a Restricted Subsidiary or such Asset
Acquisition.
"Affiliate" of any specified person means any other person which, directly
or indirectly, controls, is controlled by or is under direct or indirect common
control with, such specified person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise, and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
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"Annualized Pro Forma Consolidated Operating Cash Flow" means Consolidated
Operating Cash Flow for the latest fiscal quarter for which consolidated
financial statements of the Company are available multiplied by four. For
purposes of calculating "Consolidated Operating Cash Flow" for any fiscal
quarter for purposes of this definition, (i) any Subsidiary of the Company that
is a Restricted Subsidiary on the date of the transaction giving rise to the
need to calculate "Annualized Pro Forma Consolidated Operating Cash Flow" (the
"Transaction Date") (or would become a Restricted Subsidiary in connection with
the transaction that requires determination of such amount) shall be deemed to
have been a Restricted Subsidiary at all times during such fiscal quarter and
(ii) any Subsidiary of the Company that is not a Restricted Subsidiary on the
Transaction Date (or would cease to be a Restricted Subsidiary in connection
with the transaction that requires the determination of such amount) shall be
deemed not to have been a Restricted Subsidiary at any time during such fiscal
quarter. In addition to and without limitation of the foregoing, for purposes of
this definition, "Consolidated Operating Cash Flow" shall be calculated after
giving effect on a PRO FORMA basis for the applicable fiscal quarter to, without
duplication, any Asset Sales or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company's or one of the Restricted Subsidiaries'
(including any person who becomes a Restricted Subsidiary as a result of the
Asset Acquisition) incurring Acquired Indebtedness) occurring during the period
commencing on the first day of such fiscal quarter to and including the
Transaction Date (the "Reference Period"), as if such Asset Sale or Asset
Acquisition occurred on the first day of the Reference Period.
"Asset Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) by the Company or any
Restricted Subsidiary, or any acquisition or purchase of Capital Stock of any
other person by the Company or any Restricted Subsidiary, in either case
pursuant to which such person shall become a Restricted Subsidiary or shall be
merged with or into the Company or any Restricted Subsidiary, or (ii) any
acquisition by the Company or any Restricted Subsidiary of the assets of any
person which constitutes substantially all of an operating unit or line of
business of any person (provided that such business shall be a Permitted
Business) or which is otherwise outside of the ordinary course of business.
"Asset Sale" means any direct or indirect sale, conveyance, transfer, lease
(that has the effect of a disposition and is not for security purposes) or other
disposition (that is not for security purposes) to any person other than the
Company or a Restricted Subsidiary, in one transaction or a series of related
transactions, of (i) any Capital Stock of any Restricted Subsidiary, (ii) any
license (or contractual rights to use any licenses) for the provision of paging
services or a related business held by the Company or any Restricted Subsidiary
(whether by sale of Capital Stock, assignment of contractual rights or
otherwise) other than the transfer of any such license to a License Vehicle,
(iii) any assets of the Company or any Restricted Subsidiary which constitute
substantially all of an operating unit or line of business of the Company or any
Restricted Subsidiary or (iv) any other property or asset of the Company or any
Restricted Subsidiary outside of the ordinary course of business. For the
purposes of this definition, the term "Asset Sale" shall not include (i) any
disposition of properties or assets of the Company or one or more of the
Restricted Subsidiaries that is governed under "Consolidation, Merger, Sale of
Assets, Etc.", (ii) sales of property or equipment that have become worn out,
obsolete or damaged or otherwise unsuitable for use in connection with the
business of the Company or any Restricted Subsidiary, as the case may be, (iii)
any dividend paid to all shareholders of the Company on a proportional basis
made pursuant to and in compliance with the covenant described under
"--Limitation on Restricted Payments," or (iv) the disposition of Capital Stock
of any Unrestricted Subsidiary. For purposes of the covenant "Disposition of
Proceeds of Asset Sales," the term "Asset Sale" shall not include any sale,
conveyance, transfer, lease or other disposition of any property or asset,
whether in one transaction or a series of related transactions, either (x)
involving assets with a Fair Market Value not in excess of US$2,000,000 (or, to
the extent non-U.S. dollar denominated, the U.S. Dollar Equivalent of such
amount) or (y) in connection with a Capitalized Lease Obligation.
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"Average Life to Stated Maturity" means, with respect to any Indebtedness or
Preferred Stock, as at any date of determination, the quotient obtained by
dividing (i) the sum of the products of (a) the number of years from such date
to the date or dates of each successive scheduled principal or other return of
capital (including, without limitation, any sinking fund requirements) of such
Indebtedness or Preferred Stock multiplied by (b) the amount of each such
principal or other payment by (ii) the sum of all such principal or other
payments.
"Board" means the Board of Directors of the Company or any other competent
corporate body of a Guarantor, as the case may be.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary or General Counsel of the Company or a Guarantor, as
applicable to have been duly adopted by its Board and to be in full force and
effect on the date of such certification, and delivered to the Trustee.
"Brazilian Taxes" means any tax, duty, levy, impost, assessment or other
governmental charge of whatever nature (including penalties, interest and any
other liabilities related thereto) imposed by a taxing authority in Brazil.
"Capital Stock" means, with respect to any person, any and all capital stock
or shares, interests, participations, rights in, or other equivalents (however
designated and whether voting or non-voting) (including share appreciation
rights) of, such person's capital stock or shares, whether outstanding on the
Issue Date or issued after the Issue Date, and any and all rights, warrants or
options exchangeable for or convertible into such capital stock or shares.
"Capitalized Lease Obligation" means any obligation to pay rent or other
amounts under a lease of (or other agreement conveying the right to use) any
property (whether real, personal or mixed, immovable or movable) that is
required to be classified and accounted for as a finance lease under U.S. GAAP
and, for the purpose of the Indenture, the amount of such obligation at any date
shall be the capitalized amount thereof at such date, determined in accordance
with U.S. GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a maturity of
365 days or less issued or directly and fully guaranteed or insured by the
Federative Republic of Brazil or the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the
Federative Republic of Brazil or the United States of America, as the case may
be, is pledged in support thereof or such Indebtedness constitutes a general
obligation of it); (ii) deposits, certificates of deposit or acceptances with a
maturity of 365 days or less of any institution which is a Brazilian regulated
bank or a member of the Federal Reserve System having combined capital and
surplus and undivided profits (or any similar capital concept) of not less than
US$50,000,000 (or, to the extent non-U.S. dollar denominated, the U.S. Dollar
Equivalent of such amount) at the time of deposit; (iii) commercial paper with a
maturity of 365 days or less issued by a corporation (other than an Affiliate of
the Company) incorporated or organized under the laws of the Federative Republic
of Brazil or any jurisdiction thereof or the United States or any state thereof
or the District of Columbia and rated at least "A-1" by S&P or "P-1" by Moody's
or their respective Brazilian affiliates; (iv) Investments with a maturity of
365 days or less of any person that is fully and unconditionally guaranteed by a
bank referred to in clause (ii); (v) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States Government or issued by any
agency thereof and backed by the full faith and credit of the United States
Government, respectively, in each case maturing within one year from the date of
acquisition; and (vi) Investments in any money market fund in the United States
having assets in excess of US$500 million which is substantially invested in the
instruments referred to in clauses (i) through (v).
"Change of Control" is defined to mean the occurrence of any of the
following events: (a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than one or more of the
Permitted Holders, is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all
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securities that such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 35% of the total Voting Stock of the Company; PROVIDED,
HOWEVER, that the Permitted Holders "beneficially own" (as so defined) in the
aggregate a lower percentage of the Voting Stock than such other person and do
not have the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the Company; or
(b) the Company consolidates with, or merges with or into, another person or
sells, assigns, conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets (determined on a consolidated basis) to any
person, or any person consolidates with, or merges with or into, the Company, in
any such event pursuant to a transaction in which the outstanding Voting Stock
of the Company is converted into or exchanged for cash, securities or other
property, other than (A) any such transaction where (i) the outstanding Voting
Stock of the Company is converted into or exchanged for (1) Voting Stock (other
than Disqualified Stock) of the surviving or transferee corporation and/or (2)
cash, securities and other property in an amount which could be paid by the
Company as a Restricted Payment under the Indenture and (ii) the "beneficial
owners" of the Voting Stock of the Company immediately prior to such transaction
own, directly or indirectly, not less than a majority of the Voting Stock of the
surviving or transferee corporation immediately after such transaction or (B)
any such transaction as a result of which Permitted Holders own 35% or more of
the total Voting Stock of the surviving or transferee corporation immediately
after such transaction, unless any person or group (other than Permitted
Holders) beneficially owns in the aggregate a greater percentage of the Voting
Stock; or (c) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of the Company (together with any
new directors whose election by the Board of the Company or whose nomination for
election by the stockholders of the Company was approved by a vote of a majority
of the directors then still in office who were either directors at the beginning
of such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of the
Company then in office (other than by action of the Permitted Holders pursuant
to the Company's Shareholder Agreement or by-laws, in each case, as in effect on
the Issue Date, or otherwise); PROVIDED THAT, to the extent that one or more
regulatory approvals are required for one or more of the events or circumstances
described above to become effective under applicable law, such events or
circumstances shall be deemed to have occurred at the time such approvals have
been obtained and become effective under applicable law.
"Class A Preferred Stock" means shares of the Company's redeemable preferred
stock (acoes preferenciais), with no par value, outstanding on June 6, 1997 and
any identical shares thereof paid as dividends thereon.
"Class B Holding LLC Shares" means the Class B Member Interests of Holding
LLC.
"Class B Members" means the holders from time to time of non-voting member
interests in Holding LLC.
"Common Stock" means any Capital Stock other than Preferred Stock.
"Consolidated Income Tax Expense" means, with respect to any period, the
provision for Brazilian corporation, local, foreign and other income taxes of
the Company and the Restricted Subsidiaries for such period as determined on a
consolidated basis in accordance with U.S. GAAP.
"Consolidated Interest Expense" means, with respect to any period, without
duplication, the sum of (i) the interest expense (including, without limitation,
any payments similar to those required under the "Additional Amounts" provisions
of the Indenture) of the Company and the Restricted Subsidiaries for such period
as determined on a consolidated basis in accordance with U.S. GAAP and shall, in
any event, include, without limitation, (a) any amortization of debt discount,
(b) the net cost under any Currency Agreements and Interest Rate Protection
Obligations (including any amortization of discounts), (c) the interest portion
of any deferred payment obligation, (d) all commissions, discounts and other
fees and charges owed with respect to letters of credit, bills of exchange,
promissory notes and bankers' acceptance
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financing and (e) all accrued interest, PLUS (ii) all but the principal
component of Capitalized Lease Obligations paid, accrued and/or scheduled to be
paid or accrued by such person during such period as determined on a
consolidated basis in accordance with U.S. GAAP, PLUS (iii) all dividends
declared, paid or accumulated on (a) Disqualified Capital Stock of the Company
or any Guarantor or (b) Preferred Stock of any Restricted Subsidiary.
"Consolidated Net Income" means, with respect to any period, the
consolidated net income of the Company and the Restricted Subsidiaries for such
period, adjusted, to the extent included in calculating such net income, by
excluding, without duplication, (i) all extraordinary gains or losses (on an
after-tax basis) of such person (net of fees and expenses relating to the
transaction giving rise thereto) for such period, (ii) except to the extent
actually received by the Company or any Restricted Subsidiary, income of the
Company and the Restricted Subsidiaries derived from or in respect of all
Investments in persons other than any Restricted Subsidiary, (iii) net income
(or loss) of any other person combined with such person in a "pooling of
interests" basis attributable to any period prior to the date of combination,
(iv) any gain or loss, net of taxes realized by such person, upon the
termination of any employee pension benefit plan during such period, (v) gains
or losses in respect of any Asset Sales (on an after-tax basis and net of fees
and expenses relating to the transaction giving rise thereto) during such period
and (vi) the net income of any Restricted Subsidiary for such period to the
extent that the declaration of dividends or similar distributions by that
Restricted Subsidiary to the Company or any Restricted Subsidiary of that income
is not at the time permitted, directly or indirectly, by operation of the terms
of its charter or constituent documents or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulations applicable to that
Restricted Subsidiary; PROVIDED such amounts could not otherwise be loaned to
the Company on terms having a maturity that is later than the 180th day
following either (i) the final maturity of the Notes or (ii) the repayment in
full of the Notes.
"Consolidated Operating Cash Flow" means, with respect to any period, the
Consolidated Net Income of the Company and the Restricted Subsidiaries for such
period (a) increased by (to the extent reducing Consolidated Net Income) the sum
of (i) the Consolidated Income Tax Expense of the Company and the Restricted
Subsidiaries for such period (other than Taxes attributable to extraordinary,
unusual or non-recurring gains or losses); (ii) Consolidated Interest Expense
for such period; (iii) depreciation of the Company and the Restricted
Subsidiaries for such period, determined on a consolidated basis in accordance
with U.S. GAAP; (iv) amortization of the Company and the Restricted Subsidiaries
for such period, including, without limitation and without duplication,
amortization of capitalized debt issuance costs for such period, all determined
on a consolidated basis in accordance with U.S. GAAP; and (v) any other non-cash
charges that were deducted in computing Consolidated Net Income (excluding any
non-cash charge which requires an accrual or reserve for cash charges for any
future period) of the Company and the Restricted Subsidiaries for such period in
accordance with U.S. GAAP and (b) decreased by any non-cash gains to the extent
increasing Consolidated Net Income. "consolidation" means, with respect to the
Company, the consolidation of the accounts of the Restricted Subsidiaries with
those of the Company, all in accordance with U.S. GAAP; PROVIDED that
"consolidation" will not include consolidation of the accounts of any
Unrestricted Subsidiary with the accounts of the Company. The term
"consolidated" has a correlative meaning to the foregoing.
"Credit Facility" means (i) any commercial term loan and/or revolving credit
facility (including any letter of credit subfacility) entered into principally
with commercial banks and/or other financial institutions typically party to
commercial loan agreements or (ii) any credit facility entered into with any
vendor or supplier (or any financial institution acting on behalf of such a
vendor or supplier) of equipment (including pagers) for the purpose of financing
the acquisition of such equipment by the Company or any Restricted Subsidiary.
"Cumulative Adjusted Available Cash Flow" means, as at any date of
determination, the positive cumulative Consolidated Operating Cash Flow realized
during the period commencing on the Issue Date
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and ending on the last day of the most recent fiscal quarter immediately
preceding the date of determination for which consolidated financial information
of the Company is available or required to be available under the Indenture or,
if such cumulative Consolidated Operating Cash Flow for such period is negative,
the negative amount by which cumulative Consolidated Operating Cash Flow is less
than zero.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement designed to protect the
Company or any of the Restricted Subsidiaries against fluctuations in currency
values.
"Debt Securities" means any debt securities (including any guarantee of such
securities) issued by the Company and/or any Guarantor, whether in a public
offering or a private placement; it being understood that the term "Debt
Securities" shall not include (i) any borrowings under any Credit Facility or
(ii) any commercial bank borrowings or similar borrowings, recourse transfers of
financial assets, capital leases or other types of borrowings issued in a manner
not customarily viewed as a 'securities offering.'
"Deeply Subordinated Shareholder Indebtedness" means any Indebtedness of the
Company (but not of any Subsidiary of the Company) for money borrowed from and
held by either (x) a Permitted Holder or (y) another person whose obligations
have been guaranteed by a Permitted Holder, PROVIDED such Indebtedness of the
Company (i) has been expressly subordinated in right of payment, and (ii)
provides for no payments of interest or principal prior to the end of the sixth
month after the earlier of (x) the final maturity of the Notes or (y) the
repayment in full of the Notes; PROVIDED, FURTHER, that the terms of the
subordination agreement are in the form annexed to the Indenture and the Company
receives one or more Opinions of Counsel as to the validity and enforceability
of such subordination agreement.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Designation" has the meaning set forth under "--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries."
"Designation Amount" has the meaning set forth under "--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries."
"Disinterested Director" means, with respect to any transaction or series of
transactions, a member of the Board of the Company other than a director who has
any material direct or indirect financial interest in or with respect to such
transaction or series of transactions or is an Affiliate, beneficial holder of
10% or more of any class of Capital Stock or officer, director or employee of
any person who has any direct or indirect financial interest in or with respect
to such transaction or series of transactions.
"Disqualified Capital Stock" means, with respect to any person, any Capital
Stock (other than the Class A Preferred Stock) which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable, except to the extent exchangeable at the option of such person
subject to the terms of any debt instrument to which such person is a party), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or is exchangeable for Indebtedness
(other than at the option of such person), or is redeemable at the option of the
holder thereof, in whole or in part, in any such case on or prior to the earlier
of (x) the final maturity date of the Notes or (y) the repayment in full of the
Notes.
"Eligible Institution" means a United States commercial banking institution
that has combined capital and surplus of not less than $500 million or its
equivalent in foreign currency, whose debt is rated "A-3" or higher or "A-" or
higher according to Moody's or S&P (or such similar equivalent rating by at
least one "nationally recognized statistical rating organization" (as defined in
Rule 436 under the Securities Act)) respectively, at the time as of which any
investment or rollover therein is made.
"Expansion Markets" means all markets in Brazil other than Rio de Janeiro
and Sao Paulo.
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"Fair Market Value" means, with respect to any asset or property, the price
that could be negotiated in an arms-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under pressure
or compulsion to complete the transaction. Unless otherwise specified in the
Indenture, Fair Market Value shall be determined by the Board of the Company
acting in good faith and shall be evidenced by a Board Resolution of the Company
delivered to the Trustee; PROVIDED THAT, for purposes of the covenant
"Disposition of Proceeds of Asset Sales", the covenant "Limitation on
Transactions with Affiliates" and clause (b) of the covenant "Limitation on
Designations of Unrestricted Subsidiaries" in the case of any transaction or
series of related transactions which involve aggregate consideration of more
than US$5,000,000 (or, to the extent non-U.S. dollar denominated, the U.S.
Dollar Equivalent of such amount), Fair Market Value shall also be determined by
an Independent Financial Advisor.
"guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part or all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect of which is to assure in any way the payment or performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit.
"Guarantee" has the meaning set forth under "--Certain Covenants--Issuance
of Guarantees by Material Restricted Subsidiaries; Release of Guarantees."
"Guarantor" has the meaning set forth under "--Certain Covenants--Issuance
of Guarantees by Material Restricted Subsidiaries; Release of Guarantees."
"Holding LLC" means Paging Brazil Holding Co., LLC, a Delaware limited
liability company.
"Indebtedness" means, with respect to any person, without duplication, (i)
any liability, contingent or otherwise, of such person (A) for borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
person or only to a portion thereof), whether as a cash advance, bill, overdraft
or money market facility loan, or (B) evidenced by a note, debenture or similar
instrument or letters of credit (including a purchase money obligation) or by
any book-entry mechanism or (C) for the payment of money relating to a
Capitalized Lease Obligation or other obligation relating to the deferred
purchase price of property or (D) in respect of an Interest Rate Protection
Obligation or any foreign exchange contract, currency swap agreement or other
similar agreement; (ii) any liability of others of the kind described in the
preceding clause (i) which the person has guaranteed or which is otherwise its
legal liability; (iii) any obligation secured by a Lien (other than a Lien on
Indebtedness or Capital Stock of an Unrestricted Subsidiary which represents the
sole recourse of the secured party to the property or assets of such person for
any default in respect of the secured obligation) to which the property or
assets of such person are subject, whether or not the obligations secured
thereby shall have been assumed by or shall otherwise be such person's legal
liability; and (iv) the maximum repurchase or redemption price of any
Disqualified Stock of such person not held by the Company or a Guarantor. In no
event shall "Indebtedness" include trade payables incurred in the ordinary
course of business (or letters of credit issued in respect thereof) or
guarantees in the ordinary course of business in respect of real property leases
relating to housing for executives of the Company or any of its Subsidiaries.
For purposes of the covenants "Limitation on Additional Indebtedness and
Preferred Stock of Restricted Subsidiaries" and "Limitation on Restricted
Payments" and the definition of "Events of Default," in determining the
principal amount of any Indebtedness (1) to be incurred by the Company or a
Restricted Subsidiary or which is outstanding at any date, (x) the principal
amount of any Indebtedness which provides that an amount less than the principal
amount thereof shall be due upon any declaration of acceleration thereof shall
be the accreted value thereof at the date of determination, unless the Company
elects, for the purposes of the covenants described under "Limitation on
Additional Indebtedness and Preferred Stock of Restricted Subsidiaries" and
"Limitation on Restricted Payments," to incur the extended principal amount or
final accreted value
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thereof upon the issuance as Indebtedness permitted under such covenants, and
(y) effect shall be given to the impact of any Currency Agreements with respect
to such Indebtedness and (2) outstanding at any time under any Currency
Agreement of the Company or any Restricted Subsidiary shall be the net payment
obligation under such Currency Agreement of such person at such time.
Notwithstanding the foregoing, interest, fees and other expenses on Indebtedness
shall not be deemed to be Indebtedness if such interest, fees or other expenses
are payable on a current basis no less frequently than semi-annually and are
paid when due or within any applicable grace period. For the purposes of this
definition, the amount of Indebtedness represented by any guarantee under which
recourse is limited to a particular asset or assets subject to a Lien in favor
of the guaranteed party shall be deemed to be the lower of (x) an amount equal
to the amount of the guaranteed obligation and (y) the Fair Market Value of such
asset or assets at such time.
"Independent Financial Advisor" means a Brazilian or United States
investment or merchant banking firm or public accounting firm of national
standing in the Federative Republic of Brazil or the United States (i) which
does not, and whose directors and executive officers and Affiliates do not, have
an investment in the Company or any of its Affiliates and (ii) which, in the
judgment of the Board of the Company is otherwise independent with respect to
the Company and its Affiliates and qualified to perform the task for which it is
to be engaged. A trustee or nominee for the true parties in interest shall not
be excluded from the definition of "Independent Financial Advisor" solely as a
result of such trustee or nominee status.
"Interest Rate Protection Obligations" means the obligations of any person
pursuant to any arrangement with any other person whereby, directly or
indirectly, such person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest on
a stated notional amount in exchange for periodic payments made by such person
calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include without limitation, interest rate swaps, caps,
floors, collars, forward interest rate agreements and similar agreements.
"Investment" means, with respect to any person, any advance, loan, account
receivable (other than an account receivable or prepaid expense, including but
not limited to trade credit, arising in the ordinary course of business), or
other extension of credit (including, without limitation, by means of any
guarantee) or any capital contribution to (by means of transfers of property to
others, payments for property or services for the account or use of others, or
otherwise), or any purchase of any shares, stocks, bonds, notes, debentures or
other securities of, any other person. In addition, any foreign exchange
contract, currency swap agreement or other similar agreement made or entered
into by any person shall constitute an Investment by such person.
Notwithstanding the foregoing, in no event shall any issuance of Capital Stock
(other than Disqualified Stock) of the Company in exchange for Capital Stock,
property or assets of another person constitute an Investment by the Company in
such other person.
"Issue Date" means the original date of issuance of the Old Notes.
"License Vehicle" means any SOCIEDADE ANONIMA or COMPANHIA LIMITADA
organized under Brazilian law for the sole purpose of holding paging licenses
granted by the Brazilian Ministry of Communications for the exclusive and
unrestricted use and exploitation of such licenses by the Company or any
Restricted Subsidiary pursuant to an operating or similar agreement between such
License Vehicle and the Company or such Restricted Subsidiary the terms of which
shall not be materially less advantageous to the Company or such Restricted
Subsidiary than the Paging License Operating Agreements in effect on the Issue
Date; PROVIDED that a License Vehicle shall not at any time have any liabilities
(contingent or otherwise) except such nominal amounts as may arise in connection
with its organization and administration, which amounts shall be promptly
discharged, and such governmental fees and charges as may arise, which amounts
shall be promptly discharged.
"Lien" means any mortgage, charge, pledge, lien (statutory or other),
security interest, hypothecation, assignment for security, claim, or preference
or priority or other encumbrance upon or with respect to any
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property of any kind. A person shall be deemed to own subject to a Lien any
property which such person has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement.
"Material Restricted Subsidiary" means any Restricted Subsidiary of the
Company which, at any date of determination, (A) would have been a "Significant
Subsidiary" under the definition of such term in Rule 1-02 of Regulation S-X
issued under the Securities Act, as in effect on the Issue Date, (but
substituting "5 percent" for each occurrence of "10 percent" in such definition
for all purposes other than "--Events of Default") or (B) contributed 5% (or,
for purposes of "--Events of Default," 10%) or more to Consolidated Operating
Cash Flow of the Company on a pro forma basis in the immediately preceding
fiscal quarter or (C) is an obligor under any Indebtedness (other than to the
Company or a Restricted Subsidiary) in an aggregate principal amount equal to or
exceeding US$2,000,000 (or, to the extent non-U.S. dollar denominated, the U.S.
Dollar Equivalent thereof).
"Moody's" means Moody's Investors Service, Inc.
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or Cash Equivalents (including payments in respect
of deferred payment obligations when received in the form of cash or Cash
Equivalents and cash received in connection with the concurrent sale or other
disposition of other non-cash consideration upon consummation of any such Asset
Sale) net of (i) brokerage commissions and other fees and expenses (including
fees and expenses of legal counsel and investment bankers) related to such Asset
Sale, (ii) provisions for all Taxes payable as a result of such Asset Sale,
(iii) amounts required to be paid to any person (other than the Company or any
Restricted Subsidiary) owning a beneficial interest in or having a Lien on the
assets subject to the Asset Sale, (iv) other amounts required to be treated as
Net Cash Proceeds pursuant to the covenant "Disposition of Proceeds of Asset
Sales," and (v) appropriate amounts to be provided by the Company or any
Restricted Subsidiary, as the case may be, as a reserve required in accordance
with U.S. GAAP against any liabilities associated with such Asset Sale and
retained by the Company or any Restricted Subsidiary, as the case may be, after
such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an Officers'
Certificate of the Company delivered to the Trustee.
"Pager Acquisition Financing" means one or more facilities entered into with
any vendor or supplier of pagers (or any financial institution financing
purchases from such vendor or supplier) in order to finance the acquisition of
pagers from such vendor or supplier.
"Paging License Operating Agreements" means the Operating Agreement and
Other Covenants between the Company and each of the Licenseholders dated
December 11, 1996.
"Paging License Transfer Agreements" means the Agreements of Promise of
Assignment and Transfer of Permissions between the Company and each
Licenseholder, dated December 11, 1996.
"Pari Passu Debt Securities" means any Debt Securities of the Company or any
Guarantor which rank PARI PASSU in right of payment with the Notes or the
Guarantees, as applicable.
"Permitted Business" means (i) the delivery or distribution of wireless
communications, paging and messaging services and equipment in the Federative
Republic of Brazil and (ii) any business or activity reasonably related thereto,
including, without limitation, the resale of extended paging services outside of
the Federative Republic of Brazil to the Brazilian customers of the Company or
the Restricted Subsidiaries and any other material business conducted by the
Company or any Restricted Subsidiary on the Issue Date, and (iii) the
acquisition, holding or exploitation of any license relating to the delivery of
the services referred to in clauses (i) and (ii) of this definition.
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"Permitted Holders" means (i) Warburg, Pincus Ventures, L.P., (ii) Paging
Network International N.V., (iii) IVP--International Venture Partners, Inc.,
(iv) Multiponto Telecomunicacoes Ltda. and (v) Abril S.A., or any of their
respective controlled Affiliates.
"Permitted Indebtedness" means the Indebtedness or Preferred Stock set forth
in the following clauses (each of which shall be given independent effect):
(a) Indebtedness under the Notes, the Guarantees and the Indenture and
related rights of contribution and subrogation among the Company and the
Guarantors;
(b) Indebtedness of the Company outstanding on the Issue Date;
(c) Indebtedness of the Company and/or any Guarantor to the extent
incurred to finance the construction of paging infrastructure, the purchase
of equipment (including pagers) for use in and the installation and
construction costs related to the construction of paging infrastructure in
the Expansion Markets, or to support the operations or working capital
related to the Expansion Markets; provided the aggregate principal amount of
Indebtedness incurred under this clause (c) shall not exceed at any time
outstanding the following amount (or, to the extent non-U.S. dollar
denominated, the U.S. Dollar Equivalent of such amount): the product of (x)
US$100 and (y) the lesser of (1) the aggregate number of subscribers of the
Company and the Restricted Subsidiaries (whether or not such subscribers are
in the Expansion Markets) and (2) 250,000; PROVIDED that the amount
permitted to be incurred pursuant to this clause (c) shall be increased by
an amount equal to any unutilized amount of Indebtedness permitted to be
incurred pursuant to clause (d) of this definition;
(d) Indebtedness of the Company and/or any Guarantor in an amount not to
exceed at any time outstanding US$25,000,000 minus any amount added to the
amount of Indebtedness permitted to be incurred pursuant to clause (c) of
this definition under the proviso to such clause (c) (or to the extent
non-U.S. dollar denominated, the U.S. Dollar Equivalent of such amount);
PROVIDED that the aggregate amount of Indebtedness incurred from Permitted
Holders or their Affiliates under this clause (d) that is not in the form of
Deeply Subordinated Shareholder Indebtedness (x) shall not exceed at any
time outstanding US$10,000,000 (or, to the extent non-U.S. dollar
denominated, the U.S. Dollar Equivalent thereof) and (y) must be for working
capital purposes of the Company and the Guarantors;
(e) Indebtedness of the Company and/or any Guarantor in an amount not to
exceed the product of two times the amount of Total Incremental Invested
Equity Capital, determined at the time of incurrence of such Indebtedness;
(f) Indebtedness or Preferred Stock of any Restricted Subsidiary owed or
issued to and held by the Company or a Restricted Subsidiary and
Indebtedness of the Company owed to and held by any Restricted Subsidiary;
PROVIDED that a new incurrence of Indebtedness or issuance of Preferred
Stock shall be deemed to have occurred upon (x) any sale or other
disposition of any Indebtedness of the Company or a Restricted Subsidiary
referred to in this clause (f) to any person other than the Company or a
Restricted Subsidiary or (y) any sale or other disposition of Capital Stock
of a Restricted Subsidiary, or Designation of a Restricted Subsidiary as an
Unrestricted Subsidiary, which holds Indebtedness of the Company or
Indebtedness or Preferred Stock of another Restricted Subsidiary such that
such Restricted Subsidiary, in any such case, ceases to be a Restricted
Subsidiary;
(g) Indebtedness of the Company and/or any Restricted Subsidiary under
Interest Rate Protection Obligations relating to (i) Indebtedness of the
Company or any Restricted Subsidiary (which Indebtedness (x) bears interest
at fluctuating interest rates and (y) is otherwise permitted to be incurred
under the covenant "Limitation on Additional Indebtedness and Preferred
Stock of Restricted Subsidiaries"), and/or (ii) Indebtedness for which a
lender has provided a commitment in an amount reasonably anticipated to be
incurred by the Company or a Restricted Subsidiary in the following 180 days
after such Interest Rate Protection Obligation has been incurred, but only
to the
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extent that the notional principal amount of such Interest Rate Protection
Obligations does not exceed the principal amount of the Indebtedness (and/or
Indebtedness subject to commitments) to which such Interest Rate Protection
Obligations relate; PROVIDED in no event shall any Restricted Subsidiary
incur Indebtedness under an Interest Rate Protection Obligation under this
clause (g) relating to Indebtedness of the Company;
(h) Indebtedness of the Company and/or any Restricted Subsidiary under
Currency Agreements relating to (i) Indebtedness of the Company or a
Restricted Subsidiary and/or (ii) obligations to purchase or sell assets,
properties or services or license programming rights, in each case, incurred
in the ordinary course of business of the Company or any Restricted
Subsidiary; PROVIDED that such Currency Agreements do not increase the
Indebtedness or other obligations of the Company and the Restricted
Subsidiaries outstanding other than as a result of fluctuations in foreign
currency exchange rates or by reason of fees, indemnities and compensation
payable thereunder; PROVIDED, FURTHER, in no event shall any Restricted
Subsidiary incur Indebtedness under any Currency Agreement under this clause
(h) relating to Indebtedness or obligations of the Company;
(i) Indebtedness of the Company and/or any Restricted Subsidiary in
respect of "bid," performance or advance payment bonds of the Company or any
Restricted Subsidiary or surety or "bid," performance or advance payment
bonds provided by the Company or any Restricted Subsidiary incurred in the
ordinary course of business in connection with the construction or operation
of a Permitted Business;
(j) Indebtedness of the Company and/or any Restricted Subsidiary to the
extent it represents a replacement, renewal, refinancing, refunding,
defeasance or extension of outstanding Indebtedness of the Company or any
Restricted Subsidiary incurred pursuant to the provisos of the covenant
"Limitation on Additional Indebtedness and Preferred Stock of Restricted
Subsidiaries" or any of clause (a), (b), (c) or (e) of this definition;
PROVIDED that (i) Indebtedness of the Company or a Guarantor may not be
replaced, renewed, refinanced or extended under this clause (j) with
Indebtedness of any Restricted Subsidiary that is not a Guarantor and (ii)
any such replacement, renewal, refinancing or extension shall not exceed the
sum of the principal amount (or, if such Indebtedness provides for a lesser
amount to be due and payable upon a declaration of acceleration thereof, an
amount no greater than such lesser amount) of the Indebtedness being
replaced, renewed, refinanced or extended plus the amount of accrued
interest or accretion thereon and the amount of any reasonably determined
prepayment premium necessary to accomplish such replacement, renewal,
refinancing or extension and such reasonable fees and expenses incurred in
connection therewith; and
(k) Indebtedness of the Company and/or any Restricted Subsidiary in an
amount not to exceed US$2,000,000 (or to the extent non-U.S. dollar
denominated, the U.S. Dollar Equivalent of such amount) at any time
outstanding.
"Permitted Investments" means (a) cash and Cash Equivalents; (b) Investments
in prepaid expenses, negotiable instruments held for collection and lease,
utility and workers' compensation, performance and other similar deposits; (c)
Interest Rate Protection Obligations permitted to be incurred pursuant to clause
(g) of the definition of Permitted Indebtedness; (d) Currency Agreements; (e)
bonds, notes, debentures or other securities received as a result of Asset Sales
permitted under the covenant "Disposition of Proceeds of Asset Sales"; (f) any
Investment in another person in exchange for Capital Stock (other than
Disqualified Stock) of the Company; (g) loans and advances to employees of the
Company or any of the Restricted Subsidiaries in the ordinary course of business
in an aggregate amount not to exceed US$1,000,000 (or, to the extent non-U.S.
dollar denominated, the U.S. Dollar Equivalent of such amount) at any time
outstanding; (h) any Investment in Capital Stock obligations of any person made
in settlement of claims by the Company or any Restricted Subsidiary against such
person; (i) the contribution of (x) any paging license in exchange for Capital
Stock of a License Vehicle or (y) any cash to a License Vehicle in exchange for
Capital Stock of such License Vehicle, to the extent such cash is used for the
purpose of
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acquiring Brazilian paging licenses; (j) loans and advances to resellers and
other distributors in the ordinary course of business not to exceed at any time
an aggregate amount of US$2,000,000; (k) any Investment acquired by the Company
or any of the Restricted Subsidiaries (A) in exchange for any other Investment
or accounts receivable held by the Company or any such Restricted Subsidiary in
connection with or as a result of a bankruptcy, workout or reorganization or
recapitalization of the issuer of such other Investment or accounts receivable
or (B) as a result of the foreclosure by the Company or any of the Restricted
Subsidiaries with respect to any secured Investment or default; and (l) any
Investment in U.S. Government Securities in accordance with the provisions of
the Pledge Agreement or in connection with a legal or covenant defeasance of the
Notes or other Debt Securities in accordance with their terms.
"Pledge Account" means an account established in the United States with the
Trustee pursuant to the terms of the Pledge Agreement for the deposit of the
Pledged Securities purchased by the Company with a portion of the net proceeds
from the Offering.
"Pledge Agreement" means the Collateral Pledge and Security Agreement, dated
as of the date of the Indenture, by and between the Trustee and the Company,
governing the disbursement of funds from the Pledge Account.
"Pledged Securities" means the securities purchased by the Company with a
portion of the net proceeds from the Offering, which shall initially consist of
U.S. Government Securities, to be deposited in the Pledge Account.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated) of such
person's preferred or preference stock or shares whether now outstanding, or
issued after the Issue Date to the extent it carries any preference in respect
of the distribution of assets in the event of a liquidation or insolvency of
such person as compared with any other Capital Stock of such person.
"Pro Rata Share" means a fraction, (i) the numerator of which is the
aggregate principal amount of Notes outstanding on the applicable purchase date
and (ii) the denominator of which is the sum of (x) the aggregate principal
amount of Notes outstanding on such date and (y) if there are Pari Passu Debt
Securities or other unsubordinated Indebtedness of the Company or any Guarantor
that requires that Net Cash Proceeds be used to offer to purchase or repay such
Pari Passu Debt Securities or other unsubordinated Indebtedness of the Company
or any Guarantor, the outstanding principal amount of such Pari Passu Debt
Securities or other unsubordinated Indebtedness of the Company or such Guarantor
or Guarantors on such date.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution on Capital Stock of the
Company or any payment made to the direct or indirect holders (in their
capacities as such) of Capital Stock of the Company (other than dividends or
distributions payable solely in Capital Stock (other than Disqualified Stock) of
the Company or in options, warrants or other rights to purchase Capital Stock
(other than Disqualified Stock) of the Company); (ii) the purchase, redemption
or other acquisition or retirement for value of any Capital Stock of the Company
(other than any such Capital Stock owned by the Company or a Restricted
Subsidiary); (iii) the making of any principal payment on, or the purchase,
redemption, defeasance or other acquisition or retirement for value, prior to
any scheduled maturity, scheduled repayment or scheduled sinking fund payment
of, any Subordinated Indebtedness (other than any Subordinated Indebtedness held
by the Company or a Restricted Subsidiary); or (iv) the making of any Investment
(other than a Permitted Investment) in any person (other than an Investment by a
Restricted Subsidiary in the Company or an Investment by the Company or a
Restricted Subsidiary in either (x) a Restricted Subsidiary or (y) a person that
becomes a Restricted Subsidiary as a result of such Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that has not
been designated by the Board of the Company, by a Board Resolution delivered to
the Trustee, as an Unrestricted Subsidiary
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pursuant to and in compliance with the covenant "Limitation on Designations of
Unrestricted Subsidiaries." Any such Designation may be revoked by a Board
Resolution delivered to the Trustee, subject to the provisions of such covenant.
"Revocation" has the meaning set forth under "--Certain
Covenants--Limitation on Designations of Unrestricted Subsidiaries."
"S&P" means Standard & Poor's Ratings Group.
"Specified Indebtedness" means any Indebtedness of any Restricted Subsidiary
that is not a Guarantor which is not subordinated to any other Indebtedness of
such Restricted Subsidiary.
"Subordinated Debt Securities" means any Debt Securities (and any guarantee
of any Debt Security) which would constitute Subordinated Indebtedness.
"Subordinated Indebtedness" means any Indebtedness of the Company or any
Guarantor which is expressly subordinated in right of payment to the Notes or
any Guarantees.
"Subscription Agreement" means the Subscription Agreement dated June 6, 1997
among the Company and Holding LLC pursuant to which 125,000 shares of Common
Stock are issued to Holding LLC.
"Subsidiary" means, with respect to any person, (i) any corporation of which
the outstanding Voting Stock having at least a majority of the votes entitled to
be cast in the election of directors shall at the time be owned, directly or
indirectly, by such person, or (ii) any other person of which at least a
majority of Voting Stock is at the time, directly or indirectly, owned by such
person.
"Technical Services Agreement" means the Technical Services Agreement dated
as of December 11, 1996.
"Total Consolidated Indebtedness and Subsidiary Preferred Stock" means, at
any date of determination, an amount equal to the sum of (i) the aggregate
principal amount of all Indebtedness of the Company and the Restricted
Subsidiaries outstanding as of the date of determination and (ii) the aggregate
liquidation preference of all Preferred Stock of Restricted Subsidiaries that
are not Guarantors issued and outstanding as of the date of determination (other
than Indebtedness owing to and Preferred Stock held by the Company or a
Restricted Subsidiary that is a Guarantor).
"Total Incremental Invested Equity Capital" means, at any time of
determination, the sum of, without duplication, (i) the aggregate cash proceeds
received by the Company from capital contributions in respect of existing
Capital Stock (other than Disqualified Stock) or the issuance or sale of Capital
Stock (other than Disqualified Stock but including Capital Stock issued upon the
conversion of convertible Indebtedness or from the exercise of options, warrants
or rights to purchase Capital Stock (other than Disqualified Stock)) subsequent
to the Issue Date, other than to a Subsidiary of the Company, PLUS (ii) the
aggregate cash proceeds received by the Company or any Restricted Subsidiary
from the sale, disposition or repayment of any Investment made after the Issue
Date and constituting a Restricted Payment (other than any Investment made
pursuant to clause (v) of the second paragraph of the covenant "Limitation on
Restricted Payments") in an amount equal to the lesser of (a) the return of
capital with respect to such Investment and (b) the initial amount of such
Investment, in either case, less the cost of the disposition of such Investment,
PLUS (iii) an amount equal to the lesser of (x) the consolidated net Investment
on the date of Revocation made by the Company and/or any of the Restricted
Subsidiaries of any Subsidiary in accordance with the covenant described
under"--Certain Covenants--Limitation on Designations of Unrestricted
Subsidiaries" and (y) the Designation Amount with respect to such Subsidiary,
MINUS (iv) the aggregate amount of all Restricted Payments declared or made on
and after the Issue Date.
"Unrestricted Subsidiary" means any Subsidiary of the Company (other than a
Guarantor) designated as such pursuant to and in compliance with the covenant
"Limitation on Designations of Unrestricted
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Subsidiaries." Any such designation may be revoked by a Board Resolution of the
Company delivered to the Trustee, subject to the provisions of such covenant.
"U.S. Dollar Equivalent" means, with respect to any monetary amount in a
currency other than the U.S. dollar, at any time for the determination thereof,
the amount of U.S. dollars obtained by converting such foreign currency involved
in such computation into U.S. dollars at the spot rate for the purchase of U.S.
dollars with the applicable foreign currency as quoted by Reuters at
approximately 11:00 a.m. (New York time) on the date not more than two business
days prior to such determination. For purposes of determining whether any
Indebtedness can be incurred (including Permitted Indebtedness), any Investment
can be made and any Affiliate Transaction can be undertaken (a "Tested
Transaction"), the "U.S. Dollar Equivalent" of such Indebtedness, Investment or
Affiliate Transaction shall be determined on the date incurred, made or
undertaken and no subsequent change in the U.S. Dollar Equivalent shall cause
such Tested Transaction to have been incurred, made or undertaken in violation
of the Indenture.
"U.S. GAAP" means generally accepted accounting principles and practices in
the United States consistently applied by a corporation or as between
corporations and over time, as in effect from time to time; PROVIDED that, for
purposes of determining compliance with the covenants "Limitation on Additional
Indebtedness and Preferred Stock of Restricted Subsidiaries" and "Limitation on
Restricted Payments," U.S. GAAP shall mean such generally accepted accounting
principles and practices as adopted by the Company on the Issue Date and as are
consistent with those set forth in this Offering Memorandum.
"U.S. Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which obligations
or guarantee the full faith and credit of the United States is pledged.
"Voting Stock" means, with respect to any person, the Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors
or other members of the governing body of such person.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary of
which 100% of the outstanding Capital Stock is owned by the Company or another
Wholly Owned Restricted Subsidiary. For purposes of this definition, any
directors' qualifying shares or investments by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a Restricted
Subsidiary.
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BOOK-ENTRY; DELIVERY AND FORM
Except as set forth below, the New Notes will be issued in the form of one
or more registered notes in global form without coupons (each a "Global Note").
Upon issuance, each Global Note will be deposited with, or on behalf of, The
Depository Trust Company ("DTC") and registered in the name of Cede & Co., as
nominee of DTC.
Old Notes originally purchased by or transferred to (i) institutional
"accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) who are not "qualified institutional buyers" (as defined in Rule
144A under the Securities Act and referred to as "QIBs"), (ii) QIBs, who elected
to take physical delivery of their certificates instead of holding their
interest in Global Notes, or (iii) any other holders who are not QIBs, which Old
Notes were issued in registered form without coupons (the "Old Certificated
Notes") are exchangeable for New Notes in registered form without coupons (the
"New Certificated Notes").
Interests in the Global Notes will be exchangeable or transferable, as the
case may be, for New Certificated Notes if (i) DTC notifies the Company that it
is unwilling or unable to continue as depositary for such Global Notes, or DTC
ceases to be a "Clearing Agency" registered under the Exchange Act, and a
successor depositary is not appointed by the Company within 90 days, or (ii) an
Event of Default has occurred and is continuing with respect to such Notes. Upon
the occurrence of any of the events described in the preceding sentence, the
Company will cause the appropriate New Certificated Notes to be delivered.
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TAX CONSIDERATIONS
BRAZIL
The following is a summary of the material Brazilian income tax consequences
to the Company in connection with the sale and repayment of the Notes (including
any interest thereon) and to beneficial owners of the Notes that are
non-residents of Brazil in connection with the purchase, ownership and
disposition of such Notes. This summary is limited to the Company and to
non-residents of Brazil which acquire the Notes at the issue price from the
Initial Purchasers, and does not address investors who purchase Notes at a
premium or market discount. In addition, this summary is based on the Brazilian
tax regulations as presently in effect and does not take into account possible
future changes in such tax laws. Prospective purchasers of the Notes are advised
to consult their tax advisers as to the consequences of a purchase and sale of
the Notes.
Individuals domiciled in Brazil and Brazilian companies are taxed in Brazil
on the basis of their worldwide income (which includes earnings of Brazilian
companies' foreign subsidiaries, branches and affiliates). The income of
non-Brazilian residents in general are taxed in Brazil only when derived from
Brazilian sources. Interest, fees, commissions and any other income (which for
the purposes of this paragraph includes any deemed income on the difference
between the issue price of the Notes and the price at which the Notes are
redeemed ("original discount")) payable by a Brazilian obligor to an individual,
company, entity, trust or organization domiciled outside Brazil is subject to
income tax withheld at source. The rate of withholding with respect to debt
obligations is 15% or such other lower rate as provided for in an applicable tax
treaty between Brazil and such other country where the recipient of the payment
has its domicile. Notwithstanding the foregoing, with respect to the tax events
which take place during the calendar year of 1997, the applicable withholding
income tax rate for interest, commissions, expenses and discounts, payable to
persons or entities domiciled abroad, arising from negotiable instruments such
as the Notes, was reduced to zero, pursuant to Provisional Measure No. 1.563, of
December 31, 1996, published in the Official Gazette of January 2, 1997 and
republished in the Official Gazette of April 24, 1997, which restricts such
income tax reductions to negotiable instruments placed abroad with the previous
approval of the Central Bank, with a minimum average amortization term of at
least 96 months. As a result, since the Notes have an original maturity in
excess of 96 months, such reduction will apply to payments of interest and other
income with respect to the Notes paid during the fiscal year of 1997. It is not
certain whether such reduction will continue to apply after 1997. In any event,
if any Notes are redeemed prior to the maturity date, such reduction will not
apply and upon any such redemption the Brazilian withholding tax will be applied
on the amount of interest (including original discount), fees and commissions
paid on such Notes from the date of issue through the date of redemption. See
"Description of the Notes--Additional Amounts" and "Description of the
Notes--Brazilian Central Bank Consent for Optional and Mandatory Redemption of
Notes."
Since the Principal Paying Agent is located in Japan and payment to the
Principal Paying Agent discharges the obligations of the Company to make
payments in respect of the Notes, if interest and other income with respect to
the Notes were to become subject to Brazilian withholding income tax (as
determined in the preceding paragraph), such tax would be imposed at a rate of
only 12.5% under the current tax treaty in effect between Brazil and Japan. In
any event, under the terms of the Notes, the Company is required to gross-up
Noteholders for Brazilian withholding tax, subject to certain exceptions. See
"Description of the Notes--Additional Amounts." The Company has the right to
redeem the Notes at par in the event of certain increases in Brazilian
withholding tax to a rate in excess of 15%. See "Description of the
Notes--Redemption for Changes in Withholding Taxes."
Any earnings or capital gains made abroad as a result of a transaction
between two non-residents of Brazil are not subject to tax in Brazil. However,
gains realized by a non-resident on the disposition of the Notes inside Brazil,
or to a Brazilian resident outside of Brazil, will be subject to Brazilian tax.
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Pursuant to Decree 1,815 of February 8, 1996, REAIS resulting from the
conversion of the proceeds received by a Brazilian borrower from a foreign
currency loan (including those in connection with the issue of bonds or notes)
are subject to a tax on exchange transactions. Under Article 4 of Decree
1,815/96, the Minister of Finance is empowered to establish the applicable tax
rate, which was set by means of Portaria 241 of October 31, 1996. Portaria 241
was revoked by Portaria 85, enacted on April 24, 1997, which reduced to zero the
IOF rate applicable on the REAIS. The IOF tax is currently regulated by Decree
No. 2,219 dated May 2, 1997. Under Law 8,894 of June 21, 1994, such tax rate may
be increased up to 25%. In any event, the tax burden falls upon the Brazilian
borrower, not upon foreign creditors such as the holders of the Notes and will
be deducted from the proceeds of the issue of the Notes. See "Description of the
Notes--Additional Amounts."
On August 15, 1996, the Brazilian Congress approved Constitutional Amendment
No. 12 creating a new temporary tax, the CONTRIBUICAO PROVISORIA SOBRE
MOVIMENTACAO FINANCEIRA ("CPMF"). Based on such Amendment, Law No. 9,311 of
October 24, 1996 was enacted, determining the creation of the CPMF tax. Under
Law No. 9,311/96 all financial debt and money transfers effected on or after
January 23, 1997 will be subject to the assessment of the CPMF tax at the rate
of 0.20%. Funds arising from the collection of the CPMF tax will be applied only
in the public health system.
There is no stamp, transfer or other similar tax in Brazil with respect to
the transfer, assignment or sale or any debt instrument outside Brazil
(including the Notes).
UNITED STATES
FEDERAL INCOME TAXATION
The following is a summary of certain U.S. federal income tax consequences
associated with the purchase, ownership and disposition of a Note. This summary
does not discuss all of the tax consequences that may be relevant to certain
types of investors subject to special treatment under the U.S. federal income
tax laws (such as individual retirement accounts and other tax-deferred
accounts, securities broker-dealers, life insurance companies, tax-exempt
organizations and foreign persons, or to persons whose "functional currency" is
other than the U.S. dollar or to persons which hold Notes as part of a
"straddle" or "conversion transaction" or otherwise as part of a "synthetic
asset") and is limited to investors which hold Notes as capital assets. In
addition, this summary is limited to initial holders that acquire the Notes at
the issue price from the Initial Purchasers. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), final, temporary and
proposed Treasury regulations thereunder, revenue rulings, court cases, and
other legal authorities as now in effect (or proposed) and as currently
interpreted, and does not take into account possible changes in such tax laws or
other legal authorities or such interpretations. No rulings on any of the issues
discussed below will be sought from the U.S. Internal Revenue Service (the
"IRS").
For purposes of this discussion, a "U.S. Holder" is an individual who is a
citizen or resident of the United States, a corporation, partnership or other
entity created under the laws of the United States or any political subdivision
thereof, an estate that is subject to United States federal income taxation
without regard to the source of income, or a trust if a United States court is
able to exercise primary supervision over the administration of that trust and
one or more United States fiduciaries have the authority to control all
substantial decisions of such trust.
PROSPECTIVE PURCHASERS OF THE NOTES ARE ADVISED TO CONSULT THEIR TAX
ADVISERS AS TO THE CONSEQUENCES OF A PURCHASE AND SALE OF NOTES, INCLUDING,
WITHOUT LIMITATION, (I) THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR NON-
U.S. TAX LAWS TO WHICH THEY MAY BE SUBJECT, AND OF ANY LEGISLATIVE OR
ADMINISTRATIVE CHANGES IN LAW, (II) THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF
THE ISSUER'S DEDUCTION OF BRAZILIAN TAXES AND OTHER AMOUNTS (AND OF THE PAYMENT
BY THE ISSUER OF ADDITIONAL AMOUNTS WITH RESPECT THERETO) WITH RESPECT TO
PAYMENTS
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ON THE NOTES, (III) THE AVAILABILITY FOR U.S. FEDERAL INCOME TAX PURPOSES OF A
CREDIT OR DEDUCTION FOR BRAZILIAN TAXES OR OTHER AMOUNTS AND (IV) THE
CONSEQUENCES OF PURCHASING THE NOTES AT A PRICE OTHER THAN THE ISSUE PRICE.
TAX CONSIDERATIONS APPLICABLE TO HOLDING NOTES
TAXATION OF INTEREST AND ADDITIONAL AMOUNTS ON NOTES. Interest on the Notes
and additional amounts relating thereto (I.E., without reduction for any
Brazilian withholding taxes) will be taxable to a U.S. Holder as ordinary income
at the time it accrues or is received in accordance with the U.S. Holder's
method of accounting for tax purposes.
A U.S. Holder will treat the gross amount of interest and Additional Amounts
relating thereto (I.E., without reduction for any Brazilian withholding taxes,
if any) as ordinary interest income in respect of the Notes. If the IRS were to
successfully contend that a sufficiently large portion of the purchase price
should not be allocated to the Notes, the Notes would bear OID for U.S. federal
income tax purposes. U.S. Holders of Notes would be required to accrue in income
as additional interest (whether such holder was a cash or accrual taxpayer) in
each taxable year during which such U.S. holder held such Note, a portion of the
OID. The amount of OID on a Note would be the excess of its "stated redemption
price at maturity" over the Note's "issue price." In the event of a reallocation
of purchase price, a Note's "issue price" would be the portion of the purchase
price allocated to such Note and its "stated redemption price at maturity" would
generally be its stated principal amount. The amount of OID taken into account
in a particular year would be calculated under the constant yield to maturity
method. The effect of the OID rules, generally, would be that U.S. Holders would
recognize interest income in each year equal to the excess of the product of (i)
the yield to maturity on the Notes and (ii) the adjusted issue price over the
interest payments on the Notes. Generally, the adjusted issue price of the Notes
will be its issue price increased by previously accrued OID. Under this method,
the amount of OID included in the income of a U.S. Holder in early years would
be less than the includible amount in later years.
Pursuant to applicable OID rules, the possibility that Additional Amounts
may be payable in respect of Brazilian withholding taxes on interest payments
could subject the Notes to the rules applicable to contingent payment debt
instruments, regardless of whether or not Brazil actually imposes such a
withholding tax. The Company intends to take the position, based on advice that
it has received from Brazilian counsel, that such rules should not apply to the
Notes. However, the IRS could challenge that position, and if it were to
successfully do so, gain realized by U.S. Holders with respect to the Notes
could be recharacterized as ordinary income rather than capital gain and,
therefore, at present U.S. federal income tax rates, subject to higher tax rates
for U.S. Holders who are individuals. The application of those rules could also
result in an unfavorable mismatch of income and deduction/foreign tax credit for
U.S. Holders. PROSPECTIVE U.S. HOLDERS SHOULD CONTACT THEIR OWN TAX ADVISORS
REGARDING THE APPLICATION OF THE OID RULES TO THE NOTES.
The calculation of foreign tax credits and, in the case of a U.S. Holder
that elects to deduct foreign taxes, the availability of deductions, involves
the application of rules that depend on a U.S. Holder's particular
circumstances. U.S. Holders should consult their own tax advisers regarding the
availability of foreign tax credits and the treatment of additional amounts.
SALE, EXCHANGE OR OTHER DISPOSITION OF NOTES. A U.S. Holder will generally
recognize gain or loss upon the sale, exchange, retirement or other disposition
of Notes equal to the difference between the amount realized on the sale,
exchange or other disposition of such Note and the U.S. Holder's adjusted tax
basis in the Notes. Such gain or loss generally would be capital gain or loss,
and would be long-term if the Notes were held more than one year.
REGISTRATION AND EXCHANGE OF NOTES. Neither the Exchange Offer nor the
filing of a Notes Shelf Registration Statement as described under "Exchange
Offer; Notes Registration Rights" should result in a
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taxable event to the Company or any U.S. Holder since there would be no material
alteration in the terms of the Notes.
Under certain circumstances, Additional Interest shall become payable in
cash with respect to the applicable Notes. See "Exchange Offer; Notes
Registration Rights." This rate increase should not result in a deemed taxable
exchange of the Notes for Exchange Notes.
EFFECT OF BRAZILIAN WITHHOLDING TAXES. It is believed that payments with
respect to a Note will not be subject to Brazilian withholding tax during the
fiscal year of 1997 unless the Note is redeemed prior to June 6, 2005. After
1997 such payments may be subject to Brazilian withholding tax at a rate of up
to 15%. See "Tax Considerations--Brazil." In the case of any Note which is so
redeemed, withholding taxes in respect of interest previously paid may be
imposed by Brazil at the time of redemption. Any Brazilian tax withheld
generally will be treated as a foreign income tax that U.S. Holders may elect to
deduct in computing their taxable income or, subject to the limitations on
foreign tax credits generally, credit against their U.S. federal income tax
liability. No such deduction or credit will be available to the extent Brazil
pays a subsidy to a U.S. Holder, a related person or the Company, the amount of
which is determined (directly or indirectly) by reference to the amount of the
withholding tax. While Brazil does not have a program or policy of paying such
subsidies at present, it has had programs of that nature in the past and could
implement such programs again in the future. For purposes of determining a U.S.
Holder's United States foreign tax credit, gain or loss on the sale, redemption
or other taxable disposition of a Note will generally constitute United States
source income. Interest (including Brazilian withholding taxes imposed on
payments on a Note and Brazilian withholding taxes imposed with respect to any
Additional Amounts payable by the issuer) will generally constitute non-United
States source income. Such interest will generally constitute passive income.
However, if a Note is redeemed prior to June 6, 2005, and payments with respect
to the Note are subject to Brazilian withholding tax of five percent or more,
the IRS might retroactively treat interest paid with respect to the Note as high
withholding tax interest. In any event, a U.S. Holder may have insufficient
foreign source income to utilize fully any foreign tax credit attributable to
such withholding taxes that could otherwise be utilized (but such withholding
taxes may instead be deductible by the U.S. Holder). A U.S. Holder may be
required to provide the IRS with a certified copy of the receipt evidencing
payment of withholding tax imposed in respect of payments on the Notes (a
"Certified Copy") in order to claim a foreign tax credit in respect of such
withholding tax. A U.S. Holder (or its agent) may obtain a Certified Copy by
providing written demand therefor to the Principal Paying Agent. The Principal
Paying Agent will contact the issuer, which will provide such Certified Copy to
the Principal Paying Agent for prompt forwarding to the relevant U.S. Holder.
The issuer will attach to each Certified Copy a certificate stating (x) that the
amount of withholding tax evidenced by the Certified Copy was paid in connection
with payments in respect of the principal amount of notes then outstanding and
(y) the amount of such withholding tax paid per US$1,000 of principal amount of
the Notes.
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<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account in connection
with the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Old Notes if such
Old Notes were acquired as a result of market-making activities or other trading
activities. The Company has agreed that for a period of 180 days after the
Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer that requests such documents in the Letter of
Transmittal, for use in connection with any such resale. In addition, until
, 1997 (90 days after the date of this Prospectus), all dealers
effecting transactions in the New Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account in
connection with the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers on any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account in
connection with the Exchange Offer and any broker or dealer that participates in
a distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act, and any profit on any such resale of New Notes
and any commissions or concessions received by any such persons may be deemed to
be underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
103
<PAGE>
EXPERTS
The financial statements of the Company appearing in this Prospectus have
been audited by Ernst & Young, Auditores Independentes S.C., independent
accountants, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such reports given on the authority of said
firm as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
New Notes being offered hereby will be passed upon for the Company by Xavier,
Bernardes, Braganca, Sociedade de Advogados with respect to matters of Brazilian
law, and by Willkie Farr & Gallagher, New York, with respect to matters of
United States law. Maria Regina Mangabeira Albernaz Lynch, Horacio Bernardes
Neto and Helena de Araujo Lopes Xavier, are directors of the Company, and are
partners in the law firm of Xavier, Bernardes, Braganca, Sociedade de Advogados.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
F-4 under the Securities Act, with respect to the New Notes offered hereby (the
"Registration Statement"). This Prospectus, which constitutes a part of the
Registration Statement, does not contain all of this information set forth in
the Registration Statement, certain parts of which have been omitted from the
Prospectus in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the New Notes offered
hereby, reference is made to the Registration Statement, including the exhibits
and schedules filed therewith, and the financial statements and notes filed as a
part thereof. Statements made in the Prospectus concerning the contents of any
document referred to herein are not necessarily complete. With respect to each
such document filed with the Commission as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description of
the matter involved, and each such statement shall be deemed qualified in its
entirety by such reference.
The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith is required to file reports with the
Commission. All reports and other information filed by the Company, and the
Registration Statement, including the exhibits and schedules thereto, may be
inspected and copied at the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549, and at the
regional offices of the Commission located at Seven World Trade Center, New
York, New York 10048, and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials may be obtained
from the Public Reference Section of the Commission, Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and its public reference
facilities in New York, New York, and Chicago, Illinois, at the prescribed
rates.
The Indenture provides that, whether or not the Company has a class of
securities registered under the Exchange Act, the Company shall furnish without
cost to each holder of Notes and file with the Commission (whether or not the
Company is a public reporting company at the time), the Trustee and the Initial
Purchasers: (i) within 140 days after the end of each fiscal year of the
Company, annual reports on Form 20-F (or any successor form) containing the
information required to be contained therein (or required in such successor
form); (ii) with 60 days after the end of each of the first three fiscal
quarters of each fiscal year, reports on Form 6-K (or any successor form)
containing substantially the same information required to be contained in Form
10-Q (or required in any successor form); and (iii) promptly from time to time
after the occurrence of an event required to be therein reported, such other
reports on Form 6-K (or any successor form) containing substantially the same
information required to be contained in Form 8-K (or required in any successor
form). Each of the reports will be prepared in accordance with US GAAP
consistently applied and will be prepared in accordance with the applicable
rules and regulations of the Commission.
As a foreign private issuer, the Company is exempt from certain provisions
of the Exchange Act prescribing the furnishing and content of proxy statements.
104
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGING NETWORK DO BRASIL S.A.
(A DEVELOPMENT STAGE COMPANY)
<TABLE>
<S> <C>
Report of Independent Auditors....................................................... F-2
Balance Sheet at December 31, 1996................................................... F-3
Statement of Operations for the period ended December 31, 1996....................... F-4
Statement of Shareholders' Equity (Deficit) for the period ended December 31, 1996... F-5
Statement of Cash Flows for the period ended December 31, 1996....................... F-6
Notes to Financial Statements........................................................ F-7
Balance Sheet at March 31, 1997 (Unaudited).......................................... F-11
Statement of Operations for the three months ended March 31, 1997 (Unaudited)........ F-12
Statement of Shareholders' Equity (Deficit) for the three months ended March 31, 1997
(Unaudited)........................................................................ F-13
Statement of Cash Flows for the three months ended March 31, 1997 (Unaudited)........ F-14
Note to Financial Statements (Unaudited)............................................. F-15
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders
PAGING NETWORK DO BRASIL S.A.
Sao Paulo, Brazil
We have audited the accompanying balance sheet of Paging Network do Brasil
S.A. (a development stage company) (formerly Warburg Paging do Brasil Ltda.) as
of December 31, 1996, and related statements of operations, shareholders' equity
(deficit) and cash flows for the period April 17, 1996 (inception) through
December 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Paging Network do Brasil
S.A. (a development stage company) as of December 31, 1996 and the results of
its operations and its cash flow for the period April 17, 1996 (inception)
through December 31, 1996, in conformity with generally accepted accounting
principles in the United States.
ERNST & YOUNG
Auditores Independentes S.C.
Sao Paulo, Brazil
February 24, 1997
F-2
<PAGE>
PAGING NETWORK DO BRASIL S.A.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1996
(AMOUNTS IN U.S. DOLLARS)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $12,444,689
Refundable taxes............................................................. 839,859
Pager inventories............................................................ 2,105,955
Prepaid expenses............................................................. 635,109
----------
Total current assets........................................................... 16,025,612
Fixed assets, net.............................................................. 4,513,421
----------
Total assets................................................................... $20,539,033
----------
----------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................................................. $2,532,676
Accrued expenses............................................................. 576,374
Payable to related parties................................................... 1,854,492
----------
Total current liabilities...................................................... 4,963,542
Redeemable preferred stock, without par value
Authorized shares--63,000 shares
Issued and outstanding, 21,300 shares........................................ 20,451,427
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, without par value
Authorized shares--50,000 shares
Issued and outstanding 30,760 shares......................................... 28,672
Deficit accumulated during the development stage............................... (4,904,608)
----------
(4,875,936)
----------
Total liabilities and shareholders' equity (deficit)........................... $20,539,033
----------
----------
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
PAGING NETWORK DO BRASIL S.A.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD APRIL 17, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
(AMOUNTS IN U.S. DOLLARS)
<TABLE>
<S> <C>
Selling, general and administrative expenses.................................... $(4,961,639)
Other income and expenses
Interest income............................................................... 117,210
Loss on translation........................................................... (60,179)
----------
57,031
----------
Net loss........................................................................ $(4,904,608)
----------
----------
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
PAGING NETWORK DO BRASIL S.A.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE PERIOD APRIL 17, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
(AMOUNTS IN U.S. DOLLARS)
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE
COMMON DEVELOPMENT
STOCK STAGE TOTAL
------------ ------------- -------------
<S> <C> <C> <C>
Issuance of common stock of predecessor............................... $ 5,950,100 $ 5,950,100
Exchange of common stock of predecessor for redeemable preferred
stock............................................................... (5,940,000) (5,940,000)
Issuance of common stock.............................................. 18,572 18,572
Net loss for the period............................................... $ (4,904,608) (4,904,608)
------------ ------------- -------------
$ 28,672 $ (4,904,608) $ (4,875,936)
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
PAGING NETWORK DO BRASIL S.A.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD APRIL 17, 1996 (INCEPTION) THROUGH DECEMBER 31, 1996
(AMOUNTS IN U.S. DOLLARS)
<TABLE>
<S> <C>
Operating activities
Net loss during the development stage......................... $(4,904,608)
Adjustments to reconcile net loss to net cash used by
operating activities
Depreciation................................................ 55,582
Changes in operating assets and liabilities
Refundable taxes............................................ (839,859)
Pager inventories........................................... (2,105,955)
Prepaid expenses............................................ (635,109)
Accounts payable............................................ 2,532,676
Accrued expenses............................................ 576,374
Payable to related parties.................................. 1,854,492
----------
Net cash used by operating activities........................... (3,466,407)
Investing activities
Purchase of fixed assets........................................ (4,569,003)
----------
Net cash used by investing activities........................... (4,569,003)
Financing activities
Issuance of common stock of predecessor......................... 5,950,100
Issuance of common stock........................................ 18,572
Issuance of redeemable preferred stock.......................... 14,511,427
----------
Net cash provided by financing activities....................... 20,480,099
----------
Net increase in cash 12,444,689
Cash and cash equivalents at April 17, 1996 (inception)......... -0-
----------
Cash and cash equivalents at December 31, 1996.................. $12,444,689
----------
----------
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
PAGING NETWORK DO BRASIL S.A.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(AMOUNTS IN U.S. DOLLARS)
1. ORGANIZATION
Paging Network do Brasil S.A. (formerly Warburg Paging do Brasil Ltda., the
"Company") is a start-up operation that was formed on April 7, 1996 through an
investment by Warburg, Pincus Ventures, L.P. During 1997, the Company plans to
initially provide paging services in Sao Paulo, where it has begun building
transmission stations, and simultaneously plans for expansion into additional
Brazilian markets.
In October 1996, the Company increased its capital to approximately
$5,500,000 and in December 1996, through the incorporation of three new
shareholders, received approximately $15,000,000 of additional capital. In
December 1996, the Company changed its name from Warburg Paging do Brasil Ltda.
to Paging Network do Brasil Ltda. and then to Paging Network do Brasil S.A.
following a change in its legal formation from a limited liability company
(Ltda.) to a closed corporation (S.A.), at which time common stock in the
limited liability company was exchanged for common and redeemable preferred
stock in the Company.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements have been prepared in accordance with generally
accepted accounting principles in the United States in U.S. dollars.
The Company's significant accounting policies are as follows:
FOREIGN CURRENCY TRANSLATION
The financial statements were translated from Brazilian reais to U.S.
dollars in accordance with the provisions of Statement of Financial Accounting
Standards No 52 as it applies to entities operating in highly inflationary
economies.
Pager inventories, fixed assets and intangibles and the related income
statement accounts are remeasured at exchange rates in effect when the assets
were acquired or the liabilities were incurred. All other assets and liabilities
are remeasured at period end exchange rates, and all other income and expense
items are remeasured at average exchange rates prevailing during the period.
Remeasurement adjustments are included in exchange and translation gains
(losses).
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
REVENUE RECOGNITION
The Company recognizes revenue under service, rental and maintenance
agreements with customers as the related services are performed. Advance
billings for services are deferred and recognized as revenue when earned. Sales
of pagers are recognized upon delivery. The Company will lease certain pagers
under operating leases. Substantially all of these leases will be on a
month-to-month basis.
F-7
<PAGE>
PAGING NETWORK DO BRASIL S.A.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(AMOUNTS IN U.S. DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --(CONTINUED)
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
INVENTORIES
Inventories are valued at the lower of average cost, or market.
FIXED ASSETS
Fixed assets are stated at cost. Depreciation is computed by the
straight-line method. Amortization of leasehold improvements is based on the
shorter of the useful life or lease term.
INCOME TAXES
The Company adopted the liability method of accounting for income taxes
pursuant to Statement of Financial Accounting Standards No 109. Under this
method, deferred income taxes are recorded to reflect the tax consequences in
future years of temporary differences between the tax bases of the assets and
liabilities and the financial amounts for reporting purposes. The Company has
provided a valuation allowance to reduce deferred tax assets to their net
realizable value of zero. The Company's deferred tax assets arise principally
from start-up costs which for financial reporting purposes are expensed as
incurred; for tax and local statutory purposes they are capitalized and will be
amortized over five years when operations commence.
3. FIXED ASSETS
Fixed assets at December 31, 1996 are comprised of the following:
<TABLE>
<CAPTION>
DEPRECIATION ACCUMULATED
PERIOD COST DEPRECIATION NET
-------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Furniture and fixtures.................................. 10 years $ 138,470 $ (728) $ 137,742
Equipment............................................... 5-10 years 4,280,449 (48,101) 4,232,348
Leasehold improvements.................................. 5 years 150,084 (6,753) 143,331
------------ ------------ ------------
$ 4,569,003 $ (55,582) $ 4,513,421
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Leased pagers will be depreciated over 2.5 years when placed in service.
4. SHAREHOLDERS' EQUITY (DEFICIT)
In December 1996, the Company entered into a technical services agreement
with Paging Network, Inc. ("PageNet") pursuant to which PageNet will provide
technical services and support. In consideration therefore, the Company has
granted to a subsidiary of PageNet the right (in the form of a subscription
bond) to buy 8,000 shares of Common Stock at an exercise price of $1.00.
F-8
<PAGE>
PAGING NETWORK DO BRASIL S.A.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(AMOUNTS IN U.S. DOLLARS)
4. SHAREHOLDERS' EQUITY (DEFICIT) (CONTINUED)
In December 1996, the Company entered into operating agreements with each of
TVA Sistema de Televisao S.A.("TVA"), Multiponto Telecomunicacoes Ltda.
("Multiponto") and San Francisco Comunicacoes Ltda. ("San Francisco" and
collectively with TVA and Multiponto, the "Licenseholders"), pursuant to which
the Licenseholders have granted the Company the exclusive right to resell paging
services utilizing the paging licenses held by the Licenseholders
(the"Licenses"). The Licenseholders have agreed to transfer the Licenses to the
Company following the three year waiting period mandated by Brazilian law. In
consideration therefore, the Company has (i) issued and sold to an affiliate of
San Francisco 8,000 shares of Common Stock for a purchase price of $1.00 per
share, (ii) issued and sold to Multiponto 2,000 shared of Common Stock for a
purchase price of $1.00 each and granted Multiponto the right (in the form of
subscription bonds) to purchase up to 1,000 shares of Common Stock at a price of
$1.00 per share and (iii) has granted TVA the right (in the form of subscription
bonds) to purchase up to 1,000 shares of Common Stock at a price of $1.00 per
share.
The holders of the redeemable preferred stock are entitled to voting rights
limited to specific matters included in the Company's by-laws.
The redeemable preferred stock has an accruing dividend with an effective
annual rate of 12% compounding quarterly for the first five years from its
issuance. On the fifth anniversary of its issuance, the dividend increases to an
effective rate of 14% compounding quarterly. On the sixth anniversary all
previously accrued dividends will be paid in kind. The annual dividend rate will
increase to 16% in the seventh year, 18% in the eighth year, and 20% in the
ninth and tenth years. After the sixth anniversary, subject to the terms of the
Indenture, all dividends will be payable in cash. The Company is required to
redeem the redeemable preferred stock at $1,000 per share plus accrued and
unpaid dividends on the tenth anniversary of its issuance.
Redeemable preferred stock and common stock have been presented on the
balance sheet net of receivables for the sale of stock of $849,000 and $2,000,
respectively.
5. ACCRUED EXPENSES
Accrued expenses at December 31, 1996 are comprised of the following:
<TABLE>
<CAPTION>
<S> <C>
Withholding taxes payable......................................................... $ 263,634
Payroll and other benefits payable................................................ 259,586
Other............................................................................. 53,154
----------
$ 576,374
----------
----------
</TABLE>
F-9
<PAGE>
PAGING NETWORK DO BRASIL S.A.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
(AMOUNTS IN U.S. DOLLARS)
6. COMMITMENTS
The Company has entered into various office space and transmission antenna
rental agreements. These agreements are readjusted periodically for inflation.
Rental expense commitments at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997............................................................................ $ 1,510,000
1998............................................................................ 1,510,000
1999............................................................................ 1,504,000
2000............................................................................ 1,412,000
2001............................................................................ 1,322,000
</TABLE>
The Company incurred rental expense of $124,000 in the period ended December
31, 1996.
F-10
<PAGE>
PAGING NETWORK DO BRASIL S.A.
BALANCE SHEET
MARCH 31, 1997
(AMOUNTS IN U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................................... $3,302,499
Accounts receivable.......................................................... 68,075
Refundable taxes............................................................. 890,021
Pager inventories............................................................ 2,424,939
Prepaid expenses............................................................. 414,468
----------
Total current assets........................................................... 7,100,002
Fixed assets, net.............................................................. 6,747,877
----------
Total assets................................................................... $13,847,879
----------
----------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................................................. $ 439,840
Accrued expenses............................................................. 447,210
----------
Total current liabilities...................................................... 887,050
Redeemable preferred stock, without par value
Authorized shares--63,000 shares
Issued and outstanding, 21,300 shares........................................ 21,939,000
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, without par value
Authorized shares--50,000 shares
Issued and outstanding 30,760 shares......................................... 30,760
Accumulated deficit............................................................ (9,008,931)
----------
(8,978,171)
----------
Total liabilities and shareholders' equity (deficit)........................... $13,847,879
----------
----------
</TABLE>
See accompanying note to financial statements.
F-11
<PAGE>
PAGING NETWORK DO BRASIL S.A.
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(AMOUNTS IN U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<S> <C>
Net revenue..................................................................... $ 42,106
Cost of sales................................................................... 18,128
----------
23,978
Selling, general and administrative expenses.................................... (3,460,810)
Other income and expenses
Interest income............................................................... 205,143
Loss on translation........................................................... (233,634)
----------
(28,491)
----------
Net loss........................................................................ $(3,465,323)
----------
----------
</TABLE>
See accompanying note to financial statements.
F-12
<PAGE>
PAGING NETWORK DO BRASIL S.A.
STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(AMOUNTS IN U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON ACCUMULATED
STOCK DEFICIT TOTAL
--------- ------------- -------------
<S> <C> <C> <C>
Balance at December 31, 1996............................................. $ 28,672 $ (4,904,608) $ (4,875,936)
Proceeds of receivables for the sale of common stock..................... 2,088 2,088
Accrued dividends on redeemable preferred stock.......................... (639,000) (639,000)
Net loss................................................................. (3,465,323) (3,465,323)
--------- ------------- -------------
Balance at March 31, 1997................................................ $ 30,760 $ (9,008,931) $ (8,978,171)
--------- ------------- -------------
--------- ------------- -------------
</TABLE>
See accompanying note to financial statements.
F-13
<PAGE>
PAGING NETWORK DO BRASIL S.A.
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(AMOUNTS IN U.S. DOLLARS)
(UNAUDITED)
<TABLE>
<S> <C>
Operating activities
Net loss...................................................................... $(3,465,323)
Adjustments to reconcile net loss to net cash used by operating activities
Depreciation................................................................ 152,173
Accounts receivable......................................................... (68,075)
Refundable taxes............................................................ (50,162)
Pager inventories........................................................... (318,984)
Prepaid expenses............................................................ 220,641
Accounts payable............................................................ (2,092,836)
Accrued expenses............................................................ (129,164)
Payable to related parties.................................................. (1,854,492)
----------
Net cash used by operating activities........................................... (7,606,222)
Investing activities
Purchase of fixed assets...................................................... (2,386,629)
----------
Net cash used by Investing activities......................................... (2,386,629)
Financing activities
Proceeds of receivables from the sale of common and redeemable preferred
stock....................................................................... 850,661
----------
Net cash provided by financing activities..................................... 850,661
----------
Net decrease in cash.......................................................... (9,142,190)
Cash and cash equivalents at December 31, 1996................................ 12,444,689
----------
Cash and cash equivalents at March 31, 1997................................... $3,302,499
----------
----------
</TABLE>
See accompanying note to financial statements.
F-14
<PAGE>
PAGING NETWORK DO BRASIL S.A.
NOTE TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Paging
Network do Brasil S.A. (the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
for complete financial statements. In the opinion of management, all adjustments
(consisting only of normal recurring accruals) considered necessary for a fair
presentation have been included. The results of operations for the three month
period are not necessarily indicative of the results for the entire year.
From April 17, 1996 (inception) through December 31, 1996, the Company was
accounted for as a development stage company. Effective January 1, 1997, the
Company is no longer treated as a development stage company, as it commenced
earning revenues from operations in March 1997.
F-15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
None.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<C> <S>
3.1 --Bylaws of Paging Network do Brasil S.A. (English Translation).
4.1 --Indenture dated as of June 1, 1997 between Paging Network do Brasil S.A. and The
Chase Manhattan Bank, as Trustee (including exhibits).
4.2 --Form of Senior Note (included in Exhibit 4.1).
*5.1 --Opinion of Xavier, Bernardes, Braganca, Sociedade de Advogados, Brazilian counsel
to the Registrant, as to the legality of the Notes.
*5.2 --Opinion of Willkie Farr & Gallagher, U.S. counsel to the Registrant, as to the
legality of the Notes.
*8.1 --Opinion of Willkie Farr & Gallagher, U.S. counsel to the Registrant, as to certain
U.S. tax matters.
10.1 --Purchase Agreement dated as of May 30, 1997 among Paging Network do Brasil S.A.,
Paging Brazil Holding Co., LLC and the Initial Purchasers.
10.2 --Notes Registration Rights Agreement dated as of June 6, 1997 among Paging Network
do Brasil S.A. and the Initial Purchasers.
10.3 --Equity Registration Rights Agreement, dated as of June 6, 1997 among Paging
Network do Brasil S.A., Paging Brazil Holding Co., LLC, Warburg, Pincus Ventures,
L.P., Paging Network International N.V., IVP Paging (Cayman) L.P., Multiponto
Telecomunicacoes Ltda., TVA Sistema Televisao S.A., the Initial Purchasers and
Chase Mellon Shareholder Services.
10.4 --Escrow and Pledge Agreement, dated as of June 6, 1997 between Paging Network do
Brasil S.A.and The Chase Manhattan Bank.
10.5 --Shareholders Agreement, dated as of December 11, 1996 among Paging Network do
Brasil S.A., Warburg, Pincus Ventures, L.P., Paging Network International N.V.,
IVP Paging (Cayman) L.P., Multiponto Telecomunicacoes Ltda. and TVA Sistema
Televisao S.A.
10.6 --Shareholders Agreement Amendment No.1 and Waiver, dated as of March 10, 1997 among
Paging Network do Brasil S.A., Warburg, Pincus Ventures, L.P., Paging Network
International N.V., IVP Paging (Cayman) L.P., Multiponto Telecomunicacoes Ltda.
and TVA Sistema Televisao S.A.
10.7 --Securities Subscription Agreement dated as of December 11, 1996 among Paging
Network do Brasil S.A., Warburg, Pincus Ventures, L.P., Paging Network
International N.V., IVP Paging (Cayman) L.P., Multiponto Telecomunicacoes Ltda.
and TVA Sistema Televisao S.A.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
10.8 --Registration Rights Agreement dated as of December 11, 1996 among Paging Network
do Brasil S.A., Warburg, Pincus Ventures, L.P., Paging Network International N.V.,
IVP Paging (Cayman) L.P., Multiponto Telecomunicacoes Ltda., TVA Sistema Televisao
S.A., Thomas C. Trynin and Marco A. Fregenal.
10.9 --Technical Services Agreement dated as of December 11, 1996 between Paging Network
do Brasil S.A. and Paging Network, Inc.
10.10 --Operating Agreement and Other Covenants dated December 11, 1996 between Paging
Network do Brasil S.A. and Multiponto Telecomunicacoes Ltda.
10.11 --Agreement of Promise of Assignment and Transfer of Permissions dated December 11,
1996 between Paging Network do Brasil S.A. and Multiponto Telecomunicacoes Ltda.
10.12 --Operating Agreement and Other Covenants dated December 11, 1996 between Paging
Network do Brasil S.A. and TVA Sistema Televisao S.A.
10.13 --Agreement of Promise of Assignment and Transfer of Permissions dated December 11,
1996 between Paging Network do Brasil S.A. and TVA Sistema Televisao S.A.
10.14 --Operating Agreement and Other Covenants dated December 11, 1996 between Paging
Network do Brasil S.A. and San Francisco Comunicacoes Ltda.
10.15 --Agreement of Promise of Assignment and Transfer of Permissions dated December 11,
1996 between Paging Network do Brasil S.A and San Francisco Comunicacoes Ltda.
23.1 --Independent Auditors' Consent of Ernst & Young Auditores Independentes.
*23.2 --Consent of Xavier, Bernardes, Braganca, Sociedade de Advogados (included in
Exhibit 5.1).
*23.3 --Consent of Willkie Farr & Gallagher (included in Exhibit 5.2) legality of the
Notes.
25.1 --Statement of Eligibility and Qualification under Trust Indenture Act of 1939 of
The Chase Manhattan Bank, as Trustee on Form T-1 (bound separately).
99.1 --Authorization of the Central Bank of Brazil authorizing the issuance of the Notes
(including English translation).
*99.2 --Form of Letter of Transmittal.
*99.3 --Form of Notice of Guaranteed Delivery.
*99.4 --Form of Exchange Agent Agreement between Paging Network do Brasil S.A. and The
Chase Manhattan Bank.
</TABLE>
- ------------------------
* To be filed by amendment.
(b) Financial Statement Schedules:
None.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted
II-2
<PAGE>
by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
Registrant undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to the
reofferings by persons who may be deemed to be underwriters, in addition to the
information called for by the other Items of the applicable form.
The undersigned Registrant hereby undertakes that every prospectus: (i) that
is filed pursuant to the immediately preceding paragraph or (ii) that purports
to meet the requirements of Section 10(a)(3) of the Securities Act of 1933 and
is used in connection with an offering of securities subject to Rule 415, will
be filed as a part of an amendment to the registration statement and will not be
used until such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement or amendment thereto to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Sao
Paulo, the Federative Republic of Brazil, on this 23 day of June, 1997.
PAGING NETWORK DO BRASIL S.A.
By: /s/ THOMAS C. TRYNIN
-----------------------------------------
Name: Thomas C. Trynin
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on June 23, 1997.
SIGNATURE TITLE
/s/ THOMAS C. TRYNIN Chief Executive Officer
- ------------------------------ and Director
Thomas C. Trynin (Principal Executive
Officer)
/s/ WILSON OLIVIERI Chief Financial Officer
- ------------------------------ (Principal Financial
Wilson Olivieri Officer and
Principal Accounting
Officer)
/s/ MARIA REGINA MANGABEIRA Director
ALBERNAZ LYNCH
- ------------------------------
Maria Regina Mangabeira
Albernaz Lynch
/s/ HORACIO BERNARDES NETO Director
- ------------------------------
Horacio Bernardes Neto
/s/ RENATO ABUCHAM Director
- ------------------------------
Renato Abucham
/s/ HELENA DE ARAUJO LOPES Director
XAVIER
- ------------------------------
Helena de Araujo Lopes Xavier
II-4
<PAGE>
SIGNATURE OF AUTHORIZED UNITED STATES REPRESENTATIVE
Pursuant to the Securities Act of 1933, the undersigned certifies that it is
the duly authorized United States representative of Paging Network do Brasil
S.A. and has signed this Registration Statement or amendment thereto in the City
of New York, State of New York, on this 23 day of June, 1997.
PAGING BRAZIL HOLDING CO., LLC
Authorized U.S. Representative)
By: /s/ DAVID E. LIBOWITZ
------------------------------------------
Name: David E. Libowitz
Title: Manager
<PAGE>
BY-LAWS
OF
PAGING NETWORK DO BRASIL S.A.
CHAPTER I
NAME - HEAD OFFICE - DURATION AND PURPOSES
Article 1: PAGING NETWORK DO BRASIL S.A. (the "Company") is a corporation
governed by these by-laws and by the applicable legal provisions.
Article 2: The Company has its head office in the City of Sao Paulo, State of
Sao Paulo, at Rua Alexandre Dumas, 1.711, and is subject to the jurisdiction of
its Courts.
Sole Paragraph: The Company shall have a branch office in the city of Rio
de Janeiro, State of Rio de Janeiro, at Rua Visconde de Piraja, 608, Suite
306, Ipanema Blue Building, CEP 22410-002 and may open and close branches,
agencies and offices in Brazil or abroad, by decision of the Board of
Directors.
Article 3: The term of duration of the Company is undetermined.
Article 4: The purposes of the Company are:
a) the operation and marketing of wireless messaging services ("Servico
Especial de Radiochamada"), and any other related services;
b) to supply, operate, distribute, trade, lease, import and export
equipment for telecommunication services, especially wireless messaging
services;
c) the participation in other commercial or civil companies, especially
those which have as their purpose the operation of telecommunication
services, in general, within the limits permitted by law.
1
<PAGE>
CHAPTER II
CORPORATE CAPITAL AND SHARES
Article 5: The Company's capital stock consists of R$ 21.858.409,80 divided into
52,060 shares, all validly issued and subscribed, being 30,760 common nominative
shares without par value, of which 10,100 were fully paid in domestic currency,
and 21,300 preferred nominative shares without par value, of which 5,940 were
fully paid in domestic currency, being 20,660 shares of Common Stock and 14,860
shares of Preferred to Stock to be paid within five (5) days counted from the
date of the minutes that approved these By-laws, and the remaining 500 shall be
paid within (30) thirty days from the date thereof. The Company's capital stock
may be increased up to 113,000 shares, all nominative, without par value,
distributed as follows: (a) 50,000 shares of Common Stock without par value, and
(b) 63,000 shares of Preferred Stock without par value, and may be issued, up to
that limit, by decision of the Board of Directors.
Sole Paragraph: The shareholders shall have preemptive rights for the
subscription of new shares of any kind and class, proportionally to their
participation in the capital stock of the Company, and such preemptive
rights may be regulated by way of shareholders agreements.
Article 6: In the decisions of the General Shareholders' Meetings each common
share shall entitle its holder to one vote.
Sole Paragraph: The holders of Preferred Stock shall be entitled to vote
as a class and each share of Preferred Stock shall be entitled to one (1) vote
pursuant to Article 7 and Article 19, Sole Paragraph.
Article 7: Holders of Preferred Stock shall be entitled to voting rights limited
to the following matters:
(i) The purchase or other acquisition (in one or a series of related
transactions), by the Company or any of its Subsidiaries, of any
part of the property or assets of any person or entity, except in
the following cases: (A) the transfer of assets among the Company
and its Subsidiaries; (B) the purchase of inventory, materials
and equipment as set forth in the Operating Budget, as approved
by the Board of Directors (or for the nine month period following
the date of the General Shareholders' Meeting which approves
these By-laws ("Closing Date"), in the interim Operating Budget);
and (C) the making of permitted capital expenditures approved in
the Company's Operating Budget;
2
<PAGE>
(ii) The contracting for, the incurring, creation, assumption, or the
sufferance of any obligation by the Company or any of its
Subsidiaries in an amount in excess to the equivalent in domestic
currency of US$ 250,000.00, unless such obligation has been
contemplated in the Operating Budget (or for the nine month period
following the Closing Date, in the interim Operating Budget);
(iii) Any amendment of the By-laws of the Company or of its Subsidiaries,
including without limitation, any reduction of the cumulative and
fixed dividends payable in respect of the Preferred Stock;
(iv) The contracting for, the creation or assumption, the incurring by
or the sufferance by the Company or any of its Subsidiaries of
any obligation, contingent or otherwise, directly or indirectly
guaranteeing any Indebtedness or other obligation of another
person, except for the guaranty of permitted obligations of any
Subsidiary. Indebtedness as used herein shall mean all
obligations which in accordance with Generally Accepted
Accounting Principles - "GAAP" - are classified as liabilities
upon a balance sheet of such person;
(v) The creation, contracting or incurring by the Company or any of
its Subsidiaries of any liens upon or with respect to any
property or assets (real or personal, tangible or intangible) of
the Company or any of its Subsidiaries, whether now owned or
hereafter acquired, or the sale of any such property or assets
subject to an understanding or agreement, contingent or
otherwise, to repurchase such property or assets (including sales
of accounts receivable with recourse to the Company or any of its
Subsidiaries) or the assignment of any right to receive income,
except in case of:
(A) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation,
unemployment insurance and other types of social security
or to secure the performance of tenders, statutory
obligations, bids, leases, government contracts,
performances and return of money bonds and similar
obligations, but not any Lien in favor of a surety arising
in connection with an actual default under a construction
contract;
(B) Liens incidental to the normal conduct of the business of
the Company or any of its Subsidiaries or the ownership of
its property (including without limitation leases or
subleases granted to other persons, mechanics liens, minor
survey exceptions, title defects, minor encumbrances,
easements, reservations, rights of others for
rights-of-way, zoning or other restrictions as to the use
of real property), which are not created in connection with
the incurring of any indebtedness in excess of the amount
permitted in Article 7(vi), and which do not in the
aggregate materially interfere with the use of
3
<PAGE>
value of such property in the operation of the business of the
Company and its Subsidiaries taken as a whole;
(C) Liens of or resulting from any judgment rendered by a court of
competent jurisdiction, the appeal of which by the Company or
a Subsidiary is prosecuting in good faith, and for which the
Company shall have made reserves or other appropriate
provision, if any, in respect thereof in accordance with GAAP;
and
(D) Liens for taxes, assessments or other governmental charges
or levies, either not yet due and payable;
(vi) The contracting for, incurring, creation, assumption or
sufferance of any indebtness obligation by the Company or any of
its Subsidiaries in an amount in excess to the equivalent in
domestic currency of US$ 250,000.00, unless such obligation has
been contemplated in the Operating Budget (or for the nine month
period following the Closing Date, in the interim Operating
Budget), except accrued expenses and current trade accounts
payable or incurred in the ordinary course;
(vii) Any transaction or series of related transactions (including without
limitation the purchase, lease, sale or exchange of properties of
any kind or the rendering of any service) between the Company or any
of its Subsidiaries and any shareholder or any person or entity
directly or indirectly controlled by, controlling or under common
control with a shareholder, except pursuant to the reasonable
requirements of the Company's or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Company or such
Subsidiary than would be obtainable in a comparable arm's-length
transaction with third parties;
(viii) The engagement by the Company or any of its Subsidiaries in any
business other than that provided for in Article 4 above;
(ix) The issue by the Company or any of its Subsidiaries of any equity
interest or any options or subscription rights to purchase, or
securities convertible into, equity interests, except: within the
limits of the authorized capital, including 2,718 Shares of Common
Stock reserved for possible issuance to management of the Company
and its Subsidiaries, provide however, that the Company or any of
its Subsidiaries may (A) issue replacements of then outstanding
shares of capital stock, (B) declare stock splits, stock dividends
and similar issuances which do not decrease the percentage ownership
(on a fully diluted basis taking into account the exercise of all
permitted subscription rights) of the shareholders in the Common
Stock of the Company or the Company or any of its Subsidiaries in
any class of the capital stock of such Subsidiary, and (C) issue
capital stock to qualify Directors to the extent required by
applicable law;
4
<PAGE>
(x) The entering into any action for a composition with creditors, the
winding up, liquidation or dissolution of the Company or any of its
Subsidiaries or the entering into by them of any transaction of
merger or consolidation, or conveyance, sale, lease or other
disposition of all or substantially all of the assets of the Company
or of any of its Subsidiaries, whether in a single transaction or a
series of related transactions, except in the case of transfer of
assets among the Company and its Subsidiaries;
(xi) The authorization, declaration or payment of any dividends by the
Company or any of its Subsidiaries, except for the mandatory
dividend provided for in First Paragraph of Article 24, and the
preferred stock dividends provided for in Article 8.
Article 8: Holders of the Company's Preferred Stock shall be entitled to the
following rights:
a) Priority in the distribution of dividends;
b) The holders of Preferred Stock shall be entitled to receive, out the
funds legally available therefor, the following preferential fixed
dividends calculated on the capital value represented by such shares of
Preferred Stock:
(i) from the date of issuance to but not including the sixth anniversary
thereof, quarterly preferential fixed cumulative dividends on the
capital value represented by such shares of Preferred Stock, at the
rates set forth opposite the corresponding quarterly period
following such issuance shall be accumulated; on the sixth
anniversary of the issuance such accumulated dividends shall be
distributed and immediately reinvested in the Company by the holders
of Preferred Stock, with the issuance of corresponding additional
shares of Preferred Stock (the "PIK Preferred Stock"):
--------------------------------------
Quarter Dividend Rate
--------------------------------------
--------------------------------------
01 3.000%
--------------------------------------
02 3.090%
--------------------------------------
03 3.183%
--------------------------------------
04 3.278%
--------------------------------------
05 3.377%
--------------------------------------
06 3.478%
--------------------------------------
07 3.582%
--------------------------------------
08 3.690%
--------------------------------------
09 3.800%
--------------------------------------
10 3.914%
--------------------------------------
11 4.032%
--------------------------------------
5
<PAGE>
--------------------------------------
12 4.153%
--------------------------------------
13 4.277%
--------------------------------------
14 4.406%
--------------------------------------
15 4.538%
--------------------------------------
16 4.674%
--------------------------------------
17 4.814%
--------------------------------------
18 4.959%
--------------------------------------
19 5.107%
--------------------------------------
20 5.261%
--------------------------------------
21 6.321%
--------------------------------------
22 6.543%
--------------------------------------
23 6.772%
--------------------------------------
24 7.009%
--------------------------------------
(ii) from the sixth anniversary of to but not including the seventh
anniversary of issuance of the Preferred Stock (or in the case of
the PIK Preferred Stock from the date of issuance to but not
including the first anniversary thereof), quarterly preferential
fixed cash dividends on the capital value (including the amount of
all dividends reinvested in accordance to item b (i) above)
represented by such shares of Preferred Stock shall be paid at a
rate of 16% (sixteen per cent) per annum;
(iii) from the seventh anniversary of issuance to but not including the
eighth anniversary of issuance of the Preferred Stock (or in the
case of the PIK Preferred Stock from the first anniversary to but
not including the second anniversary thereof), quarterly
preferential fixed cash dividends on the capital value (including
the amount of all dividends reinvested in accordance to item b (i)
above) represented by such shares of Preferred Stock shall be paid
at a rate of 18% (eighteen per cent) per annum; and
(iv) from the eighth anniversary of issuance to but not including the
tenth anniversary of issuance of the Preferred Stock (or in the case
of the PIK Preferred Stock from the second anniversary to but not
including the third anniversary thereof), quarterly preferential
fixed cash dividends on the capital value (including the amount of
all dividends reinvested in accordance to item b (i) above)
represented by such shares of Preferred Stock shall be paid at a
rate of 20% (twenty per cent) per annum;
c) Priority in the reimbursement of the capital, including any
premium paid upon subscription of such shares, in the case of
liquidation, dissolution or winding up of the Company;
d) Participation, in equal conditions with the common stock, in the
distribution of shares arising from reevaluation of assets, incorporation
of monetary correction and capital reserves.
6
<PAGE>
Article 9: The Company's Preferred Stock shall be subject to mandatory
redemption on the tenth anniversary of the date of issuance of the preferred
shares, or to earlier redemption, by decision of the majority of the holders
thereof, upon the occurrence of any of the following events:
a) if the Company defaults in the performance of or compliance with any
term contained in the preferences granted to the Preferred Stock or
with any term or right granted to Preferred Stock pursuant to a
shareholders agreement and such default is not remedied within 30 days
after the earlier of: (i) a responsible Officer obtaining actual
knowledge of such default, and (ii) the Company receiving written
notice of such default from any holder of Preferred Stock ; or
b) if there is a material adverse change in the business, operations,
affairs, financial condition, assets or properties of the Company and
its Subsidiaries taken as a whole or otherwise, including, without
limitation, the loss of, or the failure to obtain, licenses necessary
for the normal conduct of business of the Company and its Subsidiaries;
or
c) if the Company (i) winds up, liquidates or dissolves its affairs or
enters into any transaction of merger or consolidation which results in
a change of control of the Company, or conveys, sells, leases or
otherwise disposes of all or substantially all of its assets, whether
in a single transaction or a series of related transactions or (ii)
makes an initial public offering of common stock in which the aggregate
net proceeds received by the Company exceed the equivalent in Brazilian
currency to US$ 30,000,000.00.
First Paragraph: In any case, the preferred shares shall be redeemed at a
price per share equal to their respective purchase price as reflected in
the Certificate of Registration of the investment issued by the Central
Bank of Brazil, but in any case at a price not less than their respective
purchase price adjusted in accordance with the variation of the General
Index of Market Prices -"IGPM", published by Fundacao Getulio Vargas, plus
an amount equal to any and all dividends accrued unpaid thereon as of the
date of such redemption.
Second Paragraph: All shares of Preferred Stock purchased or redeemed by
the Company shall be forthwith retired and canceled and shall not be
reissued, nor shall any other stock be issued in place thereof, but the
Company may, nevertheless, from time to time thereafter increase its
capital stock in the manner and to the extent permitted by law and by
these By-laws.
Article 10: The Company may issue multiple certificates representing the shares,
which, if issued, shall be signed by two (2) Officers or by one (1) Officer and
one (1) attorney, expressly authorized for this purpose.
7
<PAGE>
CHAPTER III
MANAGEMENT
Article 11: The management of the Company shall be incumbent upon the Board of
Directors ("Conselho de Administracao") and the Officers ("Diretoria"), as set
forth in these By-laws.
Article 12: The Board of Directors is composed of five (5) permanent members and
the same number of alternate members, resident in Brazil, which are
shareholders, elected by the Shareholder's General Meeting for a term of office
2 (two) years, with the right to be reelected.
First Paragraph: The Board of Directors shall hold an annual meeting for
the purpose of organization and the transaction of any business
immediately after the Annual Meeting of the Shareholders, provided a
quorum of Directors is present. Other ordinary meeting may be held at such
times as may be determined from time to time by resolution of the Board of
Directors.
Second Paragraph: Extraordinary meetings of the Board of Directors may
be called by the Chairman of the Board of Directors or by the
President.
Third Paragraph: Meeting's of the Board of Directors may be held at the
principal offices of the Company, or at such other place as shall be
stated in the notice of such meeting. Notice of any meeting of the Board
of Directors shall be given to each Director, addressed to him at his
residence or usual place of business, so as to arrive at least five (5)
days before the date on which the meeting is to be held. No notice of the
annual meeting of the Board of Directors shall be required if it is held
immediately after the Annual Meeting of the Shareholders and if a quorum
is present.
Fourth Paragraph: Any business may be transacted and any corporate action
may be taken at any ordinary or extraordinary meeting of the Board of
Directors at which a quorum shall be present, whether such business or
proposed action be stated in the notice of such meeting or not, unless
special notice of such business or proposed action shall be required by
statute. The Board of Directors shall keep minutes of all business
transacted and actions taken at such meetings in the appropriate books of
the Company.
Fifth Paragraph: A majority of the Board of Directors at any time in
office shall constitute a quorum, provided that at least two of the
Directors, or respective alternates, elected by the holders of Preferred
Stock are present at the meeting. At any meeting at which a quorum is
present, the vote of a majority of the members present shall be the act of
the Board of Directors, unless a greater number is specifically required
by law.
Sixth Paragraph: The Directors shall not receive any stated salary for
their services as Directors, but by resolution of the Board of Directors a
fixed fee and expenses of attendance may be allowed for attendance at each
meeting, subject to approval by the
8
<PAGE>
General Meeting. Nothing herein contained shall preclude any Director from
serving the Company in any other capacity, as an officer, agent or
otherwise and receiving compensation therefor, subject to limitations
imposed by applicable law.
Seventh Paragraph:The Board of Directors shall have a Chairman, selected
among its members.
Eighth Paragraph: Upon termination of the term, the members shall
remain in office until the installation of the substitutes.
Ninth Paragraph: In the event of absence or impediment of any of the
permanent members, such member shall be necessarily substituted by his
alternate member, who shall vote on behalf of the permanent member as if
such member was present at the meeting. In case of resignation or
permanent impediment of any of the members, a General Meeting shall be
called to elect a substitute, if such be deemed convenient or necessary.
Tenth Paragraph: Up to one third (1/3) of the members of the Board of
Directors may serve as Officers of the Company.
Article 13: It is incumbent upon the Board of Directors to:
(a) determine the general conduct of the business of the Company;
(b) appoint the President of the Company and the Chairman of the
Board of Directors among its members;
(c) elect and dismiss the Officers of the Company and establish
their duties and compensation within the limits established by the
Shareholders Meetings;
(d) control the Officers' conduct, examine, at any time, the Company's
books and papers, require information on the contracts, either signed
or to be signed, and any other acts;
(e) call Shareholders' General Meetings;
(f) discuss the Officers' reports and accounts;
(g) decide on the issuance of shares within the limits of the
authorized capital;
(h) approve the five-year Operating Budget of the Company and its
Subsidiaries, including any interim Operating Budget; and
(i) elect and dismiss the independent auditors and lawyers of the
Company.
9
<PAGE>
First Paragraph: All other corporate matters shall be brought to the
Shareholders General Meetings for appreciation and approval.
Article 14: The Company will have from 2 (two) to 4 (four) Officers,
shareholders or not, resident in Brazil, with duties established by the Board of
Directors, one being the President, one or more Vice-Presidents, a Secretary,
and a Treasurer.
First Paragraph: The President shall be the chief executive officer of the
Company, and shall have the general direction of the business, affairs and
property of the Company, and of its several officers, and shall have and
exercise all such powers and discharge such duties as usually pertain to
the office of President.
Second Paragraph: The Vice-Presidents, or any of them, shall, subject to
the direction of the shareholders, at the request of the President or in
his absence, or in case of his inability to perform his duties from any
cause, perform the duties of the President, and, when so acting, shall
have all the powers of, and be subject to all restrictions upon, the
President. The Vice-Presidents shall also perform such other duties as may
be assigned to them by the shareholders, and the shareholders may
determine the order of priority among them.
Third Paragraph: The Secretary shall perform such duties as are incident
to the office of Secretary, being responsible for the Company's corporate
books, or as may from time to time be assigned to him by the Board of
Directors or as are prescribed by these By-laws.
Fourth Paragraph: The Treasurer shall perform such duties and have powers
as are usually incident to the office of Treasurer, being responsible for
the financial management and accounting of the Company, and any others
which may be assigned to him by the Board of Directors.
Article 15: The Officers shall be elected annually by the Board of Directors.
Each such Officer shall hold office until his successor shall have been elected
and taken office. The taking of office of the Officers shall be made by signing
the pertinent entry in the Book of Minutes of the Officer's Meetings.
First Paragraph: Any Officer of the Company may be removed from
office, with or without cause, by the vote of the majority of the Board
of Directors.
Second Paragraph: A vacancy in any office shall be filled by the Board
of Directors.
Third Paragraph: The Officers are exempt from being bonded.
Fourth Paragraph The compensation of the Officers shall be fixed by the
Board of Directors within the parameters established by the Shareholders'
General Meeting.
10
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Article 16: The Company shall be represented by its Officers, whether in or out
of the Court, either actively or passively, before third parties, any public
body or federal, state or municipal authority, as well as quasi-governmental
agencies, mixed economy companies and quasi public corporations.
First Paragraph: The signature of the President alone, or of 2 (two)
Officers or of 1 (one) Officer and 1 (one) duly empowered attorney-in-fact
or of 2 (two) attorneys-in-fact, is needed to legally bind the Company.
Second Paragraph: Powers-of-attorney granted by the Company shall always
be granted by the President alone or by two (2) Officers and shall specify
the powers conferred to the grantees, and the terms of validity thereof,
which shall not exceed one (1) year, with the exception of those
powers-of-attorney granted for acting in Court, which may be granted for
an undetermined term.
Third Paragraph: The use of the Company's name for any kind of
guarantees or in any documents not related to the Company's business or
that may be considered as gratuitous acts, is expressly prohibited.
CHAPTER IV
COMMITTEES
Article 17: Committees, whose members need not be Directors, may be appointed by
the Board of Directors, which committees shall hold office for such a time and
have such powers and perform such duties as may from time to time be assigned to
them by the Board of Directors. Any member of such a committee may be removed at
any time, with or without cause, by the Board of Directors. Any vacancy in a
Committee occurring from any cause whatsoever may be filled by the Board of
Directors.
First Paragraph: Any member of a committee may resign at any time. Such
resignation shall be made in writing and shall take effect at the time
specified therein, or, if no time be specified, at the time of its receipt
by the President or Secretary. The acceptance of a resignation shall note
be necessary to make it effective, unless so specified therein.
Second Paragraph: A majority of the members of a committee shall
constitute a quorum, subject to the terms of these By-laws. The act of a
majority of the members of a committee present at any meeting at which a
quorum is present shall be the act of such committee. The members of a
committee shall act only as a committee, and the individual members
thereof shall not have powers as such.
11
<PAGE>
Third Paragraph: Each committee shall keep a record of its acts and
proceedings, and shall report the same to the Board of Directors when and
as required by the Board of Directors.
Fourth Paragraph: A committee may hold its meetings at the principal
office of the Company, or at any other place which a majority of the
committee may at any time agree upon. Each committee may make such rules
as it may deem expedient for the regulation and carrying on of its
meetings and proceedings. Unless otherwise ordered by the Executive
Committee, any notice of a meeting of such committee may be given by the
Secretary of the Company or by the Chairman of the committee and shall be
sufficiently given if mailed to each member at his residence or usual
place of business so as to arrive at least two (2) days before the day on
which the meeting is to be held, or if sent to him at such place by fax,
telegraph or cable, or delivered personally or by telephone not later than
twenty four (24) hours before the time at which the meeting is to be held.
Fifth Paragraph: Each member of any committee shall be entitled to
compensation only for the out-of-pocket expenses incurred by him as a
result of serving on such committee.
CHAPTER V
GENERAL SHAREHOLDERS' MEETINGS
Article 18: The shareholders of the Company, shall meet in the General
Shareholders' Meeting, ordinarily, every year within the four (4) months
following the closing of the fiscal year and, extraordinarily, whenever called
by a shareholder representing at least five percent (5%) of the voting stock,
whenever required in the corporate interest or in the events provided for by
law.
First Paragraph: The Meetings shall be installed with a minimum quorum
of shareholders representing at least the majority of the outstanding
voting capital of the Company.
Article 19: The General Shareholders' Meeting shall be called as provided for by
law and shall be chaired by the President of the Company or, in his absence, by
any shareholder present at the Meeting chosen by the majority of those present.
The President of the Meeting shall choose, among those present, a Secretary.
Sole Paragraph: Resolutions of General Shareholders' Meetings shall be
taken by the quorums and majorities provided by Brazilian law or otherwise
specified herein or in a shareholders' agreement, with the exception of
the decisions concerning the matters specified in Article 7 above that
shall in addition require the approval of shareholders
12
<PAGE>
representing more than fifty percent (50%) of the Company's total
outstanding Preferred Stock.
Article 20: Written notice of the time and place of any Shareholders' Meeting
whether ordinary or extraordinary, shall be given to each shareholder entitled
to vote, addressed to him at his address as the same appears upon the records of
the Company, and delivered by personal delivery or other means so as to arrive,
at least ten (10) days, but not more than sixty (60) days before the day of the
meeting and published as required by law. Notice of any adjourned meeting need
not be given accept by announcement at the meeting so adjourned unless otherwise
ordered in connection with such adjournment. Such further notice, if any, shall
be given as may be required by law.
CHAPTER VI
FISCAL BOARD
Article 21: The Company may have a Fiscal Board, which will function in a
non-permanent basis, the installation or dismissal of which shall be at the
discretion of the General Shareholders' Meeting, composed of a minimum of three
(3) and a maximum of five (5) permanent members and equal number of substitutes,
appointed and substituted by the General Shareholders' Meeting, with the
following attributions provided for by law:
a) To supervise the actions of the management and verify the
compliance with their legal and statutory rights;
b) To advise on the management's annual report;
c) To advise on the proposals of the management to be submitted to the
General Shareholders' Meeting, concerning the modification of the capital,
issuance of debentures or subscription bonuses, investment plans or
capital budget, distribution of dividends, transformation, merger, or
split;
d) To inform the management and, in the event the management does not take
the necessary measures to protect the Company's interests, the General
Shareholders' Meeting, about eventual mistakes, frauds or crimes
discovered by them and to propose useful measures to the Company;
e) To call the ordinary General Shareholders' Meeting, in the event the
management delays such calling for longer than one month, and to call the
Extraordinary General Shareholders' Meeting, whenever there are urgent or
extraordinary matters, including the matters they believe necessary to be
included in such Meeting's agenda.
13
<PAGE>
f) To analyze, at least quarterly, the balance sheet and other
financial statements prepared by the Company from time to time;
g) To examine the financial statements relating to the fiscal year
and advise on them;
h) To exercise such attributions, during the liquidation, subject to
the specific provisions thereon.
Sole Paragraph: The General Shareholders' Meeting which installs the
Fiscal Board shall determine its compensation.
CHAPTER VII
FISCAL YEAR
Article 22: The fiscal year shall begin on January 1st and shall close on
December 31st of each calendar year, except for the first fiscal year that shall
begin on the date of the organization of the Company and close on the following
December 31.
Article 23: At the end of each fiscal year, the Company's Officers shall cause
financial statements to be prepared, with observance of the legal provisions.
Article 24: The Officers shall present to the General Shareholders' Meeting,
along with the financial statements of the fiscal year, a proposal as to the
allocation of the net profits of the fiscal year. The General Shareholders'
Meeting, after receiving the advise of the Fiscal Board, if installed, shall
decide on the allocation of the net profits of the fiscal year, after the
deductions provided for by law are made.
First Paragraph: The holder of Common Stock shall receive a minimum
mandatory dividend of not less of 0.5% (one half of one percent) of the
annual net profits, adjusted in accordance with Article 202 of Federal Law
6404/76, but only after the closing of the fiscal year following the end
of the third fiscal year.
Second Paragraph: The Company may distribute intermediate dividends,
provided the legal provisions pertinent to this form of dividends are
complied with.
CHAPTER VIII
14
<PAGE>
LIQUIDATION
Article 25: The Company shall start liquidation in the cases required by law or
when authorized by the General Shareholders' Meeting which is competent to
determine the form of liquidation and to designate the liquidator.
Article 26: In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, then, before any distribution or
payment shall be made to the holders of the shares of Common Stock, the holders
of the shares of the Preferred Stock shall be entitled to be paid an amount per
share equal to the purchase price, as reflected in the Certificate of
Registration of the investment issued by the Central Bank of Brazil, but in any
case at a price not less than their respective purchase price adjusted in
accordance with the variation of the General Index of Market Prices -"IGPM",
published by Fundacao Getulio Vargas, plus an amount equal to any and all
dividends accrued and unpaid thereon as of the date of such distribution or
payment (the "Preferred Priority"). If, upon any liquidation, dissolution, or
winding up of the Company, the assets to be distributed to the holders of the
Preferred Stock shall be insufficient to permit the payment to such holders of
the full Preferred Priority, than all of the assets of Company shall be
distributed ratably to the holders of the Preferred Stock based on the aggregate
Preferred Priority for the shares of Preferred Stock held by each holder.
Article 27: If the above referred payment of the Preferred Priority shall have
been made in full to the holders of the Preferred Stock, the remaining assets
and funds of the Company, if any, shall be distributed among the holders of the
Common Stock according to their respective equity investment.
Article 28: The Company's shareholders may establish further rules applicable to
the liquidation, dissolution or winding up of the Company by means of the
Shareholders' Agreement.
15
<PAGE>
- --------------------------------------------------------------------------------
Paging Network Do Brasil S.A., as Issuer
and
The Chase Manhattan Bank, a banking corporation, as Trustee
====================
INDENTURE
Dated as of June 1, 1997
====================
US$125,000,000
13 1/2% Senior Notes due 2005, Series A
and
13 1/2% Senior Notes due 2005, Series B
----------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Reconciliation and tie between Trust Indenture Act of 1939, as amended,
and Indenture, dated as of June 1, 1997
- --------------------------------------------------------------------------------
Trust Indenture Indenture
Act Section Section
----------- -------
ss.310(a)(1) .......................................... 6.09
(a)(2) .......................................... 6.09
(a)(3) .......................................... Not Applicable
(a)(4) .......................................... Not Applicable
(b) .......................................... 6.08, 6.10
ss.311(a) .......................................... 6.13
(b) .......................................... 6.13
(c) .......................................... Not Applicable
ss.312(a) .......................................... 7.01
(b) .......................................... 7.02
(c) .......................................... 7.02
ss.313(a) .......................................... 7.03
(b) .......................................... 7.03
(c) .......................................... 7.03
(d) .......................................... 7.03
ss.314(a) .......................................... 7.04
(a)(4) .......................................... 10.11
(b) .......................................... Not Applicable
(c)(1) .......................................... 1.04, 4.04
(c)(2) .......................................... 1.04, 4.04
(c)(3) .......................................... Not Applicable
(d) .......................................... Not Applicable
(e) .......................................... 1.04
ss.315(a) .......................................... 6.01(a)
(b) .......................................... 6.02
(c) .......................................... 6.01(b)
(d) .......................................... 6.01(c)
(e) .......................................... 5.14
ss.316(a) (last sentence) .................................. 1.01
("Outstanding")
(a)(1)(A) .......................................... 5.12, 5.13
(a)(1)(B) .......................................... 5.13
(a)(2) .......................................... Not Applicable
(b) .......................................... 5.08
ss.317(a)(1) .......................................... 5.03
(a)(2) .......................................... 5.04
(b) .......................................... 10.03
ss.318(a) .......................................... 1.08
- ----------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF
GENERAL APPLICATION
Section 1.01 Definitions........................................... 1
Section 1.02 Other Definitions..................................... 33
Section 1.03 Rules of Construction................................. 33
Section 1.04 Form of Documents Delivered to Trustee................ 34
Section 1.05 Acts of Holders....................................... 36
Section 1.06 Notices, etc., to the Trustee and the Company......... 36
Section 1.07 Notice to Holders; Waiver............................. 37
Section 1.08 Conflict with Trust Indenture Act.................... 38
Section 1.09 Effect of Headings and Table of Contents............. 38
Section 1.10 Successors and Assigns................................ 38
Section 1.11 Severability Clause................................... 38
Section 1.12 Benefits of Indenture................................. 38
Section 1.13 Governing Law......................................... 39
Section 1.14 No Recourse Against Others............................ 39
Section 1.15 Independence of Covenants............................. 39
Section 1.16 Exhibits.............................................. 39
Section 1.17 Counterparts.......................................... 39
Section 1.18 Duplicate Originals................................... 40
Section 1.19 Agent for Service; Submission to Jurisdiction;
Waiver of Immunities............................... 40
Section 1.20 Currency of Account; Conversion of Currency;
Foreign Exchange Restrictions...................... 41
ARTICLE TWO
SECURITY AND GUARANTEE FORMS
Section 2.01 Forms Generally....................................... 44
Section 2.02 Form of Face of Securities............................ 45
Section 2.03 Form of Reverse of Security........................... 49
Section 2.04 Form of Trustee's Certificate of Authentication....... 74
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Section 2.05 Form of Legend on Restricted Securities............... 74
Section 2.06 Form of Legend for Global Securities.................. 76
ARTICLE THREE
THE SECURITIES
Section 3.01 Title and Terms....................................... 77
Section 3.02 Denominations......................................... 79
Section 3.03 Execution, Authentication, Delivery and Dating........ 79
Section 3.04 Temporary Securities.................................. 81
Section 3.05 Registration, Registration of Transfer and
Exchange........................................... 81
Section 3.06 Mutilated, Destroyed, Lost and Stolen Securities...... 84
Section 3.07 Payment of Interest; Interest Rights Preserved........ 85
Section 3.08 Paying Agents; Discharge of Payment Obligations;
Indemnity of Holders............................... 87
Section 3.09 Persons Deemed Owners................................. 88
Section 3.10 Cancellation.......................................... 88
Section 3.11 Computation of Interest............................... 88
Section 3.12 Legal Holidays........................................ 89
Section 3.13 CUSIP Number.......................................... 89
Section 3.14 Book-Entry Provisions for Global Security............. 89
Section 3.15 Special Transfer Provisions for Series A
Securities......................................... 92
ARTICLE FOUR
DEFEASANCE OR COVENANT DEFEASANCE
Section 4.01 Company's Option To Effect Defeasance or
Covenant Defeasance................................ 95
Section 4.02 Legal Defeasance and Discharge........................ 96
Section 4.03 Covenant Defeasance................................... 96
Section 4.04 Conditions to Legal Defeasance or Covenant
Defeasance......................................... 97
Section 4.05 Deposited Money and U.S. Government Obligations
To Be Held in Trust; Other Miscellaneous
Provisions......................................... 100
Section 4.06 Reinstatement......................................... 101
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ARTICLE FIVE
REMEDIES
Section 5.01 Events of Default..................................... 101
Section 5.02 Acceleration of Maturity; Rescission and
Annulment.......................................... 104
Section 5.03 Collection of Indebtedness and Suits for
Enforcement by Trustee............................. 106
Section 5.04 Trustee May File Proofs of Claims..................... 107
Section 5.05 Trustee May Enforce Claims Without Possession of
Securities......................................... 108
Section 5.06 Application of Money Collected........................ 108
Section 5.07 Limitation on Suits................................... 109
Section 5.08 Unconditional Right of Holders To Receive
Principal, Premium and Interest.................... 110
Section 5.09 Restoration of Rights and Remedies.................... 110
Section 5.10 Rights and Remedies Cumulative........................ 111
Section 5.11 Delay or Omission Not Waiver.......................... 111
Section 5.12 Control by Majority................................... 111
Section 5.13 Waiver of Past Defaults............................... 111
Section 5.14 Undertaking for Costs................................. 112
Section 5.15 Waiver of Stay, Extension or Usury Laws............... 112
ARTICLE SIX
THE TRUSTEE
Section 6.01 Certain Duties and Responsibilities................... 113
Section 6.02 Notice of Defaults.................................... 114
Section 6.03 Certain Rights of Trustee............................. 114
Section 6.04 Trustee Not Responsible for Recitals,
Dispositions of Securities or Application of
Proceeds Thereof................................... 116
Section 6.05 Trustee and Agents May Hold Securities;
Collections; Etc................................... 116
Section 6.06 Money Held in Trust................................... 116
Section 6.07 Compensation and Indemnification of Trustee and
Its Prior Claim.................................... 117
Section 6.08 Conflicting Interests................................. 117
Section 6.09 Corporate Trustee Required; Eligibility............... 118
Section 6.10 Resignation and Removal; Appointment of
Successor Trustee.................................. 118
Section 6.11 Acceptance of Appointment by Successor................ 120
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Page
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Section 6.12 Merger, Conversion, Amalgamation, Consolidation
or Succession to Business.......................... 121
Section 6.13 Preferential Collection of Claims Against Company..... 121
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND
COMPANY
Section 7.01 Preservation of Information; Company To Furnish
Trustee Names and Addresses of Holders............. 122
Section 7.02 Communications of Holders............................. 122
Section 7.03 Reports by Trustee.................................... 123
Section 7.04 Reports by Company.................................... 123
ARTICLE EIGHT
AMALGAMATION, CONSOLIDATION, MERGER, SALE
OF ASSETS, ETC.
Section 8.01 Company or Guarantor May Consolidate, etc., Only
on Certain Terms................................... 123
Section 8.02 Successor Substituted................................. 126
Section 8.03 Subsidiaries of Surviving Entity; Certain
Indebtedness and Liens............................. 127
ARTICLE NINE
SUPPLEMENTAL INDENTURES AND WAIVERS
Section 9.01 Supplemental Indentures, Agreements and Waivers
Without Consent of Holders......................... 127
Section 9.02 Supplemental Indentures, Agreements and Waivers
with Consent of Holders............................ 128
Section 9.03 Execution of Supplemental Indentures, Agreements
and Waivers........................................ 131
Section 9.04 Effect of Supplemental Indentures..................... 131
Section 9.05 Conformity with Trust Indenture Act................... 131
Section 9.06 Reference in Securities to Supplemental
Indentures......................................... 131
Section 9.07 Record Date........................................... 132
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Section 9.08 Revocation and Effect of Consents..................... 132
ARTICLE TEN
COVENANTS
Section 10.01 Payment of Principal, Premium and Interest............ 132
Section 10.02 Maintenance of Office or Agency....................... 133
Section 10.03 Money for Security Payments To Be Held in Trust....... 133
Section 10.04 Corporate Existence................................... 135
Section 10.05 Payment of Taxes and Other Claims..................... 135
Section 10.06 Maintenance of Properties............................. 136
Section 10.07 Insurance............................................. 136
Section 10.08 Payment of Additional Amounts......................... 136
Section 10.09 Provision of Financial Statements and Other
Information........................................ 139
Section 10.10 Limitation on Designations of Unrestricted
Subsidiaries....................................... 140
Section 10.11 Statement by Officers as to Default................... 142
Section 10.12 Limitation on Additional Indebtedness and
Preferred Stock of Restricted Subsidiaries......... 142
Section 10.13 Limitation on Restricted Payments..................... 143
Section 10.14 Limitation on Transactions with Affiliates............ 146
Section 10.15 Disposition of Proceeds of Asset Sales................ 147
Section 10.16 Change of Control Offer............................... 149
Section 10.17 Limitation on Liens Securing Certain Indebtedness..... 153
Section 10.18 Issuance of Guarantees by Material Restricted
Subsidiaries; Release of Guarantees................ 153
Section 10.19 Business of the Company; Restriction on
Transfers of Existing Business..................... 154
Section 10.20 Limitation on Dividends and Other Payment
Restrictions Affecting Restricted Subsidiaries..... 154
Section 10.21 Shareholder Commitments............................... 155
Section 10.22 Limitation on Status as Investment Company............ 155
-v-
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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 11.01 Redemption Generally.................................. 156
Section 11.02 Applicability of Article.............................. 156
Section 11.03 Election To Redeem; Notice to Trustee................. 156
Section 11.04 Selection by Trustee of Securities To Be Redeemed..... 157
Section 11.05 Notice of Redemption.................................. 157
Section 11.06 Deposit of Redemption Price........................... 159
Section 11.07 Securities Payable on Redemption Date................. 159
Section 11.08 Securities Redeemed or Purchased in Part.............. 159
ARTICLE TWELVE
COLLATERAL AND SECURITY
Section 12.01 Escrow Agreement...................................... 160
Section 12.02 Recording and Opinions................................ 161
Section 12.03 Release of Collateral................................. 162
Section 12.04 Certificates of the Company........................... 163
Section 12.05 Authorization of Actions To Be Taken by the
Trustee Under the Escrow Agreement................. 163
Section 12.06 Authorization of Receipt of Funds by the Trustee
Under the Escrow Agreement......................... 164
Section 12.07 Termination of Security Interest...................... 164
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE
Section 13.01 Satisfaction and Discharge of Indenture............... 164
Section 13.02 Application of Trust Money............................ 165
ARTICLE FOURTEEN
GUARANTEE OF SECURITIES
Section 14.01 Unconditional Guarantee............................... 166
Section 14.02 Execution and Delivery of Guarantee................... 168
Section 14.03 Additional Guarantors................................. 169
Section 14.04 Release of a Guarantor................................ 169
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Section 14.05 Waiver of Subrogation................................. 170
Section 14.06 Immediate Payment..................................... 171
Section 14.07 No Set-Off............................................ 171
Section 14.08 Obligations Absolute.................................. 171
Section 14.09 Obligations Continuing................................ 171
Section 14.10 Obligations Not Reduced............................... 172
Section 14.11 Obligations Reinstated................................ 172
Section 14.12 Obligations Not Affected.............................. 172
Section 14.13 Waiver................................................ 174
Section 14.14 No Obligation To Take Action Against Company.......... 174
Section 14.15 Dealing with the Company and Others................... 174
Section 14.16 Default and Enforcement............................... 175
Section 14.17 Amendment, Etc........................................ 175
Section 14.18 Acknowledgment........................................ 175
Section 14.19 Costs and Expenses.................................... 176
Section 14.20 No Merger or Waiver; Cumulative Remedies.............. 176
Section 14.21 Guarantee in Addition to Other Obligations............ 176
Section 14.22 Severability.......................................... 176
Section 14.23 Successors and Assigns................................ 177
TESTIMONIUM............................................................
SIGNATURES.............................................................
EXHIBIT A GUARANTEE
EXHIBIT B FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS TO NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT C FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS PURSUANT TO REGULATION S
EXHIBIT D FORM OF OPTION OF HOLDER TO ELECT PURCHASE
EXHIBIT E-1 SUBORDINATION PROVISIONS FOR DEEPLY SUBORDINATED
SHAREHOLDER INDEBTEDNESS
EXHIBIT E-2 FORM OF OPINION OF COUNSEL RELATING TO DEEPLY SUBORDINATED
SHAREHOLDER INDEBTEDNESS
-vii-
<PAGE>
INDENTURE, dated as of June 1, 1997, between Paging Network do
Brasil S.A., a sociedade anonima organized under the laws of the Federative
Republic of Brazil (the "Company"), as issuer, and The Chase Manhattan Bank, as
trustee (the "Trustee").
RECITALS
The Company has duly authorized the creation of an issue of 13 1/2%
Senior Notes due 2005, Series A (the "Series A Securities"), and an issue of 13
1/2% Senior Notes due 2005, Series B (the "Series B Securities," and together
with the Series A Securities, the "Securities"), of substantially the tenor and
amount hereinafter set forth, and to provide therefor the Company has duly
authorized the execution and delivery of this Indenture. (Each of the Series A
Securities and the Series B Securities shall sometimes be referred to
hereinafter as a "series.")
All things necessary have been done to make the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company the valid obligations of the Company and to make this
Indenture a valid agreement of each of the Company and the Trustee in accordance
with the terms hereof.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01 Definitions.
"Acquired Indebtedness" means Indebtedness of a person existing at
the time such person becomes a Restricted Subsidiary or assumed in connection
with an Asset Acquisition by such person and not incurred in connection with, or
in anticipation of, such person becoming a Restricted Subsidiary or such Asset
Acquisition.
<PAGE>
-2-
"Additional Amounts" shall have the meaning specified in Section
10.08 hereof.
"Additional Interest" shall have the meaning specified in the Notes
Registration Rights Agreement.
"Affiliate" of any specified person means any other person which,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified person.
"Agent Members" shall have the meaning specified in Section 3.14
hereof.
"Annualized Pro Forma Consolidated Operating Cash Flow" means
Consolidated Operating Cash Flow for the latest fiscal quarter for which
consolidated financial statements of the Company are available multiplied by
four. For purposes of calculating "Consolidated Operating Cash Flow" for any
fiscal quarter for purposes of this definition, (i) any Subsidiary of the
Company that is a Restricted Subsidiary on the date of the transaction giving
rise to the need to calculate "Annualized Pro Forma Consolidated Operating Cash
Flow" (the "Transaction Date") (or would become a Restricted Subsidiary in
connection with the transaction that requires determination of such amount)
shall be deemed to have been a Restricted Subsidiary at all times during such
fiscal quarter and (ii) any Subsidiary of the Company that is not a Restricted
Subsidiary on the Transaction Date (or would cease to be a Restricted Subsidiary
in connection with the transaction that requires the determination of such
amount) shall be deemed not to have been a Restricted Subsidiary at any time
during such fiscal quarter. In addition to and without limitation of the
foregoing, for purposes of this definition, "Consolidated Operating Cash Flow"
shall be calculated after giving effect on a pro forma basis for the applicable
fiscal quarter to, without duplication, any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of the Company's or one of the Restricted
Subsidiaries' (including any person who becomes a Restricted Subsidiary as a
result of the Asset Acquisition) incurring Acquired Indebtedness) occurring
during the period commencing on the first day of such fiscal quarter to and
including the Transaction Date (the "Reference Period"), as if such Asset Sale
or Asset Acquisition occurred on the first day of the Reference Period.
"Asset Acquisition" means (i) any capital contribution (by means of
transfers of cash or other property to others
<PAGE>
-3-
or payments for property or services for the account or use of others, or
otherwise) by the Company or any Restricted Subsidiary, or any acquisition or
purchase of Capital Stock of any other person by the Company or any Restricted
Subsidiary, in either case pursuant to which such person shall become a
Restricted Subsidiary or shall be merged with or into the Company or any
Restricted Subsidiary, or (ii) any acquisition by the Company or any Restricted
Subsidiary of the assets of any person which constitutes substantially all of an
operating unit or line of business of any person (provided that such business
shall be a Permitted Business) or which is otherwise outside of the ordinary
course of business.
"Asset Sale" means any direct or indirect sale, conveyance,
transfer, lease (that has the effect of a disposition and is not for security
purposes) or other disposition (that is not for security purposes) to any person
other than the Company or a Restricted Subsidiary, in one transaction or a
series of related transactions, of (i) any Capital Stock of any Restricted
Subsidiary, (ii) any license (or contractual rights to use any licenses) for the
provision of paging services or a related business held by the Company or any
Restricted Subsidiary (whether by sale of Capital Stock, assignment of
contractual rights or otherwise) other than the transfer of any such license to
a License Vehicle, (iii) any assets of the Company or any Restricted Subsidiary
which constitute substantially all of an operating unit or line of business of
the Company or any Restricted Subsidiary or (iv) any other property or asset of
the Company or any Restricted Subsidiary outside of the ordinary course of
business. For the purposes of this definition, the term "Asset Sale" shall not
include (i) any disposition of properties or assets of the Company or one or
more of the Restricted Subsidiaries that is governed under Article Eight, (ii)
sales of property or equipment that have become worn out, obsolete or damaged or
otherwise unsuitable for use in connection with the business of the Company or
any Restricted Subsidiary, as the case may be, (iii) any dividend paid to all
shareholders of the Company on a proportional basis made pursuant to and in
compliance with Section 10.13 or (iv) the disposition of Capital Stock of any
Unrestricted Subsidiary. For purposes of Section 10.15, the term "Asset Sale"
shall not include any sale, conveyance, transfer, lease or other disposition of
any property or asset, whether in one transaction or a series of related
transactions, either (x) involving assets with a Fair Market Value not in excess
of US$2,000,000 (or, to the extent non-U.S. dollar denominated, the U.S. Dollar
Equivalent of such amount) or (y) in connection with a Capitalized Lease
Obligation.
<PAGE>
-4-
"Average Life to Stated Maturity" means, with respect to any
Indebtedness or Preferred Stock, as at any date of determination, the quotient
obtained by dividing (i) the sum of the products of (a) the number of years from
such date to the date or dates of each successive scheduled principal or other
return of capital (including, without limitation, any sinking fund requirements)
of such Indebtedness or Preferred Stock multiplied by (b) the amount of each
such principal or other payment by (ii) the sum of all such principal or other
payments.
"Bankruptcy Law" means Decree Law No. 7661, of June 21, 1945, or any
other Brazilian law relating to, or Title 11, United States Code or any similar
United States federal or state law relating to, bankruptcy, insolvency,
receivership, winding-up, liquidation, reorganization, "concordata" or relief of
debtors or similar laws affecting creditors' rights generally, or the law of any
other jurisdiction relating to bankruptcy, insolvency, receivership, winding-up,
liquidation, reorganization, "concordata" or relief of debtors or similar laws
affecting creditors' rights generally, or any amendment to, succession to or
change in any such law.
"Bankruptcy Order" means any court order made in a proceeding
pursuant to or within the meaning of any Bankruptcy Law, containing an
adjudication of bankruptcy or insolvency, or providing for liquidation,
receivership, winding-up, dissolution, "concordata" or reorganization, or
appointing a Custodian of a debtor or of all or any substantial part of a
debtor's property, or providing for the staying, arrangement, adjustment or
composition of indebtedness or other relief of a debtor.
"Board" means the Board of Directors of the Company or any other
competent corporate body of a Guarantor, as the case may be.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary or General Counsel of the Company or a
Guarantor, as applicable, to have been duly adopted by its Board and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Brazilian Taxes" means any tax, duty, levy, impost, assessment or
other governmental charge of whatever nature (including penalties, interest and
any other liabilities related thereto) imposed by a taxing authority in Brazil.
<PAGE>
-5-
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York,
State of New York, Tokyo, Japan or Sao Paulo, Brazil are authorized or obligated
by law, regulation or executive order to close.
"Capital Stock" means, with respect to any person, any and all
capital stock or shares, interests, participations, rights in, or other
equivalents (however designated and whether voting or non-voting) (including
share appreciation rights) of, such person's capital stock or shares, whether
outstanding on the Issue Date or issued after the Issue Date, and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock or shares.
"Capitalized Lease Obligation" means any obligation to pay rent or
other amounts under a lease of (or other agreement conveying the right to use)
any property (whether real, personal or mixed, immovable or movable) that is
required to be classified and accounted for as a finance lease under U.S. GAAP
and, for the purpose of this Indenture, the amount of such obligation at any
date shall be the capitalized amount thereof at such date, determined in
accordance with U.S. GAAP.
"Cash Equivalents" means (i) any evidence of Indebtedness with a
maturity of 365 days or less issued or directly and fully guaranteed or insured
by the Federative Republic of Brazil or the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the Federative Republic of Brazil or the United States of America, as the case
may be, is pledged in support thereof or such Indebtedness constitutes a general
obligation of it); (ii) deposits, certificates of deposit or acceptances with a
maturity of 365 days or less of any institution which is a Brazilian regulated
bank or a member of the Federal Reserve System having combined capital and
surplus and undivided profits (or any similar capital concept) of not less than
US$50,000,000 (or, to the extent non-U.S. dollar denominated, the U.S. Dollar
Equivalent of such amount) at the time of deposit; (iii) commercial paper with a
maturity of 365 days or less issued by a corporation (other than an Affiliate of
the Company) incorporated or organized under the laws of the Federative Republic
of Brazil or any jurisdiction thereof or the United States or any state thereof
or the District of Columbia and rated at least "A-1" by S&P or "P-1" by Moody's
or their respective Brazilian affiliates; (iv) Investments with a maturity of
365 days or less of any person that is fully and unconditionally guaranteed by a
bank referred to in clause (ii); (v) repurchase agreements
<PAGE>
-6-
and reverse repurchase agreements relating to marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States Government, respectively, in each case maturing within one year from the
date of acquisition; and (vi) Investments in any money market fund in the United
States having assets in excess of US$500 million which is substantially invested
in the instruments referred to in clauses (i) through (v).
"Change of Control" is defined to mean the occurrence of any of the
following events: (a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than one or more of the
Permitted Holders, is or becomes the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, except that a person shall be deemed to
have "beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time), directly or indirectly, of more than 35% of the total Voting Stock of
the Company; provided, however, that the Permitted Holders "beneficially own"
(as so defined) in the aggregate a lower percentage of the Voting Stock than
such other person and do not have the right or ability by voting power, contract
or otherwise to elect or designate for election a majority of the Board of
Directors of the Company; or (b) the Company consolidates with, or merges with
or into, another person or sells, assigns, conveys, transfers, leases or
otherwise disposes of all or substantially all of its assets (determined on a
consolidated basis) to any person, or any person consolidates with, or merges
with or into, the Company, in any such event pursuant to a transaction in which
the outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than (A) any such transaction where
(i) the outstanding Voting Stock of the Company is converted into or exchanged
for (1) Voting Stock (other than Disqualified Stock) of the surviving or
transferee corporation and/or (2) cash, securities and other property in an
amount which could be paid by the Company as a Restricted Payment under this
Indenture and (ii) the "beneficial owners" of the Voting Stock of the Company
immediately prior to such transaction own, directly or indirectly, not less than
a majority of the Voting Stock of the surviving or transferee corporation
immediately after such transaction or (B) any such transaction as a result of
which Permitted Holders own 35% or more of the total Voting Stock of the
surviving or transferee corporation immediately after such transaction, unless
any person or group (other than Permitted Holders) beneficially owns in the
aggregate a
<PAGE>
-7-
greater percentage of the Voting Stock; or (c) during any consecutive two-year
period, individuals who at the beginning of such period constituted the Board of
the Company (together with any new directors whose election by the Board of the
Company or whose nomination for election by the stockholders of the Company was
approved by a vote of a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the Board of the Company then in office (other than by action of the
Permitted Holders pursuant to the Company's Shareholder Agreement or by-laws, in
each case, as in effect on the Issue Date, or otherwise); provided that, to the
extent that one or more regulatory approvals are required for one or more of the
events or circumstances described above to become effective under applicable
law, such events or circumstances shall be deemed to have occurred at the time
such approvals have been obtained and become effective under applicable law.
"Class A Preferred Stock" means shares of the Company's redeemable
preferred stock (acoes preferenciais), with no par value, outstanding on the
Issue Date and any identical shares thereof paid as dividends thereon.
"Class B Holding LLC Shares" means the Class B Member Interests of
Holding LLC.
"Class B Members" means the holders from time to time of Class B
Holding LLC Shares.
"Collateral" shall have the meaning ascribed to such term in
the Escrow Agreement.
"Commission" means the United States Securities and Exchange
Commission, as from time to time constituted, or if at any time after the
execution of this Indenture such Commission is not existing and performing the
applicable duties now assigned to it, then the body or bodies performing such
duties at such time.
"Common Stock" means any Capital Stock other than Preferred
Stock.
"Company" means the person named as the "Company" in the first
paragraph of this Indenture, until a successor person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor person.
<PAGE>
-8-
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by any one of its Chairman of the Board,
its Vice-Chairman, its Chief Executive Officer, its President or a Vice
President, and by any one of its Secretary or an Assistant Secretary or General
Counsel, and delivered to the Trustee.
"Consolidated Income Tax Expense" means, with respect to any period,
the provision for Brazilian corporation, local, foreign and other income taxes
of the Company and the Restricted Subsidiaries for such period as determined on
a consolidated basis in accordance with U.S. GAAP.
"Consolidated Interest Expense" means, with respect to any period,
without duplication, the sum of (i) the interest expense (including, without
limitation, any payments similar to those required under Section 10.08 of this
Indenture) of the Company and the Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with U.S. GAAP and shall, in
any event, include, without limitation, (a) any amortization of debt discount,
(b) the net cost under any Currency Agreements and Interest Rate Protection
Obligations (including any amortization of discounts), (c) the interest portion
of any deferred payment obligation, (d) all commissions, discounts and other
fees and charges owed with respect to letters of credit, bills of exchange,
promissory notes and bankers' acceptance financing and (e) all accrued interest,
plus (ii) all but the principal component of Capitalized Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such person during such period
as determined on a consolidated basis in accordance with U.S. GAAP, plus (iii)
all dividends declared, paid or accumulated on (a) Disqualified Capital Stock of
the Company or any Guarantor (unless paid to the Company) or (b) Preferred Stock
of any Restricted Subsidiary (unless paid to the Company).
"Consolidated Net Income" means, with respect to any period, the
consolidated net income of the Company and the Restricted Subsidiaries for such
period, adjusted, to the extent included in calculating such net income, by
excluding, without duplication, (i) all extraordinary gains or losses (on an
after-tax basis) of such person (net of fees and expenses relating to the
transaction giving rise thereto) for such period, (ii) except to the extent
actually received by the Company or any Restricted Subsidiary, income of the
Company and the Restricted Subsidiaries derived from or in respect of all
Investments in persons other than any Restricted Subsidiary, (iii) net income
(or loss) of any other person combined with
<PAGE>
-9-
such person in a "pooling of interests" basis attributable to any period prior
to the date of combination, (iv) any gain or loss, net of taxes realized by such
person, upon the termination of any employee pension benefit plan during such
period, (v) gains or losses in respect of any Asset Sales (on an after-tax basis
and net of fees and expenses relating to the transaction giving rise thereto)
during such period and (vi) the net income of any Restricted Subsidiary for such
period to the extent that the declaration of dividends or similar distributions
by that Restricted Subsidiary to the Company or any Restricted Subsidiary of
that income is not at the time permitted, directly or indirectly, by operation
of the terms of its charter or constituent documents or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulations
applicable to that Restricted Subsidiary; provided such amounts could not
otherwise be loaned to the Company on terms having a maturity that is later than
the 180th day following either the final maturity of the Securities or (ii) the
repayment in full of the Securities.
"Consolidated Operating Cash Flow" means, with respect to any
period, the Consolidated Net Income of the Company and the Restricted
Subsidiaries for such period (a) increased by (to the extent reducing
Consolidated Net Income) the sum of (i) the Consolidated Income Tax Expense of
the Company and the Restricted Subsidiaries for such period (other than Taxes
attributable to extraordinary, unusual or non-recurring gains or losses); (ii)
Consolidated Interest Expense for such period; (iii) depreciation of the Company
and the Restricted Subsidiaries for such period, determined on a consolidated
basis in accordance with U.S. GAAP; (iv) amortization of the Company and the
Restricted Subsidiaries for such period, including, without limitation and
without duplication, amortization of capitalized debt issuance costs for such
period, all determined on a consolidated basis in accordance with U.S. GAAP; and
(v) any other non-cash charges that were deducted in computing Consolidated Net
Income (excluding any non-cash charge which requires an accrual or reserve for
cash charges for any future period) of the Company and the Restricted
Subsidiaries for such period in accordance with U.S. GAAP and (b) decreased by
any non-cash gains to the extent increasing Consolidated Net Income.
"consolidation" means, with respect to the Company, the
consolidation of the accounts of the Restricted Subsidiaries with those of the
Company, all in accordance with U.S. GAAP; provided that "consolidation" will
not include consolidation of the accounts of any Unrestricted Subsidiary with
the
<PAGE>
-10-
accounts of the Company. The term "consolidated" has a correlative meaning to
the foregoing.
"control" means, with respect to any specified person, the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of Voting Stock, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at 450 West 33rd Street, 15th Floor, New York, New York 10001, Attention:
International Corporate Trust Administration.
"Credit Facility" means (i) any commercial term loan and/or
revolving credit facility (including any letter of credit subfacility) entered
into principally with commercial banks and/or other financial institutions
typically party to commercial loan agreements or (ii) any credit facility
entered into with any vendor or supplier (or any financial institution acting on
behalf of such a vendor or supplier) of equipment (including pagers) for the
purpose of financing the acquisition of such equipment by the Company or any
Restricted Subsidiary.
"Cumulative Adjusted Available Cash Flow" means, as at any date of
determination, the positive cumulative Consolidated Operating Cash Flow realized
during the period commencing on the Issue Date and ending on the last day of the
most recent fiscal quarter immediately preceding the date of determination for
which consolidated financial information of the Company is available or required
to be available under this Indenture or, if such cumulative Consolidated
Operating Cash Flow for such period is negative, the negative amount by which
cumulative Consolidated Operating Cash Flow is less than zero.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect the
Company or any of the Restricted Subsidiaries against fluctuations in currency
values.
"Custodian" means any receiver, interim receiver, receiver and
manager, receiver-manager, trustee, assignee, liquidator, sequestrator,
"sindico," "comissario" or similar official under any Bankruptcy Law or any
other person with like
<PAGE>
-11-
powers whether appointed judicially or out of court and whether pursuant to an
interim or final appointment.
"CVM" means the Comissao de Valores Mobiliarios, the equivalent of
the Commission in Brazil.
"Debt Securities" means any debt securities (including any guarantee
of such securities) issued by the Company and/or any Guarantor, whether in a
public offering or a private placement; it being understood that the term "Debt
Securities" shall not include (i) any borrowings under any Credit Facility or
(ii) any commercial bank borrowings or similar borrowings, recourse transfers of
financial assets, capital leases or other types of borrowings issued in a manner
not customarily viewed as a "securities offering."
"Deeply Subordinated Shareholder Indebtedness" means any
Indebtedness of the Company (but not of any Subsidiary of the Company) for money
borrowed from and held by either (x) a Permitted Holder or (y) another person
whose obligations have been guaranteed by a Permitted Holder, provided such
Indebtedness of the Company (i) has been expressly subordinated in right of
payment, and (ii) provides for no payments of interest or principal prior to the
end of the sixth month after the earlier of (x) the final maturity of the
Securities or (y) the repayment in full of the Securities; provided, further,
that the terms of the subordination agreement are in the form annexed to this
Indenture and the Company receives one or more Opinions of Counsel as to the
validity and enforceability of such subordination agreement.
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Depository" means, with respect to the Securities issued in the
form of one or more Global Securities, The Depository Trust Company or another
person designated as Depository by the Company, which must be a clearing agency
registered under the Exchange Act.
"Designation" shall have the meaning specified in Section 10.10
hereof.
"Designation Amount" has the meaning set forth under Section 10.10.
"Disinterested Director" means, with respect to any transaction or
series of transactions, a member of the Board of
<PAGE>
-12-
the Company other than a director who has any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions or is an Affiliate, beneficial holder of 10% or more of any class
of Capital Stock or officer, director or employee of any person who has any
direct or indirect financial interest in or with respect to such transaction or
series of transactions.
"Disqualified Capital Stock" means, with respect to any person, any
Capital Stock (other than the Class A Preferred Stock as in effect on the Issue
Date) which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable, except to the extent exchangeable
at the option of such person subject to the terms of any debt instrument to
which such person is a party), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is exchangeable for Indebtedness (other than at the option of such person), or
is redeemable at the option of the holder thereof, in whole or in part, in any
such case on or prior to the earlier of (x) the final maturity date of the
Securities or (y) the repayment in full of the Securities.
"Eligible Institution" means a United States commercial banking
institution that has combined capital and surplus of not less than US$500
million or its equivalent in foreign currency, whose debt is rated "A-3" or
higher or "A-" or higher according to Moody's or S&P (or such similar equivalent
rating by at least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act)) respectively, at the time as
of which any investment or rollover therein is made.
"Escrow Account" means an escrow account established under the
Escrow Agreement for the deposit of a portion of the net proceeds from the sale
of the Securities (the "Initial Escrow Amount"), and the proceeds from the
investment thereof.
"Escrow Agent" means The Chase Manhattan Bank, as Escrow Agent
pursuant to the Escrow Agreement until a successor escrow agent replaces it in
accordance with the provisions of the Escrow Agreement and thereafter means such
successor.
"Escrow Agreement" means the Escrow Agreement dated as of June 6,
1997, among the Company, the Escrow Agent and the Trustee, in substantially the
form set forth as Exhibit E hereto, as amended, modified or supplemented.
<PAGE>
-13-
"Event of Default" shall have the meaning specified in Section 5.01
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Offer" means any exchange pursuant to the Registration
Rights Agreement of Series A Securities for a like principal amount of Series B
Securities.
"Excluded Holder" shall have the meaning specified in Section 10.08
hereof.
"Expansion Markets" means all markets in Brazil other than Rio de
Janeiro and Sao Paulo.
"Fair Market Value" means, with respect to any asset or property,
the price that could be negotiated in an arm's-length free market transaction,
for cash, between a willing seller and a willing buyer, neither of whom is under
pressure or compulsion to complete the transaction. Unless otherwise specified
in this Indenture, Fair Market Value shall be determined by the Board of the
Company acting in good faith and shall be evidenced by a Board Resolution of the
Company delivered to the Trustee; provided that, for purposes of Section 10.15,
Section 10.14 and clause (b) of Section 10.10, in the case of any transaction or
series of related transactions which involve aggregate consideration of more
than US$5,000,000 (or, to the extent non-U.S. dollar denominated, the U.S.
Dollar Equivalent of such amount), Fair Market Value shall also be determined by
an Independent Financial Advisor.
"Fiscal Year" shall mean the fiscal year of the Company, which ends
on December 31 of each year.
"Global Security" shall have the meaning set forth in Section 3.01
hereof.
"guarantee" means, as applied to any obligation, (i) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of any part or
all of such obligation and (ii) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
<PAGE>
-14-
"Guarantee" has the meaning set forth under Section 10.18.
"Guaranteed Obligations" means the principal of, premium, if any,
interest on, and Additional Amounts, if any, and all other amounts owing by the
Company with respect to (including its obligations to the Trustee under Section
6.07 of this Indenture), the Securities which may from time to time be issued
and outstanding under this Indenture and all other indebtedness, liabilities and
obligations of the Company at any time and from time to time existing or arising
under this Indenture.
"Guaranteed Parties" means all the Persons who are now or who
hereafter become Holders and the Trustee under this Indenture.
"Guarantor" has the meaning set forth under Section 10.18.
"Holder" or "Securityholder" means a person in whose name a Security
is registered in the Security Register.
"Holding LLC" means Paging Brazil Holdings Co., LLC, a Delaware
limited liability company.
"Indebtedness" means, with respect to any person, without
duplication, (i) any liability, contingent or otherwise, of such person (A) for
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such person or only to a portion thereof), whether as a cash advance,
bill, overdraft or money market facility loan, or (B) evidenced by a note,
debenture or similar instrument or letters of credit (including a purchase money
obligation) or by any book-entry mechanism or (C) for the payment of money
relating to a Capitalized Lease Obligation or other obligation relating to the
deferred purchase price of property or (D) in respect of an Interest Rate
Protection Obligation or any foreign exchange contract, currency swap agreement
or other similar agreement; (ii) any liability of others of the kind described
in the preceding clause (i) which the person has guaranteed or which is
otherwise its legal liability; (iii) any obligation secured by a Lien (other
than a Lien on Indebtedness or Capital Stock of an Unrestricted Subsidiary which
represents the sole recourse of the secured party to the property or assets of
such person for any default in respect of the secured obligation) to which the
property or assets of such person are subject, whether or not the obligations
secured thereby shall have been
<PAGE>
-15-
assumed by or shall otherwise be such person's legal liability; and (iv) the
maximum repurchase or redemption price of any Disqualified Stock of such person
not held by the Company or a Guarantor. In no event shall "Indebtedness" include
trade payables incurred in the ordinary course of business (or letters of credit
issued in respect thereof) or guarantees in the ordinary course of business in
respect of real property leases relating to housing for executives of the
Company or any of its Subsidiaries. For purposes of Sections 10.12 and 10.13,
and the definition of "Events of Default," in determining the principal amount
of any Indebtedness (l) to be incurred by the Company or a Restricted Subsidiary
or which is outstanding at any date, (x) the principal amount of any
Indebtedness which provides that an amount less than the principal amount
thereof shall be due upon any declaration of acceleration thereof shall be the
accreted value thereof at the date of determination, unless the Company elects,
for the purposes of Sections 10.12 and 10.13, to incur the extended principal
amount or final accreted value thereof upon the issuance as Indebtedness
permitted under such covenants, and (y) effect shall be given to the impact of
any Currency Agreements with respect to such Indebtedness and (2) outstanding at
any time under any Currency Agreement of the Company or any Restricted
Subsidiary shall be the net payment obligation under such Currency Agreement of
such person at such time. Notwithstanding the foregoing, interest, fees and
other expenses on Indebtedness shall not be deemed to be Indebtedness if such
interest, fees or other expenses are payable on a current basis no less
frequently than semi-annually and are paid when due or within any applicable
grace period. For the purposes of this definition, the amount of Indebtedness
represented by any guarantee under which recourse is limited to a particular
asset or assets subject to a Lien in favor of the guaranteed party shall be
deemed to be the lower of (x) an amount equal to the amount of the guaranteed
obligation and (y) the Fair Market Value of such asset or assets at such time.
"Indenture" means this instrument as originally executed (including
all exhibits and schedules hereto) and as it may from time to time be
supplemented or amended by one or more indentures supplemental hereto entered
into pursuant to the applicable provisions hereof.
"Indenture Obligations" means the obligations of the Company and any
other obligor under this Indenture or under the Securities, including each
Guarantor, to pay principal of, premium, if any, and interest on the Securities
(and any Additional Amounts thereon) when due and payable, whether at maturity,
by acceleration, call for redemption or repurchase or oth-
<PAGE>
-16-
erwise, and all other amounts due or to become due under or in connection with
this Indenture, the Securities or the Guarantees and the performance of all
other obligations to the Trustee (including, but not limited to, payment of all
amounts due the Trustee under Section 6.07) and the Holders of the Securities
under this Indenture, the Securities and the Guarantees, according to the terms
thereof.
"Independent Financial Advisor" means a Brazilian or United States
investment or merchant banking firm or public accounting firm of national
standing in the Federative Republic of Brazil or the United States (i) which
does not, and whose directors and executive officers and Affiliates do not, have
an investment in the Company or any of its Affiliates and (ii) which, in the
judgment of the Board of the Company is otherwise independent with respect to
the Company and its Affiliates and qualified to perform the task for which it is
to be engaged. A trustee or nominee for the true parties in interest shall not
be excluded from the definition of "Independent Financial Advisor" solely as a
result of such trustee or nominee status.
"Initial Purchasers" means Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Goldman, Sachs & Co. and Bear, Stearns & Co. Inc.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"interest," when used with respect to any Security, means the amount
of all interest accruing on such Security, including all Additional Interest
payable on the Securities pursuant to the Notes Registration Rights Agreement
and all interest accruing subsequent to the occurrence of any events specified
in Sections 5.01(i), (j) and (k) or which would have accrued but for any such
event, whether or not such claims are allowable under applicable law.
"Interest Payment Date" means, when used with respect to any
Security, the Stated Maturity of an installment of interest on such Security, as
set forth in such Security.
"Interest Rate Protection Obligations" means the obligations of any
person pursuant to any arrangement with any other person whereby, directly or
indirectly, such person is entitled to receive from time to time periodic
payments calculated by applying either a floating or a fixed rate of interest
<PAGE>
-17-
on a stated notional amount in exchange for periodic payments made by such
person calculated by applying a fixed or a floating rate of interest on the same
notional amount and shall include without limitation, interest rate swaps, caps,
floors, collars, forward interest rate agreements and similar agreements.
"Investment" means, with respect to any person, any advance, loan,
account receivable (other than an account receivable or prepaid expense,
including but not limited to trade credit, arising in the ordinary course of
business), or other extension of credit (including, without limitation, by means
of any guarantee) or any capital contribution to (by means of transfers of
property to others, payments for property or services for the account or use of
others, or otherwise), or any purchase of any shares, stocks, bonds, notes,
debentures or other securities of, any other person. In addition, any foreign
exchange contract, currency swap agreement or other similar agreement made or
entered into by any person shall constitute an Investment by such person.
Notwithstanding the foregoing, in no event shall any issuance of Capital Stock
(other than Disqualified Stock) of the Company in exchange for Capital Stock,
property or assets of another person constitute an Investment by the Company in
such other person.
"Issue Date" means the original date of issuance of the Securities.
"Licenseholders" means TVA Sistema de Telivisao S.A.,
IVP-International Venture Partners, Inc. and San Francisco Telecomunicacoes
Ltda.
"License Vehicle" means any sociedade anonima or companhia limitada
organized under Brazilian law for the sole purpose of holding paging licenses
granted by the Brazilian Ministry of Communications for the exclusive and
unrestricted use and exploitation of such licenses by the Company or any
Restricted Subsidiary pursuant to an operating or similar agreement between such
License Vehicle and the Company or such Restricted Subsidiary the terms of which
shall not be materially less advantageous to the Company or such Restricted
Subsidiary than the Paging License Operating Agreements in effect on the Issue
Date provided that a License Vehicle shall not at any time have any liabilities
(contingent or otherwise) except such nominal amounts as may arise in connection
with its organization and administration, which amounts shall be promptly
discharged, and such governmental fees and charges as may arise, which amounts
shall be promptly discharged.
<PAGE>
-18-
"Lien" means any mortgage, charge, pledge, lien (statutory or
other), security interest, hypothecation, assignment for security, claim, or
preference or priority or other encumbrance upon or with respect to any property
of any kind. A person shall be deemed to own subject to a Lien any property
which such person has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement.
"LLC Agreement" means the Limited Liability Company Agreement, dated
and effective as of June 6, 1997, providing for the organization of Paging
Brazil Holding Co., LLC under the Delaware Limited Liability Company Act and any
amendment or modification thereof.
"Material Restricted Subsidiary" means any Restricted Subsidiary of
the Company which, at any date of determination, (A) would have been a
"Significant Subsidiary" under the definition of such term in Rule 1-02 of
Regulation S-X issued under the Securities Act, as in effect on the Issue Date,
(but substituting "5 percent" for each occurrence of "10 percent" in such
definition for all purposes other than of Section 5.01 or (B) contributed 5%
(or, for purposes of Section 5.01, 10%) or more to Consolidated Operating Cash
Flow of the Company on a pro forma basis in the immediately preceding fiscal
quarter or (C) is an obligor under any Indebtedness (other than to the Company
or a Restricted Subsidiary) in an aggregate principal amount equal to or
exceeding US$2,000,000 (or, to the extent non-U.S. dollar denominated, the U.S.
Dollar Equivalent thereof).
"Maturity" means, with respect to any Security, the date on which
any principal of such Security becomes due and payable as therein or herein
provided, whether at the Stated Maturity with respect to such principal or by
declaration of acceleration, call for redemption or purchase or otherwise.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or Cash Equivalents (including payments in
respect of deferred payment obligations when received in the form of cash or
Cash Equivalents and cash received in connection with the concurrent sale or
other disposition of other non-cash consideration upon consummation of any such
Asset Sale) net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of le-
<PAGE>
-19-
gal counsel and investment bankers) related to such Asset Sale, (ii) provisions
for all Taxes payable as a result of such Asset Sale, (iii) amounts required to
be paid to any person (other than the Company or any Restricted Subsidiary)
owning a beneficial interest in or having a Lien on the assets subject to the
Asset Sale, (iv) other amounts required to be treated as Net Cash Proceeds
pursuant to Section 10.15, and (v) appropriate amounts to be provided by the
Company or any Restricted Subsidiary, as the case may be, as a reserve required
in accordance with U.S. GAAP against any liabilities associated with such Asset
Sale and retained by the Company or any Restricted Subsidiary, as the case may
be, after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities under any indemnification
obligations associated with such Asset Sale, all as reflected in an Officers'
Certificate of the Company delivered to the Trustee.
"Non-U.S. person" means a person who is not a U.S. person, as
defined in Regulation S.
"Notes Registration Rights Agreement" means the Notes Registration
Rights Agreement, dated as of June 6, 1997 by and between the Company and the
Initial Purchasers, as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the terms thereof.
"Offering Memorandum" means the Offering Memorandum dated May 30,
1997 pursuant to which the Series A Securities were offered, and any supplement
thereto.
"Officers' Certificate" means a certificate signed by the Chairman
of the Board, Vice Chairman, the Chief Executive Officer, the Chief Financial
Officer, the President or a Vice President, and by the Secretary or an Assistant
Secretary, of the Company or any Guarantor, as the case may be, and delivered to
the Trustee.
"Offshore Global Security" shall have the meaning set forth in
Section 3.01 hereof.
"Offshore Physical Security" shall have the meaning set forth
in Section 3.01 hereof.
"Opinion of Counsel" means a written opinion of counsel who shall be
reasonably acceptable to the Trustee.
<PAGE>
-20-
"Outstanding" means, as of the date of determination, all Securities
theretofore authenticated and delivered under this Indenture, except:
(i) Securities theretofore cancelled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Securities, or portions thereof, for whose payment or
redemption money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company or any
Guarantor or any Affiliate thereof) in trust for the Holders of such
Securities; provided, however, that if such Securities are to be redeemed,
notice of such redemption has been duly and irrevocably given pursuant to
this Indenture or provision therefor satisfactory to the Trustee has been
made;
(iii) Securities with respect to which the Company has effected
defeasance or covenant defeasance as provided in Article Four, to the
extent provided in Sections 4.02 and 4.03 ; and
(iv) Securities in exchange for or in lieu of which other Securities
have been authenticated and delivered pursuant to this Indenture, other
than any such Securities in respect of which there shall have been
presented to the Trustee proof satisfactory to it that such Securities are
held by a bona fide purchaser in whose hands the Securities are valid
obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Securities owned
by the Company, any Guarantor or any other obligor upon the Securities or any
Affiliate of the Company, any Guarantor or such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company, any
Guarantor or any other obligor upon the Securities or any Affiliate of the
Company, any Guarantor or such other obligor.
<PAGE>
-21-
"Pager Acquisition Financing" means one or more facilities entered
into with any vendor or supplier of pagers (or any financial institution
financing purchases from such vendor or supplier) in order to finance the
acquisition of pagers from such vendor or supplier.
"Paging License Operating Agreements" means the Operating Agreement
and Other Covenants between the Company and each of the Licenseholders, dated
December 11, 1996, as the same may be amended, modified or supplemented from
time to time; provided, that such amendment, modification or supplement shall
not be adverse to the Company or the Holders.
"Paging License Transfer Agreements" means the Agreements of Promise
of Assignment and Transfer of Permissions between the Company and each of the
Licenseholders dated December 11, 1996, as the same may be amended, modified or
supplemented from time to time; provided, that such amendment, modification or
supplement shall not be adverse to the Company or the Holders.
"Pari Passu Debt Securities" means any Debt Securities of the
Company or any Guarantor which rank pari passu in right of payment with the
Securities or the Guarantees, as applicable.
"Paying Agent" means any person authorized by the Company to pay the
principal, premium, if any, or interest on any Securities on behalf of the
Company. The Company may so authorize a principal Paying Agent and one or more
co-Paying Agents.
"Permitted Business" means (i) the delivery or distribution of
wireless communications, paging and messaging services and equipment in the
Federative Republic of Brazil and (ii) any business or activity reasonably
related thereto, including, without limitation, the resale of extended paging
services outside of the Federative Republic of Brazil to the Brazilian customers
of the Company or the Restricted Subsidiaries and any other material business
conducted by the Company or any Restricted Subsidiary on the Issue Date, and
(iii) the acquisition, holding or exploitation of any license relating to the
delivery of the services referred to in clauses (i) and (ii) of this definition.
"Permitted Holders" means (i) Warburg Pincus Ventures, L.P.,
(ii) Paging Network International N.V., (iii) IVP-International Venture
Partners, Inc., (iv) Multiponto Telecomu-
<PAGE>
-22-
nicacoes Ltda. and (v) Abril S.A., or any of their respective controlled
Affiliates.
"Permitted Indebtedness" means the Indebtedness or Preferred Stock
set forth in the following clauses (each of which shall be given independent
effect):
(a) Indebtedness under the Securities, the Guarantees and this
Indenture and related rights of contribution and subrogation among the
Company and the Guarantors;
(b) Indebtedness of the Company outstanding on the Issue Date;
(c) Indebtedness of the Company and/or any Guarantor to the extent
incurred to finance the construction of paging infrastructure, the
purchase of equipment (including pagers) for use in and the installation
and construction costs related to the construction of paging
infrastructure in the Expansion Markets, or to support the operations or
working capital related to the Expansion Markets; provided the aggregate
principal amount of Indebtedness incurred under this clause (c) shall not
exceed at any time outstanding the following amount (or, to the extent
non-U.S. dollar denominated, the U.S. Dollar Equivalent of such amount):
the product of (x) US$100 and (y) the lesser of (1) the aggregate number
of subscribers of the Company and the Restricted Subsidiaries (whether or
not such subscribers are in the Expansion Markets) and (2) US$250,000;
provided that the amount permitted to be incurred pursuant to this clause
(c) shall be increased by an amount equal to any unutilized amount of
Indebtedness permitted to be incurred pursuant to clause (d) of this
definition;
(d) Indebtedness of the Company and/or any Guarantor in an amount
not to exceed at any time outstanding US$25,000,000 minus any amount added
to the amount of Indebtedness permitted to be incurred pursuant to clause
(c) of this definition under the proviso to such clause (c) (or to the
extent non-U.S. dollar denominated, the U.S. Dollar Equivalent of such
amount); provided that the aggregate amount of Indebtedness incurred from
Permitted Holders or their Affiliates under this clause (d) that is not in
the form of Deeply Subordinated Shareholder Indebtedness (x) shall not
exceed at any time outstanding US$10,000,000 (or, to the extent non-U.S.
dollar denominated, the U.S. Dollar Equivalent thereof) and (y) must be
<PAGE>
-23-
for working capital purposes of the Company and the Guarantors;
(e) Indebtedness of the Company and/or any Guarantor in an amount
not to exceed the product of two times the amount of Total Incremental
Invested Equity Capital, determined at the time of incurrence of such
Indebtedness;
(f) Indebtedness or Preferred Stock of any Restricted Subsidiary
owed or issued to and held by the Company or a Restricted Subsidiary and
Indebtedness of the Company owed to and held by any Restricted Subsidiary;
provided that a new incurrence of Indebtedness or issuance of Preferred
Stock shall be deemed to have occurred upon (x) any sale or other
disposition of any Indebtedness of the Company or a Restricted Subsidiary
referred to in this clause (f) to any person other than the Company or a
Restricted Subsidiary or (y) any sale or other disposition of Capital
Stock of a Restricted Subsidiary, or Designation of a Restricted
Subsidiary as an Unrestricted Subsidiary, which holds Indebtedness of the
Company or Indebtedness or Preferred Stock of another Restricted
Subsidiary such that such Restricted Subsidiary, in any such case, ceases
to be a Restricted Subsidiary;
(g) Indebtedness of the Company and/or any Restricted Subsidiary
under Interest Rate Protection Obligations relating to (i) Indebtedness of
the Company or any Restricted Subsidiary (which Indebtedness (x) bears
interest at fluctuating interest rates and (y) is otherwise permitted to
be incurred under Section 10.12), and/or (ii) Indebtedness for which a
lender has provided a commitment in an amount reasonably anticipated to be
incurred by the Company or a Restricted Subsidiary in the following 180
days after such Interest Rate Protection Obligation has been incurred, but
only to the extent that the notional principal amount of such Interest
Rate Protection Obligations does not exceed the principal amount of the
Indebtedness (and/or Indebtedness subject to commitments) to which such
Interest Rate Protection Obligations relate; provided in no event shall
any Restricted Subsidiary incur Indebtedness under an Interest Rate
Protection Obligation under this clause (g) relating to Indebtedness of
the Company;
(h) Indebtedness of the Company and/or any Restricted Subsidiary
under Currency Agreements relating to (i) Indebtedness of the Company or a
Restricted Subsidiary
<PAGE>
-24-
and/or (ii) obligations to purchase or sell assets, properties or services
or license programming rights, in each case, incurred in the ordinary
course of business of the Company or any Restricted Subsidiary; provided
that such Currency Agreements do not increase the Indebtedness or other
obligations of the Company and the Restricted Subsidiaries outstanding
other than as a result of fluctuations in foreign currency exchange rates
or by reason of fees, indemnities and compensation payable thereunder;
provided, further, in no event shall any Restricted Subsidiary incur
Indebtedness under any Currency Agreement under this clause (h) relating
to Indebtedness or obligations of the Company;
(i) Indebtedness of the Company and/or any Restricted Subsidiary in
respect of "bid," performance or advance payment bonds of the Company or
any Restricted Subsidiary or surety or bid," performance or advance
payment bonds provided by the Company or any Restricted Subsidiary
incurred in the ordinary course of business in connection with the
construction or operation of a Permitted Business;
(j) Indebtedness of the Company and/or any Restricted Subsidiary to
the extent it represents a replacement, renewal, refinancing, refunding,
defeasance or extension of outstanding Indebtedness of the Company or any
Restricted Subsidiary incurred pursuant to the provisos to Section 10.12
or any of clauses (a), (b), (c) or (e) of this definition; provided that
(i) Indebtedness of the Company or a Guarantor may not be replaced,
renewed, refinanced or extended under this clause (j) with Indebtedness of
any Restricted Subsidiary that is not a Guarantor and (ii) any such
replacement, renewal, refinancing or extension shall not exceed the sum of
the principal amount (or, if such Indebtedness provides for a lesser
amount to be due and payable upon a declaration of acceleration thereof,
an amount no greater than such lesser amount) of the Indebtedness being
replaced, renewed, refinanced or extended plus the amount of accrued
interest or accretion thereon and the amount of any reasonably determined
prepayment premium necessary to accomplish such replacement, renewal,
refinancing or extension and such reasonable fees and expenses incurred in
connection therewith; and
(k) Indebtedness of the Company and/or any Restricted Subsidiary in
an amount not to exceed US$2,000,000 (or to
<PAGE>
-25-
the extent non-U.S. dollar denominated, the U.S. Dollar Equivalent of such
amount) at any time outstanding.
"Permitted Investments" means (a) cash and Cash Equivalents; (b)
Investments in prepaid expenses, negotiable instruments held for collection and
lease, utility and workers' compensation, performance and other similar
deposits; (c) Interest Rate Protection Obligations permitted to be incurred
pursuant to clause (g) of the definition of Permitted Indebtedness; (d) Currency
Agreements; (e) bonds, notes, debentures or other securities received as a
result of Asset Sales permitted under Section 10.15; (f) any Investment in
another person in exchange for Capital Stock (other than Disqualified Stock) of
the Company; (g) loans and advances to employees of the Company or any of the
Restricted Subsidiaries in the ordinary course of business in an aggregate
amount not to exceed US$1,000,000 (or, to the extent non-U.S. dollar
denominated, the U.S. Dollar Equivalent of such amount) at any time outstanding;
(h) any Investment in Capital Stock obligations of any person made in settlement
of claims by the Company or any Restricted Subsidiary against such person; (i)
the contribution of (x) any paging license in exchange for Capital Stock of a
License Vehicle or (y) any cash to a License Vehicle in exchange for Capital
Stock of such License Vehicle, to the extent such cash is used for the purpose
of acquiring Brazilian paging licenses; (j) loans and advances to resellers and
other distributors in the ordinary course of business not to exceed at any time
an aggregate amount of US$2 million (or, to the extent non-U.S. dollar
denominated, the U.S. Dollar Equivalent of such amount); (k) any Investment
acquired by the Company or any of the Restricted Subsidiaries (A) in exchange
for any other Investment or accounts receivable held by the Company or any such
Restricted Subsidiary in connection with or as a result of a bankruptcy, workout
or reorganization or recapitalization of the issuer of such other Investment or
accounts receivable or (B) as a result of the foreclosure by the Company or any
of the Restricted Subsidiaries with respect to any secured Investment or
default; and (l) any Investment in U.S. Government Securities in accordance with
the provisions of the Escrow Agreement or in connection with a legal or covenant
defeasance of the Securities or other Debt Securities in accordance with their
terms.
"person" means any individual, corporation, limited or general
partnership, joint venture, association, joint stock company, trust, limited
liability company, unincorporated organization or government or any agency or
political subdivision thereof.
<PAGE>
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"Physical Security" shall have the meaning set forth in Section 3.01
hereof.
"Predecessor Security" means, with respect to any particular
Security, every previous Security evidencing all or a portion of the same debt
as that evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 3.06 hereof
in exchange for a mutilated Security or in lieu of a lost, destroyed or stolen
Security shall be deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Security.
"Preferred Stock" means, with respect to any person, any and all
shares, interests, participations or other equivalents (however designated) of
such person's preferred or preference stock or shares, whether now outstanding
or issued after the Issue Date to the extent it carries any preference in
respect of the distribution of assets in the event of a liquidation or
insolvency of such person as compared with any other Capital Stock of such
person.
"Private Exchange Securities" shall have the meaning specified in
the Notes Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on
the Securities in the form set forth in Section 2.02(a).
"Pro Rata Share" means a fraction, (i) the numerator of which is the
aggregate principal amount of Securities outstanding on the applicable purchase
date and (ii) the denominator of which is the sum of (x) the aggregate principal
amount of Securities outstanding on such date and (y) if there are Pari Passu
Debt Securities or other unsubordinated Indebtedness of the Company or any
Guarantor that requires that Net Cash Proceeds be used to offer to purchase or
repay such Pari Passu Debt Securities or other unsubordinated Indebtedness of
the Company or any Guarantor, the outstanding principal amount of such Pari
Passu Debt Securities or other unsubordinated Indebtedness of the Company or
such Guarantor or Guarantors on such date.
"Purchase Agreement" means the Purchase Agreement, dated as of May
30, 1997, among the Company, Holding LLC and the Initial Purchasers.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A under the Securities Act.
<PAGE>
-27-
"Redemption Date" means, with respect to any Security to be
redeemed, any date fixed for such redemption by or pursuant to this Indenture
and the terms of the Securities.
"Redemption Price" means, with respect to any Security to be
redeemed, the price at which it is to be redeemed pursuant to this Indenture and
the terms of the Securities.
"Registered Exchange Offer" means the registration by the Company
and each of the Guarantors under the Securities Act of all Series B Securities
that are not Private Exchange Securities and the related Guarantees pursuant to
a registration statement under which the Company and the Guarantors offer each
Holder of Series A Securities and the related Guarantees the opportunity to
exchange all Series A Securities (together with the related Guarantees) held by
such Holder for Series B Securities and the related Guarantees in an aggregate
principal amount equal to the aggregate principal amount of Series A Securities
held by such Holder, all in accordance with the terms and conditions of the
Registration Rights Agreement.
"Registrable Securities" shall have the meaning specified in
the Registration Rights Agreement.
"Regular Record Date" means the Regular Record Date specified
in the Securities.
"Regulation S" means Regulation S under the Securities Act.
"Responsible Officer" means, with respect to the Trustee, the
chairman or vice chairman of the board of directors, the chairman or vice
chairman of the executive committee of the board of directors, the president,
any vice president, the secretary, any assistant secretary, the treasurer, any
assistant treasurer, the cashier, any assistant cashier, any trust officer or
assistant trust officer, the controller and any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer of the Trustee to whom
any corporate trust matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"Restricted Payment" means any of the following: (i) the declaration
or payment of any dividend or any other distribution on Capital Stock of the
Company or any payment
<PAGE>
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made to the direct or indirect holders (in their capacities as such) of Capital
Stock of the Company (other than dividends or distributions payable solely in
Capital Stock (other than Disqualified Stock) of the Company or in options,
warrants or other rights to purchase Capital Stock (other than Disqualified
Stock) of the Company); (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company (other than any such
Capital Stock owned by the Company or a Restricted Subsidiary); (iii) the making
of any principal payment on, or the purchase, redemption, defeasance or other
acquisition or retirement for value, prior to any scheduled maturity, scheduled
repayment or scheduled sinking fund payment of, any Subordinated Indebtedness
(other than any Subordinated Indebtedness held by the Company or a Restricted
Subsidiary); or (iv) the making of any Investment (other than a Permitted
Investment) in any person (other than an Investment by a Restricted Subsidiary
in the Company or an Investment by the Company or a Restricted Subsidiary in
either (x) a Restricted Subsidiary or (y) a person that becomes a Restricted
Subsidiary as a result of such Investment).
"Restricted Subsidiary" means any Subsidiary of the Company that has
not been designated by the Board of the Company, by a Board Resolution delivered
to the Trustee, as an Unrestricted Subsidiary pursuant to and in compliance with
Section 10.10. Any such Designation may be revoked by a Board Resolution
delivered to the Trustee, subject to the provisions of such covenant.
"Revocation" has the meaning set forth under Section 10.10.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Group and its successors.
"Securities" means any of the securities, as defined in the first
paragraph of the recitals hereof, that are authenticated and delivered under
this Indenture. For all purposes of this Indenture, the term "Securities" shall
include any Series B Securities to be issued and exchanged for any Series A
Securities pursuant to the Notes Registration Rights Agreement and this
Indenture and, for purposes of this Indenture, all Series A Securities and
Series B Securities shall vote together as one series of Securities under this
Indenture.
<PAGE>
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"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" shall have the
respective meanings specified in Section 3.05 hereof.
"Series A Securities" has the meaning stated in the first recital of
this Indenture.
"Series B Securities" has the meaning stated in the first recital of
this Indenture and refers to any Series B Securities, containing terms
substantially identical to the Series A Securities (except that such Series B
Securities (other than the Private Exchange Securities) shall be registered
under the Securities Act), that are issued and exchanged for the Series A
Securities pursuant to the Registration Rights Agreement and this Indenture.
"Shareholder Commitments" shall have the meaning specified in
Section 10.21 hereof.
"Significant Equity Offering" means a public offering of Capital
Stock (other than Disqualified Capital Stock) of the Company (or American
Depositary Receipts or Global Depositary Receipts representing such Capital
Stock) either (x) in the United States pursuant to an offering registered under
the Securities Act or (y) in Brazil pursuant to an offering registered with the
CVM and listed on the Sao Paulo Stock Exchange or Rio de Janeiro Stock Exchange
and/or (z) in the United Kingdom pursuant to an offering that results in such
Capital Stock (or Global Depositary Receipts representing such Capital Stock)
being listed on the London Stock Exchange or the Luxembourg Stock Exchange.
"Special Record Date" means, with respect to the payment of any
Defaulted Interest, a date fixed by the Trustee pursuant to Section 3.07 hereof.
"Specified Indebtedness" means any Indebtedness of any Restricted
Subsidiary that is not a Guarantor which is not subordinated to any other
Indebtedness of such Restricted Subsidiary.
"Stated Maturity" means, when used with respect to any Security or
any installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable, and when used with respect to any other
Indebted-
<PAGE>
-30-
ness, means the date specified in the instrument governing such Indebtedness as
the fixed date on which the principal of such Indebtedness, or any installment
of interest thereon, is due and payable.
"Subordinated Debt Securities" means any Debt Securities (and any
guarantee of any Debt Security) which would constitute Subordinated
Indebtedness.
"Subordinated Indebtedness" means any Indebtedness of the Company or
any Guarantor which is expressly subordinated in right of payment to the
Securities or any Guarantees.
"Subscription Agreement" means the Subscription Agreement dated June
6, 1997 among the Company and Holding LLC pursuant to which 125,000 shares of
Common Stock are issued to Holding LLC.
"Subsidiary" means, with respect to any person, (i) any corporation
of which the outstanding Voting Stock having at least a majority of the votes
entitled to be cast in the election of directors shall at the time be owned,
directly or indirectly, by such person, or (ii) any other person of which at
least a majority of Voting Stock is at the time, directly or indirectly, owned
by such person.
"Taxes" means any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and any other liabilities
related thereto) imposed or levied by or on behalf of a Taxing Authority.
"Taxing Authority" means the government of the Federative Republic
of Brazil or of Japan or any state of the Federative Republic of Brazil or of
Japan or any political subdivision or territory or possession of the government
of the Federative Republic of Brazil or of Japan or any jurisdiction in which
the Company or a Guarantor is engaged in business for tax purposes or is
resident for withholding tax purposes or, in all such instances, any authority
or agency therein or thereof having power to tax.
"Technical Services Agreement" means the Technical Services
Agreement dated as of December 11, 1996, between the Company and Paging Network,
Inc., as the same may be amended, modified or supplemented from time to time;
provided, that such amendment, modification or supplement shall not be adverse
to the Company or the Holders.
<PAGE>
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"Total Consolidated Indebtedness and Subsidiary Preferred Stock"
means, at any date of determination, an amount equal (i) the aggregate principal
amount of all Indebtedness of the Company and the Restricted Subsidiaries
outstanding as of the date of determination and (ii) the aggregate liquidation
preference of all Preferred Stock of Restricted Subsidiaries that are not
Guarantors issued and outstanding as of the date of determination (other than
Indebtedness owing to and Preferred Stock held by the Company or a Restricted
Subsidiary that is a Guarantor).
"Total Incremental Invested Equity Capital" means, at any time of
determination, the sum of, without duplication, (i) the aggregate cash proceeds
received by the Company from capital contributions in respect of existing
Capital Stock (other than Disqualified Stock) or the issuance or sale of Capital
Stock (other than Disqualified Stock but including Capital Stock issued upon the
conversion of convertible Indebtedness or from the exercise of options, warrants
or rights to purchase Capital Stock (other than Disqualified Stock)) subsequent
to the Issue Date, other than to a Subsidiary of the Company, plus (ii) the
aggregate cash proceeds received by the Company or any Restricted Subsidiary
from the sale, disposition or repayment of any Investment made after the Issue
Date and constituting a Restricted Payment (other than any Investment made
pursuant to clause (b)(v) of Section 10.13) in an amount equal to the lesser of
(a) the return of capital with respect to such Investment and (b) the initial
amount of such Investment, in either case, less the cost of the disposition of
such Investment, plus (iii) an amount equal to the lesser of (x) the
consolidated net Investment on the date of Revocation made by the Company and/or
any of the Restricted Subsidiaries of any Subsidiary in accordance with the
covenant described under Section 10.10 and (y) the Designation Amount with
respect to such Subsidiary, minus (iv) the aggregate amount of all Restricted
Payments declared or made on and after the Issue Date.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of
1939, as amended.
"Trustee" means the person named as the "Trustee" in the first
paragraph of this Indenture, until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"Unrestricted Subsidiary" means any Subsidiary of the Company (other
than a Guarantor) designated as such pursuant to
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and in compliance with Section 10.10. Any such designation may be revoked by a
Board Resolution of the Company delivered to the Trustee, subject to the
provisions of such covenant.
"U.S. Dollar Equivalent" means, with respect to any monetary amount
in a currency other than the U.S. dollar, at any time for the determination
thereof, the amount of U.S. dollars obtained by converting such foreign currency
involved in such computation into U.S. dollars at the spot rate for the purchase
of U.S. dollars with the applicable foreign currency as quoted by Reuters at
approximately 11:00 a.m. (New York time) on the date not more than two business
days prior to such determination. For purposes of determining whether any
Indebtedness can be incurred (including Permitted Indebtedness), any Investment
can be made and any Affiliate Transaction can be undertaken (a "Tested
Transaction"), the "U.S. Dollar Equivalent" of such Indebtedness, Investment or
Affiliate Transaction shall be determined on the date incurred, made or
undertaken and no subsequent change in the U.S. Dollar Equivalent shall cause
such Tested Transaction to have been incurred, made or undertaken in violation
of the Indenture.
"U.S. GAAP" means generally accepted accounting principles and
practices in the United States consistently applied by a corporation or as
between corporations and over time, as in effect from time to time; provided
that, for purposes of determining compliance with Sections 10.12 and 10.13, U.S.
GAAP shall mean such generally accepted accounting principles and practices as
adopted by the Company on the Issue Date and as are consistent with those set
forth in the Offering Memorandum.
"U.S. Global Security" shall have the meaning set forth in Section
3.01 hereof.
"U.S. Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
obligations or guarantee the full faith and credit of the United States is
pledged.
"U.S. Physical Security" shall have the meaning set forth in Section
3.01 hereof.
"Voting Stock" means, with respect to any person, the Capital Stock
of any class or kind ordinarily having the power to vote for the election of
directors or other members of the governing body of such person.
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"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary
of which 100% of the outstanding Capital Stock is owned by the Company or
another Wholly Owned Restricted Subsidiary. For purposes of this definition, any
directors' qualifying shares or investments by foreign nationals mandated by
applicable law shall be disregarded in determining the ownership of a Restricted
Subsidiary.
Section 1.02 Other Definitions.
Defined in
Term Section
- ---- ---------
"Act" 1.05
"Agent Member 3.13
"Asset Sale Offer" 10.15
"Asset Sale Offer Price" 10.15
"Asset Sale Purchase Date" 10.15
"Change of Control Date" 10.16
"Change of Control Offer" 10.16
"Change of Control Payment Date" 10.16
"Change of Control Purchase Notice" 10.16
"Change of Control Purchase Price" 10.16
"covenant defeasance" 4.03
"Defaulted Interest" 3.07
"defeasance" 4.02
"Defeased Securities" 4.01
"Deficiency" 10.15
"Designation Amount" 10.10
"Excess Proceeds" 10.15
"incur" 10.12
"insolvent person" 4.04
"Notice of Default" 5.01
"Payment Date" 3.08
"rate of exchange" 1.20
"Replacement Assets" 10.15
"Restricted Security" 2.05
"surviving entity" 8.01
"Surviving Guarantor" 8.01
Section 1.03 Rules of Construction.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
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(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with U.S. GAAP;
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision;
(e) all references to "$," "US$," "dollars" or "United States
dollars" shall refer to the lawful currency of the United States of
America; and
(f) the words "include," "included" and "including" as used herein
shall be deemed in each case to be followed by the phrase "without
limitation."
Section 1.04 Form of Documents Delivered to Trustee.
Upon any request or application by the Company or any Guarantor to
the Trustee to take any action under this Indenture, the Company or such
Guarantor, as the case may be, shall furnish to the Trustee (a) an Officers'
Certificate satisfactory to the Trustee stating that, in the opinion of the
signers, all conditions precedent, if any, provided for in this Indenture
relating to the proposed action have been complied with, (b) an Opinion of
Counsel satisfactory to the Trustee stating that, in the opinion of counsel, all
such conditions have been complied with and (c) where applicable, a certificate
or opinion by an accountant that complies with Section 314(c) of the Trust
Indenture Act.
Each certificate and Opinion of Counsel with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(a) a statement that the person making such certificate or
Opinion of Counsel has read such covenant or condition;
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(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements contained in such certificate
or Opinion of Counsel are based;
(c) a statement that, in the opinion of such person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
person, or that they be so certified or covered by only one document, but one
such person may certify or give an opinion with respect to some matters and one
or more other such persons as to other matters, and any such person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company or any
Guarantor may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which his
certificate or opinion is based are erroneous. Any such certificate or opinion
of counsel may be based, insofar as it relates to factual matters, upon a
certificate or opinion of, or representations by, an officer or officers of the
Company or any Guarantor stating that the information with respect to such
factual matters is in the possession of the Company or any Guarantor, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated, with
proper identification of each matter covered therein, and form one instrument.
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Section 1.05 Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by an agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution (as provided below in
subsection (b) of this Section 1.05) of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01 hereof) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any person of any such
instrument or writing may be proved in any reasonable manner which the Trustee
deems sufficient.
(c) The ownership of Securities shall be proved by the Security
Register.
(d) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Security shall bind every future
Holder of the same Security or the Holder of every Security issued upon the
transfer thereof or in exchange therefor or in lieu thereof to the same extent
as the original Holder, in respect of anything done, suffered or omitted to be
done by the Trustee, any Paying Agent or the Company or any Guarantor in
reliance thereon, whether or not notation of such action is made upon such
Security.
Section 1.06 Notices, etc., to the Trustee and the Company.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with:
(a) the Trustee by any Holder or by the Company shall be sufficient
for every purpose hereunder if made,
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given, furnished or filed, in writing, to or with the Trustee at 450 West
33rd Street, 15th Floor, New York, New York 10001, Attention:
International Corporate Trust Division or at any other address previously
furnished in writing to the Holders, the Company and the Guarantors by the
Trustee; or
(b) the Company by the Trustee or by any Holder shall be sufficient
for every purpose (except as otherwise expressly provided herein)
hereunder if in writing and mailed, first-class postage prepaid, to the
Company addressed to it at Rua Alexandre Dumas, 1.711, Chacara Santa
Antonio, Sao Paulo 04717-004 Brazil, Attention: Chief Executive Officer,
or at any other address previously furnished in writing to the Trustee by
the Company.
Section 1.07 Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event,
such notice shall be sufficiently given (unless otherwise expressly provided
herein) if in writing and mailed, first-class postage prepaid, to each Holder
affected by such event, at the address of such Holder as it appears in the
Security Register, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders. Any notice when mailed
to a Holder in the aforesaid manner shall be conclusively deemed to have been
received by such Holder whether or not actually received by such Holder. Where
this Indenture provides for notice in any manner, such notice may be waived in
writing by the person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause, it shall be impracticable to mail notice of any event
as required by any provision of this Indenture, then any method of giving such
notice as shall be satisfactory to the Trustee shall be deemed to be a
sufficient giving of such notice.
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Section 1.08 Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with any
provision of the Trust Indenture Act or another provision which is required or
deemed to be included in this Indenture by any of the provisions of the Trust
Indenture Act, such provision or requirement of the Trust Indenture Act shall
control.
If any provision of this Indenture modifies or excludes any
provision of the Trust Indenture Act that may be so modified or excluded, the
latter provision shall be deemed to apply to this Indenture as so modified or
excluded, as the case may be.
Section 1.09 Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
Section 1.10 Successors and Assigns.
All covenants and agreements in this Indenture by the Company and
any Guarantor, shall bind their respective successors and assigns, whether so
expressed or not.
Section 1.11 Severability Clause.
In case any provision in this Indenture or in the Securities or any
Guarantees issued pursuant hereto shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
Section 1.12 Benefits of Indenture.
Nothing in this Indenture or in the Securities or in any Guarantees
issued pursuant hereto, express or implied, shall give to any person (other than
the parties hereto and their successors hereunder, any Paying Agent and the
Holders) any benefit or any legal or equitable right, remedy or claim under this
Indenture.
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Section 1.13 Governing Law.
THIS INDENTURE, THE SECURITIES AND THE GUARANTEES SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW, EXCEPT THAT MATTERS RELATING TO
THE AUTHORIZATION BY THE COMPANY OR ANY GUARANTORS OF THIS INDENTURE AND THE
SECURITIES SHALL BE GOVERNED BY THE APPLICABLE LAWS OF THE FEDERATIVE REPUBLIC
OF BRAZIL OR OTHER JURISDICTION OF ITS ORGANIZATION. THE TRUSTEE, THE COMPANY,
ANY GUARANTOR, ANY OTHER OBLIGOR IN RESPECT OF THE SECURITIES AND THE HOLDERS
AGREE TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL
OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN, IN THE CITY OF NEW YORK, IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE
SECURITIES OR THE GUARANTEES.
Section 1.14 No Recourse Against Others.
A director, officer, employee or stockholder, as such, of the
Company or of a Guarantor shall not have any liability for any obligations of
the Company or a Guarantor under the Securities, the Guarantees or this
Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Holder by accepting any of the Securities,
the Guarantees or this Indenture waives and releases all such liability.
Section 1.15 Independence of Covenants.
All covenants and agreements in this Indenture shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default if such action is taken or condition exists.
Section 1.16 Exhibits.
All exhibits attached hereto are by this reference made a part
hereof with the same effect as if herein set forth in full.
Section 1.17 Counterparts.
This Indenture may be executed in any number of counterparts, each
of which shall be an original; but such counter-
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parts shall together constitute but one and the same instrument.
Section 1.18 Duplicate Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 1.19 Agent for Service; Submission to Jurisdiction; Waiver
of Immunities.
By the execution and delivery of this Indenture or any amendment or
supplement hereto, each of the Company and any Guarantor, (i) acknowledges that
it has, by separate written instrument, designated and appointed CT Corporation
System, currently located at 1633 Broadway, New York, New York 10019, as its
authorized agent upon which process may be served in any suit, action or
proceeding with respect to, arising out of, or relating to, the Securities, this
Indenture or any Guarantee that may be instituted in any Federal or state court
in the State of New York, The City of New York, the Borough of Manhattan, or
brought under Federal or state securities laws or brought by the Trustee
(whether in its individual capacity or in its capacity as Trustee hereunder),
and acknowledges that CT Corporation System has accepted such designation, (ii)
submits to the jurisdiction of any such court in any such suit, action or
proceeding, and (iii) agrees that service of process upon CT Corporation System
shall be deemed in every respect effective service of process upon the Company
or any such Guarantor, as the case may be, in any such suit, action or
proceeding. The Company and any Guarantor further agree to take any and all
action, including the execution and filing of any and all such documents and
instruments as may be necessary to continue such designation and appointment of
CT Corporation System in full force and effect so long as this Indenture shall
be in full force and effect; provided that the Company and any Guarantor may and
shall (to the extent CT Corporation System ceases to be able to be served on the
basis contemplated herein), by written notice to the Trustee, designate such
additional or alternative agents for service of process under this Section 1.19
that (i) maintains an office located in the Borough of Manhattan, The City of
New York in the State of New York, (ii) are either (x) counsel for the Company
and any Guarantor or (y) a corporate service company which acts as agent for
service of process for other persons in the ordinary course of its business and
(iii) agrees to act as agent for service of process in accordance with this
Section 1.19. Such notice shall identify the
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name of such agent for process and the address of such agent for process in the
Borough of Manhattan, The City of New York, State of New York. Upon the request
of any Holder, the Trustee shall deliver such information to such Holder.
Notwithstanding the foregoing, there shall, at all times, be at least one agent
for service of process for the Company and the Guarantors appointed and acting
in accordance with this Section 1.19.
To the extent that the Company or any Guarantor has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service of notice, attachment prior to judgment, attachment in
aid of execution, execution or otherwise) with respect to itself or its
property, the Company and any Guarantor hereby irrevocably waives such immunity
in respect of its obligations under this Indenture and the Securities, to the
extent permitted by law.
Section 1.20 Currency of Account; Conversion of Currency; Foreign
Exchange Restrictions.
(a) U.S. dollars are the sole currency of account and payment for
all sums payable by the Company and the Guarantors under or in connection with
the Securities, the Guarantees or this Indenture, including damages. Any amount
received or recovered in a currency other than U.S. dollars (whether as a result
of, or of the enforcement of, a judgment or order of a court of any
jurisdiction, in the winding-up or dissolution of the Company and the
Guarantors, if any, or otherwise) by any Holder of the Securities in respect of
any sum expressed to be due to it from the Company and the Guarantors, if any,
shall only constitute a discharge to the Company and the Guarantors, if any, to
the extent of the U.S. dollar amount which the recipient is able to purchase
with the amount so received or recovered in that other currency on the date of
that receipt or recovery (or, if it is not practicable to make that purchase on
that date, on the first date on which it is practicable to do so). If that U.S.
dollar amount is less than the U.S. dollar amount expressed to be due to the
recipient under the Securities, the Company and the Guarantors, if any, shall,
jointly and severally, indemnify it against any loss sustained by it as a result
as set forth in Section 1.20(b). In any event, the Company and the Guarantors,
if any, shall, jointly and severally, indemnify the recipient against the cost
of making any such purchase. For the purposes of this Section 1.20, it will be
sufficient for the holder of a Security to certify in a satisfactory manner
(indicating sources of information used) that it would have suffered a loss had
an actual purchase of U.S.
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dollars been made with the amount so received in that other currency on the date
of receipt or recovery (or, if a purchase of U.S. dollars on such date had not
been practicable, on the first date on which it would have been practicable, it
being required that the need for a change of date be certified in the manner
mentioned above). The indemnities set forth in this Section 1.20 constitute
separate and independent obligations from other obligations of the Company and
the Guarantors, if any, shall give rise to a separate and independent cause of
action, shall apply irrespective of any indulgence granted by any Holder of the
Securities and shall continue in full force and effect despite any other
judgment, order, claim or proof for a liquidated amount in respect of any sum
due under the Securities.
(b) The Company and each Guarantor, if any, covenant and agree that
the following provisions shall apply to conversion of currency in the case of
the Securities, the Guarantees and this Indenture:
(i)(A) If for the purpose of obtaining judgment in, or enforcing the
judgment of, any court in any country, it becomes necessary to convert
into a currency (the "judgment currency") an amount due in any other
currency (the "Base Currency"), then the conversion shall be made at the
rate of exchange prevailing on the Business Day before the day on which
the judgment is given or the order of enforcement is made, as the case may
be (unless a court shall otherwise determine).
(B) if there is a change in the rate of exchange prevailing between
the Business Day before the day on which the judgment is given or an order
of enforcement is made, as the case may be (or such other date as a court
shall determine), and the date of receipt of the amount due, the Company
or the relevant Guarantor, as the case may be, will pay such additional
(or, as the case may be, such lesser) amount, if any, as may be necessary
so that the amount paid in the judgment currency when converted at the
rate of exchange prevailing on the date of receipt will produce the amount
in the Base Currency originally due.
(ii) the event of the winding-up of the Company or any Guarantor at
any time while any amount or damages owing under the Securities, the
Guarantee and this Indenture, or any judgment or order rendered in respect
thereof, shall remain outstanding, the Company or the
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relevant Guarantor, as the case may be, shall indemnify and hold the
Holders and the Trustee harmless against any deficiency arising or
resulting from any variation in rates of exchange between (1) the date as
of which the U.S. Dollar Equivalent of the amount due or contingently due
under the Securities, the Guarantees and this Indenture (other than under
this Subsection (b)(ii)) is calculated for the purposes of such winding-up
and (2) the final date for the filing of proofs of claim in such
winding-up. For the purpose of this Subsection (b)(ii), the final date for
the filing of proofs of claim in the winding-up of the Company or the
relevant Guarantor, as the case may be, shall be the date fixed by the
liquidator or otherwise in accordance with the relevant provisions of
applicable law as being the latest practicable date as at which
liabilities of the Company or the relevant Guarantor, as the case may be,
may be ascertained for such winding-up prior to payment by the liquidator
or otherwise in respect thereto.
(iii) The obligations contained in Subsections (a), (b)(i)(B) and
(b)(ii) of this Section 1.20 shall constitute separate and independent
obligations from the other Indenture Obligations of the Company and the
Guarantors, shall give rise to separate and independent causes of action
against the Company and each Guarantor, shall apply irrespective of any
waiver or extension granted by any Holder or the Trustee or either of them
from time to time and shall continue in full force and effect
notwithstanding any judgment or order or the filing of any proof of claim
in the winding-up of the Company or any Guarantor for a liquidated sum in
respect of amounts due hereunder (other than under Subsection (b)(ii)
above) or under any such judgment or order. Any such deficiency as
aforesaid shall be deemed to constitute a loss suffered by the Holders or
the Trustee, as the case may be, and no proof or evidence of any actual
loss shall be required by the Company or the relevant Guarantor or the
liquidator or otherwise or any of them. In the case of Subsection (b)(ii)
above, the amount of such deficiency shall not be deemed to be reduced by
any variation in rates of exchange occurring between the said final date
and the date of any liquidating distribution.
(iv) The term "rate(s) of exchange" shall mean the rate of exchange
quoted by Reuters at 10:00 a.m. (New York time) for spot purchases of the
Base Currency with the judgment currency other than the Base Currency
referred to
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in Subsections (b)(i) and (b)(ii) above and includes any premiums and
costs of exchange payable.
(c) In the event that on any payment date in respect of the
Securities or any Guarantee, any restrictions or prohibition of access to the
Brazilian foreign exchange market exists, the Company and each Guarantor agree
to pay all amounts payable under the Securities and the Guarantees in the
currency of the Securities by means of any legal procedure existing in Brazil
(except commencing legal proceedings against the Central Bank of Brazil), on any
due date for payment under the Securities, for the purchase of the currency of
such Securities. All costs and taxes payable in connection with the procedures
referred to in this Section 1.20 shall be borne by the Company and the
Guarantors.
ARTICLE TWO
SECURITY AND GUARANTEE FORMS
Section 2.01 Forms Generally.
The Securities, the Guarantees and the Trustee's certificate of
authentication with respect thereto shall be in substantially the forms set
forth, or referenced, in this Article, with such appropriate insertions,
omissions, substitutions and other variations as are required or permitted by
this Indenture and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with any applicable law or with the rules of the Depository,
any clearing agency or any securities exchange or as may, consistently herewith,
be determined by the officers executing such Securities and such Guarantees as
evidenced by their execution thereof.
The definitive Securities and Guarantees shall be printed,
typewritten, lithographed or engraved or produced by any combination of these
methods or may be produced in any other manner permitted by the rules of any
securities exchange on which the Securities and such Guarantees may be listed,
all as determined by the officers executing such Securities and Guarantees as
evidenced by their execution of such Securities and Guarantees.
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Section 2.02 Form of Face of Securities.
(a) The form of the face of the Series A Securities shall be
substantially as follows:
[INSERT PRIVATE PLACEMENT LEGEND IF APPLICABLE]
PAGING NETWORK DO BRASIL S.A.
-----------
13 1/2% SENIOR NOTES DUE 2005,
SERIES A
CUSIP No. __________
No. ___________ US$____________
PAGING NETWORK DO BRASIL S.A., a sociedade anonima organized under
the laws of the Federative Republic of Brazil (herein called the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to _______________ or
registered assigns, the principal sum of _______________ United States Dollars
on June 6, 2005, at the office or agency of the Company referred to below, and
to pay interest thereon on June 6 and December 6 (each an "Interest Payment
Date"), of each year, commencing on December 6, 1997, accruing from the Issue
Date or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, at the rate of 13 1/2% per annum, until the principal
hereof is paid or duly provided for. Interest shall be computed on the basis of
a 360-day year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in the Indenture referred to on
the reverse hereof, be paid to the person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on the May
15 or November 15 (each a "Regular Record Date"), whether or not a Business Day,
as the case may be, next preceding such Interest Payment Date. Any such interest
not so punctually paid, or duly provided for, and interest on such defaulted
interest at the then applicable interest rate borne by the Securities, to the
extent lawful, shall forthwith cease to be payable to the Holder on such Regular
Record Date, and may be paid to the person in whose name this Security (or one
or more Predecessor Securities) is registered at the close of business
<PAGE>
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on a Special Record Date for the payment of such defaulted interest to be fixed
by the Trustee, notice of which shall be given to Holders of Securities not less
than 10 days prior to such Special Record Date, or may be paid at any time in
any other lawful manner not inconsistent with the requirements of the Depository
or any clearing agency through which clearing of trades of the Securities
regularly takes place or any securities exchange on which the Securities may be
listed, and upon such notice as may be required by the Depository or any such
clearing agency or exchange, all as more fully provided in such Indenture. In
addition, the Company (i) will pay to the Holder of this Security such
Additional Amounts as may become payable under Section 10.08 of the Indenture
and (ii) may be obligated to pay additional interest pursuant to certain
provisions of the Notes Registration Rights Agreement.
If this Security is a Global Security, all payments in respect of
this Security will be made to the Depository or its nominee in immediately
available funds in accordance with customary procedures established from time to
time by the Depository. If this Security is a Global Security and a Restricted
Security, reference is made to the restrictions on ownership of beneficial
interests herein contained in the Indenture. If this Security is not a Global
Security, payment of the principal of, premium, if any, and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that payment of interest may be
made at the option of the Company by check mailed to the address of the person
entitled thereto as such address shall appear on the Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature,
this Security shall not be entitled to any benefit under the Indenture, or be
valid or obligatory for any purpose.
<PAGE>
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IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.
Dated: PAGING NETWORK DO BRASIL S.A.
By:
----------------------------------
Name:
Title:
(b) The form of the face of the Series B Securities shall be
substantially as follows:
PAGING NETWORK DO BRASIL S.A.
----------------
13 1/2% SENIOR NOTES DUE 2005,
SERIES B
CUSIP No.________
No. _____________ US$_____________
PAGING NETWORK DO BRASIL S.A., a sociedade anonima organized under
the laws of the Federative Republic of Brazil (herein called the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to ___________________
or registered assigns, the principal sum of _________________ United States
Dollars on June 6, 2005, at the office or agency of the Company referred to
below, and to pay interest thereon on June 6 and December 6 (each an "Interest
Payment Date"), of each year, commencing on December 6, 1997, accruing from the
Issue Date or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, at the rate of 13 1/2% per annum, until the
principal hereof is paid or duly provided for. Interest shall be computed on the
basis of a 360-day year of twelve 30-day months.
The interest so payable, and punctually paid or duly provided for,
on any Interest Payment Date will, as provided in the Indenture referred to on
the reverse hereof, be paid to the person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on the May
15 and November 15 (each a "Regular Record Date"), whether
<PAGE>
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or not a Business Day, as the case may be, next preceding such Interest Payment
Date. Any such interest not so punctually paid, or duly provided for, and
interest on such defaulted interest at the then applicable interest rate borne
by the Securities, to the extent lawful, shall forthwith cease to be payable to
the Holder on such Regular Record Date, and may be paid to the person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such defaulted
interest to be fixed by the Trustee, notice of which shall be given to Holders
of Securities not less than 10 days prior to such Special Record Date, or may be
paid at any time in any other lawful manner not inconsistent with the
requirements of the Depository or any clearing agency through which clearing of
trades of the Securities regularly takes place or any securities exchange on
which the Securities may be listed, and upon such notice as may be required by
the Depository or any such clearing agency or exchange, all as more fully
provided in such Indenture. In addition, the Company will pay to the Holder of
this Security such Additional Amounts as may become payable under Section 10.08
of the Indenture.
If this Security is a Global Security, all payments in respect of
this Security will be made to the Depository or its nominee in immediately
available funds in accordance with customary procedures established from time to
time by the Depository. If this Security is not a Global Security, payment of
the principal of, premium, if any, and interest on this Security will be made at
the office or agency of the Company maintained for that purpose in the Borough
of Manhattan in The City of New York, or at such other office or agency of the
Company as may be maintained for such purpose, in such coin or currency of the
United States of America as at the time of payment is legal tender for payment
of public and private debts; provided, however, that payment of interest may be
made at the option of the Company by check mailed to the address of the person
entitled thereto as such address shall appear on the Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof.
Unless the certificate of authentication hereon has been duly
executed by the Trustee referred to on the reverse hereof by manual signature
and a seal has been affixed hereon, this Security shall not be entitled to any
benefit under the Indenture, or be valid or obligatory for any purpose.
<PAGE>
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IN WITNESS WHEREOF, the Company has caused this instrument to be
duly executed.
Dated: PAGING NETWORK DO BRASIL S.A.
By:
----------------------------------
Name:
Title:
Section 2.03. Form of Reverse of Security.
(a) The form of the reverse of the Series A Securities shall be
substantially as follows:
1. Indenture. This Security is one of a duly authorized issue of
Securities of the Company designated as its 13 1/2% Senior Notes due 2005,
Series A (herein called the "Series A Securities"), limited (except as otherwise
provided in the Indenture referred to below) in aggregate principal amount to
US$125,000,000, which may be issued under an indenture (herein called the
"Indenture") dated as of June 1, 1997, between the Company and The Chase
Manhattan Bank, as trustee (herein called the "Trustee," which term includes any
successor Trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties, obligations, covenants and immunities
thereunder of the Company, the Trustee and the Holders of the Securities, and of
the terms upon which the Securities are, and are to be, authenticated and
delivered.
All capitalized terms used in this Series A Security which are
defined in the Indenture and not otherwise defined herein shall have the
meanings assigned to them in the Indenture.
No reference herein to the Indenture and no provisions of this
Series A Security or of the Indenture shall alter or impair the obligation of
the Company or any Guarantor, which is absolute and unconditional, to pay the
principal of, premium, if any, and interest on this Security at the times,
place, and rate, and in the coin or currency, herein prescribed.
<PAGE>
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2. Guarantees; Collateral. The Indenture provides that each Material
Restricted Subsidiary shall become a Guarantor of this Security. The Holder of
this Security may obtain the endorsement of any such Guarantee upon this
Security by presenting this Security to the Trustee. The Indenture further
provides that this Security shall have the full benefit of and every right and
privilege relating to any such Guarantee notwithstanding that such Guarantee is
not endorsed hereon. The Holder of this Security will be entitled to the
benefits of the Escrow Agreement between the Company and the Trustee dated as of
June 1, 1997, including the security interest in the Collateral granted to the
trustee for the benefit of the Holders of Securities pursuant thereto until such
Collateral is released pursuant to the terms of the Escrow Agreement.
3. Redemption.
(a) Optional Redemption. The Securities are subject to redemption,
in whole or in part, at any time on or after June 6, 2001 at the option of the
Company, upon not less than 30 nor more than 60 days prior notice, in principal
amounts of US$1,000 or any integral multiple of US$1,000, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest (together with any Additional Amounts and Additional
Interest payable hereon) to the redemption date, if redeemed during the 12-month
period beginning June 6 of the years indicated below:
Year Redemption Price
---- ----------------
2001 106.75%
2002 104.50%
2003 102.25%
2004 and thereafter 100.00%
(b) Optional Redemption upon Significant Equity Offering. On or
prior to June 6, 2000, the Company may, at its option, use the net proceeds of
one or more Significant Equity Offerings yielding gross cash proceeds of not
less than US$35,000,000 (or, to the extent non-U.S. dollar denominated, the U.S.
Dollar Equivalent thereof) to redeem up to an aggregate of 35% of the principal
amount of the Securities originally issued from Holders on a pro rata basis (or
as nearly pro rata as practicable), at a redemption price of 113 1/2% of the
principal amount thereof, plus accrued and unpaid interest (together with any
Additional Amounts and Additional Interest payable hereon), if any, to the date
of redemption; provided
<PAGE>
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that not less than US$81,250,000 in aggregate principal amount of Securities
would remain outstanding immediately after such redemption. To effect the
foregoing redemption, the Company must mail a notice of redemption complying
with Section 11.05 of the Indenture not later than 60 days after the
consummation of the Significant Equity Offering that resulted in the requisite
gross proceeds. As used above, "Significant Equity Offering" means a public
offering of Capital Stock (other than Disqualified Capital Stock) of the Company
(or American Depositary Receipts or Global Depositary Receipts representing such
Capital Stock) either (x) in the United States pursuant to an offering
registered under the Securities Act or (y) in Brazil pursuant to an offering
registered with the Comissao de Valores Mobiliarios ("CVM") and listed on the
Sao Paulo Stock Exchange or Rio de Janeiro Stock Exchange and/or (z) in the
United Kingdom pursuant to an offering that results in such Capital Stock (or
Global Depositary Receipts representing such Capital Stock) being listed on the
London Stock Exchange or the Luxembourg Stock Exchange.
(c) Sinking Fund. The Company will not be required to make any
mandatory sinking fund payments in respect of the Securities.
(d) Interest Payments. In the case of any redemption of Series A
Securities, interest installments whose Stated Maturity is on or prior to the
Redemption Date (together with any Additional Amounts payable thereon) will be
payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Date
referred to on the face hereof. Securities (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture shall
cease to bear interest from and after the Redemption Date.
(e) Partial Redemption. In the event of redemption of this Series A
Security in part only, a new Series A Security or Securities for the unredeemed
portion hereof shall be issued in the name of the Holder hereof upon the
cancellation hereof.
4. Tax Redemption. The Securities may be redeemed at the option of
the Company, in whole but not in part, at any time prior to maturity if (A)
there is any change in or amendment to the Treaty to Avoid Double Taxation
entered into between the Federative Republic of Brazil and Japan, approved by
Legislative Decree No. 43 dated November 23, 1967, and enacted in Brazil by
Decree No. 61,899 dated December 14, 1967, as amended by Decree No. 81,194 dated
January 9, 1978, which has
<PAGE>
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the effect of increasing the rate of tax applicable under such treaty to a rate
exceeding 15.0% of interest payable; or (B) (i) as the result of any change in
or amendment to the laws or regulations of the Federative Republic of Brazil or
Japan, the Company has or will become obligated to pay, or (ii) any act is taken
by a taxing authority of the Federative Republic of Brazil or Japan after the
date of issuance of the Securities (whether or not such action is taken with
respect to the Company or any Affiliate thereof) that results in a substantial
probability that the Company will be required to pay, Additional Amounts
(excluding interest and penalties) in excess of the Additional Amounts that the
Company would be obligated to pay if Brazilian Taxes (excluding interest and
penalties) were payable with respect to such payments of interest at a rate of
15.0% and such obligation cannot be avoided by the Company, taking reasonable
measures available to it, upon not more than 60 nor less than 30 days' notice to
the holders of such Securities (with copies to the Trustee and each Paying
Agent) at a redemption price of 100% of the principal amount thereof, plus
accrued and unpaid interest to the redemption date plus any such Additional
Amounts payable with respect to such redemption price and interest as provided
under Section 10.08 of the Indenture. Prior to the giving of notice of
redemption of the Securities as described herein and as a condition to any such
redemption, the Company will deliver to the Trustee an Officers' Certificate
(together with a copy of the written opinion of counsel to the effect that the
applicable rate has so increased, or the Company has or will become so
obligated, or that an action taken by a taxing authority of Brazil has resulted
in a substantial probability that the Company will become so obligated to pay
Additional Amounts as a result of such change, amendment, interpretation or
action), stating that the Company is entitled to effect such redemption and
setting forth in reasonable detail a statement of facts relating thereto. No
notice of redemption shall be given earlier than 60 days prior to the earliest
date on which the Company would be obligated or there is a substantial
probability that the Company would be obligated to pay such Additional Amounts
were a payment in respect of the Securities then due and, at the time such
notice of redemption is given, such obligation to pay, or such substantial
probability that the Company will be required to pay, such Additional Amounts
remains in effect.
5. Offers to Purchase. Section 10.15 of the Indenture provides that
following any Asset Sale, and subject to further limitations contained therein,
the Company shall make an offer to purchase Securities in accordance with the
procedures set forth in the Indenture. In addition, the Company is
<PAGE>
-53-
required to make an offer to repurchase this Security at a purchase price of
101% of the principal amount hereof upon the occurrence of a Change of Control
in the manner set forth in Section 10.16.
6. Defaults and Remedies. Events of Default under the Indenture
include, among others: (a) default in the payment of the principal of, or
premium, if any, on the Securities when due; (b) default in the payment of
interest on the Securities when it becomes due and payable and the continuance
of such default for a period of 30 days or more; provided, however, that a
failure to pay interest (but not Additional Amounts or Additional Interest) on
the Notes in a timely manner through June 6, 2000 will constitute an immediate
Event of Default, with no grace or cure period; (c) default in the performance,
or breach, of certain covenants in the Indenture, this Security or any
Guarantees, and continuance of such default or breach for a period of 45 days or
more after written notice; (d) failure by the Company or any Restricted
Subsidiary to perform any provision of one or more classes or issues of other
Indebtedness in an aggregate principal amount of US$5,000,000 (or, to the extent
non-U.S. dollar denominated, the U.S. Dollar Equivalent thereof) or more, and,
in the case of any such default other than a failure to pay, following any
applicable period of grace, principal on such Indebtedness when due, such
failure results in the acceleration of the maturity of such Indebtedness; (e)
one or more final and non-appealable judgments, orders or decrees for the
payment of money in the amount of US$5,000,000 (or, to the extent non-U.S.
dollar denominated, the U.S. Dollar Equivalent thereof) or more; (f) seizure,
compulsory acquisition, expropriation or nationalization of substantially all of
the assets of the Company and the Restricted Subsidiaries, taken as a whole; (g)
any Guarantee ceases to be in full force and effect or is declared null and void
or any Guarantor denies that it has any further liability under, or disaffirms
its obligations under, any Guarantee or gives notice to that effect (other than
by reason of the termination of the Indenture or the release of any Guarantee in
accordance with the Indenture); (h) the Company asserts or admits in writing
that the Escrow Agreement is unenforceable or is not in full force and effect;
and (i) certain events of bankruptcy, dissolution, insolvency, reorganization or
administration with respect to the Company or any Material Restricted Subsidiary
shall have occurred.
Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default as specified in clause (i) of the
previous paragraph with respect to
<PAGE>
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the Company or (f) of the previous paragraph) occurs and is continuing, then the
Trustee or the Holders of not less than 25% in aggregate principal amount of the
Outstanding Securities may, and the Trustee upon the request of the Holders of
not less than 25% in aggregate principal amount of the Outstanding Securities
shall, declare all principal or premium, if any, on and any accrued and unpaid
interest on all Outstanding Securities (and any Additional Amounts payable in
respect thereof) to be immediately due and payable. If an Event of Default
specified in clause (h) of the previous paragraph with respect to the Company or
clause (f) of the previous paragraph occurs, then the principal amount of, and
any accrued and unpaid interest on, all Outstanding Securities (and any
Additional Amounts payable in respect thereof) shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. Except in the case of a default of a specific amount
of premium due, the amount of any premium shall be determined by interpolation
between (a) the premium payable on the next succeeding date on which either
Holders or the Company may optionally redeem Securities or on which the
Securities mature, as applicable (a "Payment Date"), and (b) the immediately
preceding Payment Date or, if there is no immediately preceding Payment Date,
0%.
7. Defeasance. The Indenture contains provisions (which provisions
apply to this Series A Security) for defeasance at any time of (a) the entire
indebtedness of the Company and any Guarantors on this Series A Security and (b)
certain restrictive covenants and related Defaults and Events of Default, in
each case upon compliance by the Company with certain conditions set forth
therein.
8. Amendments and Waivers. The Company, the Guarantors, if any, and
the Trustee (if a party thereto) may, without the consent of the Holders of any
Outstanding Securities, amend, waive or supplement the Indenture, the Securities
or the Guarantees for certain specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies, maintaining the qualification of
the Indenture under the Trust Indenture Act of 1939, as amended, and making any
change that does not adversely affect the rights of any Holder. Other amendments
and modifications of the Indenture, the Securities or the Guarantees may be made
by the Company, the Guarantors, if any, and the Trustee with the consent of the
Holders of not less than a majority of the aggregate principal amount of the
Outstanding Securities, subject to certain exceptions requiring the consent of
the Holders of the particular Securities to be affected. Any such consent or
waiver by or on behalf of the
<PAGE>
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Holder of this Series A Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Series A Security and of any Series A
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof whether or not notation of such consent or waiver is made upon
this Series A Security.
9. Denominations, Transfer and Exchange. The Series A Securities are
issuable only in registered form without coupons in denominations of US$1,000
and any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, the Series A Securities are exchangeable
for a like aggregate principal amount of Series A Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
If this Series A Security is in certificated form, then as provided
in the Indenture and subject to certain limitations therein set forth, the
transfer of this Series A Security is registrable on the Security Register of
the Company, upon surrender of this Series A Security for registration of
transfer at the office or agency of the Company maintained for such purpose in
The City of New York or at such other office or agency of the Company as may be
maintained for such purpose, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Series A Securities, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
If this Series A Security is a Restricted Security in certificated
form, then as provided in the Indenture and subject to certain limitations
therein set forth, the Holder, provided it is a Qualified Institutional Buyer,
may exchange this Series A Security for a book-entry security by instructing the
Trustee to arrange for such Series A Security to be represented by a beneficial
interest in a Global Security in accordance with the customary procedures of the
Depository.
If this Series A Security is a Global Security, it is exchangeable
for Series A Securities in certificated form if (i) the Depository notifies the
Company that it is unwilling or unable to continue as depository or the
Depository ceases to be a "clearing agency" registered under the Exchange Act
and, in each case, a successor Depository is not appointed by the Company within
90 days of such notice or such cessation, as the
<PAGE>
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case may be, or (ii) there shall have occurred and be continuing an Event of
Default with respect to any Securities represented by the Global Security and
Holders who hold more than 25% in aggregate principal amount of the Securities
at the time outstanding represented by the Global Security advise the Trustee
through the Depository in writing that the continuation of a book-entry system
through the Depository (or a successor thereto) with respect to the Global
Security is no longer required and the Security Registrar has received a request
from the Depository to issue certificated Securities. In addition, in accordance
with the provisions of the Indenture and subject to certain limitations therein
set forth, a beneficial owner of a beneficial interest in a Global Security may
request a Series A Security in certificated form, in exchange in whole or in
part, as the case may be, for such beneficial owner's interest in the Global
Security. In any such instance, an owner of a beneficial interest in a Global
Security will be entitled to physical delivery in certificated form of Series A
Securities in authorized denominations equal in principal amount to such
beneficial interest and to have such Series A Securities registered in its name.
No service charge shall be made for any registration of transfer or
exchange or redemption of Series A Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
10. Certain Information Obligations. At any time when the Company is
not subject to Section 13 or 15(d) of the Securities Exchange Act of 1934, upon
the request of a Holder of a Series A Security, the Company will promptly
furnish or cause to be furnished such information as is specified pursuant to
Rule 144A(d)(4) under the Securities Act (or any successor provision thereto) to
such Holder or to a prospective purchaser of such Series A Security designated
by such Holder, as the case may be, in order to permit compliance by such Holder
with Rule 144A under the Securities Act. In addition, the Company is required to
furnish to the Trustee and to the Holder of this Security certain quarterly,
annual and other financial statements and other information as set forth in
Section 10.09 of the Indenture.
11. Persons Deemed Owners. Prior to and at the time of due
presentment of this Series A Security for registration of transfer, the Company,
the Trustee and any agent of the Company or the Trustee may treat the person in
whose name this Series A Security is registered as the owner hereof for all
pur-
<PAGE>
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poses, whether or not this Series A Security shall be overdue, and neither the
Company, the Trustee nor any agent shall be affected by notice to the contrary.
12. GOVERNING LAW. THE INDENTURE, THIS SECURITY AND THE GUARANTEES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW, EXCEPT THAT
MATTERS RELATING TO THE AUTHORIZATION BY THE COMPANY OR ANY GUARANTORS OF THE
INDENTURE, THIS SECURITY AND THE GUARANTEES SHALL BE GOVERNED BY THE APPLICABLE
LAWS OF THE FEDERATIVE REPUBLIC OF BRAZIL OR OTHER JURISDICTION OF ITS
ORGANIZATION. THE TRUSTEE, THE COMPANY, ANY GUARANTOR, ANY OTHER OBLIGOR IN
RESPECT OF THE SECURITIES AND THE HOLDERS AGREE TO SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE INDENTURE, THIS SECURITY OR ANY GUARANTEES.
13. Paying Agents and Registrar. Initially, The Chase Manhattan
Bank, a banking corporation (the "Trustee"), will act as co-Paying Agent and
Registrar. Initially, Chase Trust Company will act as Principal Paying Agent.
The Company may change any Paying Agent, Registrar or co-Registrar. Upon such
change, the Company shall give written notice thereof to the Trustee and the
Holders. Neither the Company nor any of its Affiliates may act as Registrar or
co-Registrar. The Company may, subject to Section 3.08 and Section 10.03 of the
Indenture, act as Paying Agent.
14. Additional Amounts. The Company will pay to the Holders of
Securities such Additional Amounts as may become payable under Section 10.08 of
the Indenture.
15. Conversion of Currency. U.S. dollars are the sole currency of
account and payment for all sums payable by the Company and the Guarantors under
or in connection with the Securities, the Guarantees or the Indenture, including
damages. The Company and each Guarantor have agreed that the provisions of
Section 1.20 of the Indenture shall apply to conversion of currency in the case
of the Securities, the Guarantees and the Indenture. Among other things, Section
1.20 specifies that if there is a change in the rate of exchange prevailing
between the Business Day before the day on which a judgment is given or an order
of enforcement is made, as the case may be (or such other date as a court shall
determine), and the date of receipt of the amount due, the Company or the
relevant Guarantor, as the case may be, will pay such additional (or, as the
case may
<PAGE>
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be, such lesser) amount, if any, as may be necessary so that the amount paid in
the judgment currency when converted at the rate of exchange prevailing on the
date of receipt will produce the amount in the Base Currency originally due. In
the event that on any payment date in respect of the Securities or any
Guarantee, any restrictions or prohibition of access to the Brazilian foreign
exchange market exists, the Company and each Guarantor agrees to pay all amounts
payable under the Securities and the Guarantees in the currency of the
Securities by means of any legal procedure existing in Brazil (except commencing
legal proceedings against the Central Bank of Brazil), on any due date for
payment under the Securities, for the purchase of the currency of such
Securities. All costs and taxes payable in connection with the procedures
referred to in this paragraph shall be borne by the Company and the Guarantors.
16. Agent for Service; Submission to Jurisdiction, Waiver of
Immunities. The Company and each Guarantor have appointed CT Corporation System,
currently located at 1633 Broadway, New York, New York 10019, as its authorized
agent upon which process may be served in any suit, or proceeding with respect
to, arising out of, or relating to, this Security, the Indenture or any
Guarantee, that may be instituted in any Federal or state court in the State of
New York, The City of New York, the Borough of Manhattan, or brought under
Federal or state securities laws and have agreed that there shall, at all times,
be at least one agent for service of process for the Company and the Guarantors
appointed and acting in accordance with the provisions of Section 1.19 of the
Indenture relating to agent for service of process. To the extent that the
Company or any Guarantor has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service of
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, the Company and each
Guarantor have irrevocably waived such immunity in respect of its obligations
under the Indenture, this Security and the Guarantees, to the extent permitted
by law.
17. Registration Rights. Pursuant to the Notes Registration Rights
Agreement among the Company and the Holders of the Series A Securities, the
Company and any Guarantor will be obligated to consummate an exchange offer
pursuant to which the Holder of this Security shall have the right to exchange
this Security together with the Guarantees hereof whether or not endorsed hereon
for 13 1/2% Senior Notes due 2005, Series B, of the Company (herein called the
"Series B Securities"), which have been registered under the Securities Act, in
like princi-
<PAGE>
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pal amount and having identical terms as the Series A Securities, except that
such Series B Securities shall not bear the Private Placement Legend and this
paragraph relating to registration rights shall not be included therein. The
Holders of Series A Securities shall be entitled to receive certain Additional
Interest in the event such exchange offer is not consummated and upon certain
other conditions, all pursuant to and in accordance with the terms of the Notes
Registration Rights Agreement. Whenever in the Indenture or in this Security
there is mentioned, in any context, the payment of amounts based upon the
payment of principal, premium, if any, interest or of any other amount payable
under or with respect to any Security, such mention shall be deemed to include
mention of the payment of Additional Amounts and Additional Interest to the
extent that, in such context, Additional Amounts and Additional Interest are,
were or would be payable in respect thereof. The Series A Securities and the
Series B Securities are together referred to herein as the "Securities."
<PAGE>
-60-
ASSIGNMENT FORM
If you the holder want to assign this Security, fill in the form
below and have your signature guaranteed:
I or we assign and transfer this Security to
________________________________________________________________________________
(Insert assignee's social security or tax ID number) ___________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint:
________________________________________________________________________________
agent to transfer this Security on the books of the Company. The agent
may substitute another to act for such agent.
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act"), covering resales of this
Security (which effectiveness shall not have been suspended or terminated at the
date of the transfer) and (ii) the later of June 6, 1999 or the date two years
(or such shorter period of time as permitted by Rule 144(k) under the Securities
Act or any successor provision thereunder) after the later of the date of
issuance appearing on the face of this Security and the last date on which the
Company or an affiliate of the Company was the owner of this Security (or any
Predecessor Security), the undersigned confirms that it has not utilized any
general solicitation or general advertising in connection with the transfer and
that:
[Check One]
[ ] (a) this Security is being transferred in compliance with
the exemption from registration under the Secu-
<PAGE>
-61-
rities Act provided by Rule 144A thereunder.
or
[ ] (b) this Security is being transferred other than in
accordance with (a) above and documents, including a
transferee certificate substantially in the form attached
hereto, are being furnished which comply with the conditions
of transfer set forth in this Security and the Indenture.
If none of the foregoing boxes is checked and, in the case of (b) above, if the
appropriate document is not attached or otherwise furnished to the Trustee, the
Trustee or Registrar shall not be obligated to register this Security in the
name of any person other than the Holder hereof unless and until the conditions
to any such transfer of registration set forth herein and in Section 3.15 of the
Indenture shall have been satisfied.
Date:______________ Your signature:
---------------------------------
(Sign exactly as your name
appears on the other side of
this Security)
By:
-----------------------------
NOTICE: To be executed by
an executive officer
Signature Guarantee:
-----------------------
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested
<PAGE>
-62-
pursuant to Rule 144A (including the information specified in Rule 144A(d)(4))
or has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated: __________________ _____________________________
NOTICE: To be executed by an
executive officer
[The Transferee Certificates (Exhibits B and C to the
Indenture) will be attached to the Series A Security]
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have the entire principal amount of this Security
purchased by the Company pursuant to Section 10.15 or 10.16 of the Indenture,
check the Box: [ ]
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 10.15 or 10.16 of the Indenture, state the amount:
US$ _________________
Dated: __________________ Your Signature:
----------------------------
(Sign exactly as your name
appears on the other side
of this Security)
Signature Guarantee:
------------------------
(b) The form of the reverse of the Series B Securities shall be
substantially as follows:
1. Indenture. This Security is one of a duly authorized issue of
Securities of the Company designated as its 13 1/2% Senior Notes due 2005,
Series B (herein called the "Series B Securities"), limited (except as otherwise
provided in the Indenture referred to below) in aggregate principal amount to
US$125,000,000, which may be issued under an indenture (herein called the
"Indenture") dated as of June 1, 1997, between the Company and The Chase
Manhattan Bank, as trustee (herein called the "Trustee," which term includes any
successor Trustee under the Indenture), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitation of rights, du-
<PAGE>
-63-
ties, obligations, covenants and immunities thereunder of the Company, the
Trustee, the Guarantors and the Holders of the Securities, and of the terms upon
which the Securities are, and are to be, authenticated and delivered.
All capitalized terms used in this Series B Security which are
defined in the Indenture and not otherwise defined herein shall have the
meanings assigned to them in the Indenture.
No reference herein to the Indenture and no provision of this Series
B Security or of the Indenture shall alter or impair the obligation of the
Company or any Guarantor, which is absolute and unconditional, to pay the
principal of, premium, if any, and interest on this Security at the times,
place, and rate, and in the coin or currency, herein prescribed.
The Series B Securities were issued pursuant to an exchange offer
pursuant to which 13 1/2% Senior Notes due 2005, Series A of the Company (herein
called the "Series A Securities"), in like principal amount and having
substantially identical terms as the Series B Securities (except that the Series
A Securities were subject to certain restrictions on transfer thereof), were
exchanged for the Series B Securities. The Series A Securities and the Series B
Securities are together referred to herein as the "Securities."
2. Guarantees; Collateral. The Indenture provides that each Material
Restricted Subsidiary shall become a Guarantor of this Security. The Holder of
this Security may obtain the endorsement of any such Guarantee upon this
Security by presenting this Security to the Trustee. The Indenture further
provides this Security shall have the full benefit of and every right and
privilege relating to any such Guarantee notwithstanding that such Guarantee is
not endorsed hereon. The Holder of this Security will be entitled to the
benefits of the Escrow Agreement between the Company and the Trustee dated as of
June 1, 1997, including the security interest in the Collateral granted to the
trustee for the benefit of the Holders of Securities pursuant thereto until such
Collateral is released pursuant to the terms of the Escrow Agreement.
3. Redemption.
(a) Optional Redemption. The Securities are subject to redemption,
in whole or in part at any time, on or after June 6, 2001 at the option of the
Company, upon not less than 30 nor more than 60 days prior notice in principal
amounts of
<PAGE>
-64-
US$1,000 or any integral multiple of US$1,000, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest (together with any Additional Amounts payable hereon) to the
redemption date, if redeemed during the 12 month period beginning June 6 of the
years indicated below:
Year Redemption Price
---- ----------------
2001 106.75%
2002 104.50%
2003 102.25%
2004 and thereafter 100.00%
(b) Optional Redemption upon Significant Equity Offering. On or
prior to June 6, 2000, the Company may, at its option, use the net proceeds of
one or more Significant Equity Offerings yielding gross cash proceeds of not
less than US$35,000,000 (or, to the extent non-U.S. dollar denominated, the U.S.
Dollar Equivalent thereof)to redeem up to an aggregate of 35% of the principal
amount of the Securities originally issued from Holders on a pro rata basis (or
as nearly pro rata as practicable), at a redemption price of 113 1/2% of the
principal amount thereof, plus accrued and unpaid interest (together with any
Additional Amounts payable hereon), if any, to the date of redemption; provided
that not less than US$81,250,000 in aggregate principal amount of Securities
would remain outstanding immediately after such redemption. To effect the
foregoing redemption, the Company must mail a notice of redemption complying
with Section 11.05 of the Indenture not later than 60 days after the
consummation of the Significant Equity Offering that resulted in the requisite
gross proceeds. As used above, "Significant Equity Offering" means either a
public offering of Capital Stock (other than Disqualified Capital Stock) of the
Company (or American Depositary Receipts or Global Depositary Receipts
representing such Capital Stock) either (x) in the United States pursuant to an
offering registered under the Securities Act or (y) in Brazil pursuant to an
offering registered with the Comissao de Valores Mobiliarios ("CVM") and listed
on the Sao Paulo Stock Exchange or Rio de Janeiro Stock Exchange and/or (z) in
the United Kingdom pursuant to an offering that results in such Capital Stock
(or Global Depositary Receipts representing such Capital Stock) being listed on
the London Stock Exchange or the Luxembourg Stock Exchange.
<PAGE>
-65-
(c) Sinking Fund. The Company will not be required to make any
mandatory sinking fund payments in respect of the Securities.
(d) Interest Payments. In the case of any redemption of Series B
Securities, interest installments whose Stated Maturity is on or prior to the
Redemption Date (together with any Additional Amounts payable thereon) will be
payable to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record Date
referred to on the face hereof. Securities (or portions thereof) for whose
redemption and payment provision is made in accordance with the Indenture shall
cease to bear interest from and after the Redemption Date.
(e) Partial Redemption. In the event of redemption of this Series B
Security in part only, a new Series B Security or Securities for the unredeemed
portion hereof shall be issued in the name of the Holder hereof upon the
cancellation hereof.
4. Tax Redemption. The Securities may be redeemed at the option of
the Company, in whole but not in part, at any time prior to maturity if (A)
there is any change in or amendment to the Treaty to Avoid Double Taxation
entered into between the Federative Republic of Brazil and Japan, approved by
Legislative Decree No. 43 dated November 23, 1967, and enacted in Brazil by
Decree No. 61,899 dated December 14, 1967, as amended by Decree No. 81,194 dated
January 9, 1978, which has the effect of increasing the rate of tax applicable
under such treaty to a rate exceeding 15.0% of interest payable; or (B) (i) as
the result of any change in or amendment to the laws or regulations of the
Federative Republic of Brazil or Japan, the Company has or will become obligated
to pay, or (ii) any act is taken by a taxing authority of the Federative
Republic of Brazil or Japan after the date of issuance of the Securities
(whether or not such action is taken with respect to the Company or any
Affiliate thereof) that results in a substantial probability that the Company
will be required to pay, Additional Amounts (excluding interest and penalties)
in excess of the Additional Amounts that the Company would be obligated to pay
if Brazilian Taxes (excluding interest and penalties) were payable with respect
to such payments of interest at a rate of 15.0% and such obligation cannot be
avoided by the Company, taking reasonable measures available to it, upon not
more than 60 nor less than 30 days' notice to the holders of such Securities
(with copies to the Trustee and each Paying Agent) at a redemption price of 100%
of the principal amount thereof, plus accrued and unpaid interest to the
redemption date plus any
<PAGE>
-66-
such additional Amounts payable with respect to such redemption price and
interest as provided under Section 10.08 of the Indenture. Prior to the giving
of notice of redemption of the Securities as described herein and as a condition
to any such redemption, the Company will deliver to the Trustee an Officers'
Certificate (together with a copy of the written opinion of counsel to the
effect that the applicable rate has so increased, or the Company has or will
become so obligated, or that an action taken by a taxing authority of Brazil has
resulted in a substantial probability that the Company will become so obligated
to pay Additional Amounts as a result of such change, amendment, interpretation
or action), stating that the Company is entitled to effect such redemption and
setting forth in reasonable detail a statement of facts relating thereto. No
notice of redemption shall be given earlier than 60 days prior to the earliest
date on which the Company would be obligated or there is a substantial
probability that the Company would be obligated to pay such Additional Amounts
were a payment in respect of the Securities then due and, at the time such
notice of redemption is given, such obligation to pay, or such substantial
probability that the Company will be required to pay, such Additional Amounts
remains in effect.
5. Offers to Purchase. Section 10.15 of the Indenture provides that
following any Asset Sale, and subject to further limitations contained therein,
the Company shall make an offer to purchase Securities in accordance with the
procedures set forth in the Indenture. In addition, the Company is required to
make an offer to repurchase this Security at a purchase price of 101% of the
principal amount hereof upon the occurrence of a Change of Control in the manner
set forth in Section 10.16.
6. Defaults and Remedies. Events of Default under the Indenture
include, among others: (a) default in the payment of the principal of, or
premium, if any, on the Securities when due; (b) default in the payment of
interest on the Securities when it becomes due and payable and the continuance
of such default for a period of 30 days or more; provided, however, that a
failure to pay interest (but not Additional Amounts or Additional Interest) on
the Notes in a timely manner through June 6, 2000 will constitute an immediate
Event of Default, with no grace or cure period; (c) default in the performance,
or breach, of certain covenants in the Indenture, this Security or any
Guarantees, and continuance of such default or breach for a period of 45 days or
more after written notice; (d) failure by the Company or any Restricted
Subsidiary to perform any provision of one or more classes or issues of
<PAGE>
-67-
other Indebtedness in an aggregate principal amount of US$5,000,000 (or, to the
extent non-U.S. dollar denominated, the U.S. Dollar Equivalent thereof) or more,
and, in the case of any such default other than a failure to pay, following any
applicable period of grace, principal on such Indebtedness when due, such
failure results in the acceleration of the maturity of such Indebtedness; (e)
one or more final and non-appealable judgments, orders or decrees for the
payment of money in the amount of US$5,000,000 (or, to the extent non-U.S.
dollar denominated, the U.S. Dollar Equivalent thereof) or more; (f) seizure,
compulsory acquisition, expropriation or nationalization of substantially all of
the assets of the Company and the Restricted Subsidiaries, taken as a whole; (g)
any Guarantee ceases to be in full force and effect or is declared null and void
or any Guarantor denies that it has any further liability under, or disaffirms
its obligations under, any Guarantee or gives notice to that effect (other than
by reason of the termination of the Indenture or the release of any Guarantee in
accordance with the Indenture); (h) the Company asserts or admits in writing
that the Escrow Agreement is unenforceable or is not in full force and effect;
and (i) certain events of bankruptcy, dissolution, insolvency, reorganization or
administration with respect to the Company or any Material Restricted Subsidiary
shall have occurred.
Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default as specified in clause (i) of the
previous paragraph with respect to the Company or (f) of the previous paragraph)
occurs and is continuing, then the Trustee or the Holders of not less than 25%
in aggregate principal amount of the Outstanding Securities may, and the Trustee
upon the request of the Holders of not less than 25% in aggregate principal
amount of the Outstanding Securities shall, declare all principal or premium, if
any, on and any accrued and unpaid interest on all Outstanding Securities (and
any Additional Amounts payable in respect thereof) to be immediately due and
payable. If an Event of Default specified in clause (h) of the previous
paragraph with respect to the Company or clause (f) of the previous paragraph
occurs, then the principal amount of, and any accrued and unpaid interest on,
all Outstanding Securities (and any Additional Amounts payable in respect
thereof) shall ipso facto become and be immediately due and payable without any
declaration or other act on the part of the Trustee or any Holder. Except in the
case of a default of a specific amount of premium due, the amount of any premium
shall be determined by interpolation between (a) the premium payable on the next
succeeding date on which either Holders or the Company may optionally redeem
Securities or on
<PAGE>
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which the Securities mature, as applicable (a "Payment Date"), and (b) the
immediately preceding Payment Date or, if there is no immediately preceding
Payment Date, 0%.
7. Defeasance. The Indenture contains provisions (which provisions
apply to this Series A Security) for defeasance at any time of (a) the entire
indebtedness of the Company and any Guarantors on this Series A Security and (b)
certain restrictive covenants and related Defaults and Events of Default, in
each case upon compliance by the Company with certain conditions set forth
therein.
8. Amendments and Waivers. The Company, the Guarantors, if any, and
the Trustee (if a party thereto) may, without the consent of the Holders of any
Outstanding Securities, amend, waive or supplement the Indenture, the Securities
or the Guarantees for certain specified purposes, including, among other things,
curing ambiguities, defects or inconsistencies, maintaining the qualification of
the Indenture under the Trust Indenture Act of 1939, as amended, and making any
change that does not adversely affect the rights of any Holder. Other amendments
and modifications of the Indenture, the Securities or the Guarantees may be made
by the Company, the Guarantors, if any, and the Trustee with the consent of the
Holders of not less than a majority of the aggregate principal amount of the
Outstanding Securities, subject to certain exceptions requiring the consent of
the Holders of the particular Securities to be affected. Any such consent or
waiver by or on behalf of the Holder of this Series B Security shall be
conclusive and binding upon such Holder and upon all future Holders of this
Series B Security and of any Series B Security issued upon the registration of
transfer hereof or in exchange herefor or in lieu hereof whether or not notation
of such consent or waiver is made upon this Series B Security.
9. Denominations, Transfer and Exchange. The Series B Securities are
issuable only in registered form without coupons in denominations of US$1,000
and any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, the Series B Securities are exchangeable
for a like aggregate principal amount of Series B Securities of a different
authorized denomination, as requested by the Holder surrendering the same.
If this Series B Security is in certificated form, then as provided
in the Indenture and subject to certain limitations therein set forth, the
transfer of this Series B Security is registrable on the Security Register of
the Company,
<PAGE>
-69-
upon surrender of this Series B Security for registration of transfer at the
office or agency of the Company maintained for such purpose in The City of New
York or at such other office or agency of the Company as may be maintained for
such purpose, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly
executed by, the Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Series B Securities, of authorized denominations and
for the same aggregate principal amount, will be issued to the designated
transferee or transferees.
If this Series B Security is a Global Security, it is exchangeable
for Series B Securities in certificated form if (i) the Depository notifies the
Company that it is unwilling or unable to continue as depository or the
Depository ceases to be a "clearing agency" registered under the Exchange Act
and, in each case, a successor Depository is not appointed by the Company within
90 days of such notice or such cessation, as the case may be, or (ii) there
shall have occurred and be continuing an Event of Default with respect to any
Securities represented by this Global Security and Holders who hold more than
25% in aggregate principal amount of the Securities at the time outstanding
represented by this Global Security advise the Trustee through the Depository in
writing that the continuation of book-entry system through the Depository (or a
successor thereto) with respect to this Global Security is no longer required
and the Security Registrar has received a request from the Depository to issue
certificated Securities. In addition, in accordance with the provisions of the
Indenture and subject to certain limitations therein set forth, a beneficial
owner of a beneficial interest in a Global Security may request a Series B
Security in certificated form, in exchange in whole or in part, as the case may
be, for such beneficial owner's interest in the Global Security. In any such
instance, an owner of a beneficial interest in a Global Security will be
entitled to physical delivery in certificated form of Series B Securities in
authorized denominations equal in principal amount to such beneficial interest
and to have such Series B Securities registered in its name.
No service charge shall be made for any registration of transfer or
exchange or redemption of Series B Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge
payable in connection therewith.
<PAGE>
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10. Certain Information Obligations. The Company is required to
furnish to the Trustee and to the Holder of this Security certain quarterly,
annual and other financial statements and other information as set forth in
Section 10.09 of the Indenture.
11. Persons Deemed Owners. Prior to and at the time of due
presentment of this Series B Security for registration of transfer, the Company,
the Trustee and any agent of the Company or the Trustee may treat the person in
whose name this Series B Security is registered as the owner hereof for all
purposes, whether or not this Series B Security shall be overdue, and neither
the Company, the Trustee nor any agent shall be affected by notice to the
contrary.
12. GOVERNING LAW. THE INDENTURE, THIS SECURITY AND THE GUARANTEES
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW, EXCEPT THAT
MATTERS RELATING TO THE AUTHORIZATION BY THE COMPANY OR ANY GUARANTORS OF THE
INDENTURE, THIS SECURITY AND THE GUARANTEES SHALL BE GOVERNED BY THE APPLICABLE
LAWS OF THE FEDERATIVE REPUBLIC OF BRAZIL OR OTHER JURISDICTION OF ITS
ORGANIZATION. THE TRUSTEE, THE COMPANY, ANY GUARANTOR, ANY OTHER OBLIGOR IN
RESPECT OF THE SECURITIES AND THE HOLDERS AGREE TO SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THE INDENTURE, THIS SECURITY OR ANY GUARANTEES.
13. Paying Agents and Registrar. Initially, The Chase Manhattan
Bank, a banking corporation (the "Trustee") will act as co-Paying Agent and
Registrar. Initially, Chase Trust Company will act as Principal Paying Agent.
The Company may change any Paying Agent, Registrar or co-Registrar. Upon such
change, the Company shall give written notice thereof to the Trustee and the
Holders. Neither the Company nor any of its Affiliates may act as Registrar or
co-Registrar. The Company may, subject to Section 3.08 and Section 10.03 of the
Indenture, act as Paying Agent.
14. Additional Amounts. The Company will pay to the Holders of
Securities such Additional Amounts as may become payable under Section 10.08 of
the Indenture.
15. Conversion of Currency. U.S. dollars are the sole currency of
account and payment for all sums payable by the Company and the Guarantors under
or in connection with the
<PAGE>
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Securities, the Guarantees or the Indenture, including damages. The Company and
each Guarantor have agreed that the provisions of Section 1.20 of the Indenture
shall apply to conversion of currency in the case of the Securities, the
Guarantees and the Indenture. Among other things, Section 1.20 specifies that if
there is a change in the rate of exchange prevailing between the Business Day
before the day on which a judgment is given or an order of enforcement is made,
as the case may be (or such other date as a court shall determine), and the date
of receipt of the amount due, the Company or the relevant Guarantor, as the case
may be, will pay such additional (or, as the case may be, such lesser) amount,
if any, as may be necessary so that the amount paid in the judgment currency
when converted at the rate of exchange prevailing on the date of receipt will
produce the amount in the Base Currency originally due. In the event that on any
payment date in respect of the Securities or any Guarantee, any restrictions or
prohibition of access to the Brazilian foreign exchange market exists, the
Company and each agrees to pay all amounts payable under the Securities and the
Guarantees in the currency of the Securities by means of any legal procedure
existing in Brazil (except commencing legal proceedings against the Central Bank
of Brazil), on any due date for payment under the Securities, for the purchase
of the currency of such Securities. All costs and taxes payable in connection
with the procedures referred to in this paragraph shall be borne by the Company
and the Guarantors.
16. Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. The Company and each Guarantor have appointed CT Corporation System,
currently located at 1633 Broadway, New York, New York 10019, as its authorized
agent upon which process may be served in any suit, or proceeding with respect
to, arising out of, or relating to, this Security, the Indenture or any
Guarantee, that may be instituted in any Federal or state court in the State of
New York, The City of New York, the Borough of Manhattan, or brought under
Federal or state securities laws and have agreed that there shall, at all times,
be at least one agent for service of process for the Company and the Guarantors
appointed and acting in accordance with the provisions of Section 1.19 of the
Indenture relating to agent for service of process. To the extent that the
Company or any Guarantor has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service of
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, the Company and each
Guarantor have irrevocably waived such immunity in respect of
<PAGE>
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its obligations under the Indenture, this Security and the Guarantees, to the
extent permitted by law.
<PAGE>
-73-
ASSIGNMENT FORM
If you the holder want to assign this Security, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Security to
________________________________________________________________________________
(Insert assignee's social security or tax ID number) ___________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
________________________________________________________________________________
agent to transfer this Security on the books of the Company. The agent
may substitute another to act for such agent.
Dated: __________________ Your Signature:
(Sign exactly as your name
appears on the other side
of this Security)
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company
pursuant to Section 10.15 or 10.16 of the Indenture, check the Box: [ ]
If you wish to have a portion of this Security purchased by the
Company, state the amount:
$___________________
<PAGE>
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Dated: __________________ Your Signature:
----------------------------
(Sign exactly as your name
appears on the other side
of this Security)
Signature Guarantee:
------------------------
Section 2.04 Form of Trustee's Certificate of Authentication
An authorized officer of the Trustee shall authenticate the
Securities by executing a certificate of authentication which shall be endorsed
upon the Securities in substantially the following form:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
This is one of the 13 1/2% Senior Notes due 2005 of Paging Network
do Brasil S.A. referred to in the within-mentioned Indenture.
The Chase Manhattan Bank,
as Trustee
By:
------------------------------
Authorized Officer
Section 2.05 Form of Legend on Restricted Securities
During the period beginning on the later of the Issue Date and the
last date on which the Company or any Affiliate of the Company was the owner of
a Series A Security (or any Predecessor Security) and ending on the date two
years (or such shorter period of time as permitted by Rule 144(k) under the
Securities Act or any successor provision thereunder) from any such date (or
such longer period as may be required under the Securities Act or applicable
state securities laws in the opinion of counsel for the Company), any Series A
Security issued or owned during the period set forth above, as the case may be,
and any Security issued upon registration of transfer of, or in exchange for, or
in lieu of, such Series A Security, shall be deemed a "Restricted Security" and
shall be subject to the restrictions on transfer provided in the legend set
forth below;
<PAGE>
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provided, however, that the term "Restricted Security" shall not include (a) any
Series A Security which is issued upon transfer of, or in exchange for, any
Security which is not a Restricted Security or (b) any Series A Security as to
which such restrictions on transfer have been terminated in accordance with
Section 3.05, (c) any Series B Security issued pursuant to the Registered
Exchange Offer, (d) any Series B Security covered by a Shelf Registration
Statement (as defined in the Notes Registration Rights Agreement) or (e) any
Offshore Global Security or Offshore Physical Security. Any Restricted Security
shall bear the legend set forth below:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN
"ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING
THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO RULE 903 or 904 OF
REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS
TWO YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k)
UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR ANY PREDECESSOR OF THIS
SECURITY) OR THE LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY OR ANY PREDECESSOR OF THIS SECURITY
AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS
(THE "RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE
TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
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MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING
OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 904 OF
REGULATION S, (E) TO AN ACCREDITED INVESTOR THAT IS ACQUIRING THE
SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH ACCREDITED
INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES
ACT OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO
EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT.
Section 2.06 Form of Legend for Global Securities.
Any Global Security authenticated and delivered hereunder shall bear
a legend (which would be in addition to any other legends required in the case
of a Restricted Security) in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY OR A NOMINEE OF THE DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS
SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY
(OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A
NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE
DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER
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NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
ARTICLE THREE
THE SECURITIES
Section 3.01 Title and Terms.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to US$125,000,000 in
aggregate principal amount of Series A Securities and Series B Securities,
except for Securities authenticated and delivered upon registration of, transfer
of, or in exchange for, or in lieu of, other Securities pursuant to Section
3.03, 3.04, 3.05, 3.06, 9.06, 10.15, 10.16 or 11.08.
The Series A Securities shall be known and designated as the "13
1/2% Senior Notes due 2005, Series A" of the Company. The Series B Securities
shall be known and designated as the "13 1/2% Senior Notes due 2005, Series B"
of the Company. The final Stated Maturity of the Series A Securities and the
Series B Securities shall be June 6, 2005, and the Series A Securities and
Series B Securities shall each bear interest at the rate of 13 1/2% per annum
from the Issue Date or from the most recent Interest Payment Date to which
interest has been paid, as the case may be, payable on December 6, 1997 and
semi-annually thereafter on June 6 and December 6, in each year, until the
principal thereof is paid or duly provided for. Subject to Article Thirteen,
interest on any overdue principal, interest (to the extent lawful) or premium,
if any, shall be payable on demand.
Series B Securities may be issued only in exchange for a like
principal amount of Series A Securities pursuant to an Exchange Offer.
Series A Securities offered and sold in reliance on Rule 144A shall
be issued initially in the form of a single permanent global security (the "U.S.
Global Security") and Series A Securities offered and sold in reliance on
Regulation S
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may be issued initially in the form of a permanent global security (the
"Offshore Global Security" and together with the U.S. Global Security, the
"Global Securities"), each substantially in the form set forth in Sections
2.02(a) and 2.03(a) hereof, deposited with the Trustee, as custodian of the
Depository, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of any Global Security may
from time to time be increased or decreased by adjustments made on the records
of the Trustee, as custodian for the Depository or its nominee, as hereinafter
provided.
Series A Securities which are offered and sold to Institutional
Accredited Investors which are not QIBs (excluding Non-U.S. Persons) shall be
issued in the form of permanent certificated Securities in registered form (the
"U.S. Physical Securities"). Securities issued pursuant to Section 3.14(b) in
exchange for interests in the U.S. Global Security shall be in the form of U.S.
Physical Securities. Series A Securities offered in reliance on Regulation S may
be issued initially in the form of permanent certificated Securities in
registered form and Securities issued in exchange for interests in the Offshore
Global Security pursuant to Section 3.14(b) shall be in the form of permanent
certificated Securities in registered form (together, the "Offshore Physical
Securities" and together with the U.S. Physical Securities, the "Physical
Securities").
Physical Securities shall be in substantially the form set forth in
Sections 2.02(a) and 2.03(a) hereof.
Subject to Section 3.13 hereof, the principal of, premium, if any,
and interest on Global Securities shall be payable at the office or agency of
the Company maintained for such purpose in the Borough of Manhattan in The City
of New York, or at such other office or agency of the Company as may be
maintained for such purpose; provided, however, that at the option of the
Company interest may be paid by check mailed to the addresses of the persons
entitled thereto as such addresses shall appear on the Security Register.
The Securities shall be redeemable only as provided in Article
Eleven.
At the election of the Company, the entire Indebtedness on the
Securities or certain of the Company's obligations and covenants and certain
Events of Default thereunder may be defeased as provided in Article Four.
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Section 3.02 Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of US$1,000 and any integral multiple thereof.
Section 3.03 Execution, Authentication, Delivery and Dating.
The Securities shall be manually executed on behalf of the Company
by its Chairman of the Board, Vice-Chairman, its President or one of its Vice
Presidents.
Securities bearing the manual signature of individuals who were at
any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices on the date of such Securities.
At any time and from time to time upon or after the execution and
delivery of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities; and the Trustee in accordance
with such Company Order shall authenticate and deliver such Securities as
provided in this Indenture and not otherwise.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for in Section
2.04 hereof duly executed by the Trustee by manual signature of an authorized
representative, and such certificate upon any Security shall be conclusive
evidence, and the only evidence, that such Security has been duly authenticated
and delivered hereunder.
In case the Company, pursuant to Article Eight, shall be
consolidated, amalgamated, merged with or into any other person or shall convey,
transfer or lease substantially all of its properties and assets to any person,
and the successor person resulting from such consolidation, amalgamation or
surviving such merger, or into which the Company shall have been merged, or the
person which shall have received a conveyance,
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transfer or lease as aforesaid, shall have executed an indenture supplemental
hereto with the Trustee pursuant to Article Eight, any of the Securities
authenticated or delivered prior to such consolidation, amalgamation, merger,
conveyance, transfer or lease may, from time to time, at the request of the
successor person, be exchanged for other Securities executed in the name of the
successor person with such changes in terminology and form as may be
appropriate, but otherwise in substance of like tenor as the Securities
surrendered for such exchange and of like principal amount; and the Trustee,
upon Company Order of the successor person, shall authenticate and deliver
replacement Securities as specified in such request for the purpose of such
exchange. If such Securities shall at any time be authenticated and delivered in
any new name of a successor person pursuant to this Section 3.03 in exchange or
substitution for or upon registration of transfer of any Securities, such
successor person, at the option of the Holders but without expense to them,
shall provide for the exchange of all Securities at the time Outstanding for
Securities authenticated and delivered in such new name.
The Trustee may appoint an authenticating agent to authenticate
Securities on behalf of the Trustee if directed to do so by a Company Order.
Each reference in this Indenture to authentication by the Trustee includes
authentication by each such agent. An authenticating agent has the same rights
as any Security Registrar or Paying Agent to deal with the Company and its
Affiliates.
If any of the Securities are to be issued in the form of one or more
Global Securities, then the Company shall execute and the Trustee shall
authenticate and deliver one or more Global Securities that (i) shall represent
and shall be in minimum denominations of US$1,000 or integral multiples thereof,
(ii) shall be registered in the name of the Depository for such Global Security
or Securities or the nominee of such Depository, (iii) shall be delivered by the
Trustee to such Depository or pursuant to such Depository's instructions and
(iv) shall bear the legend in substantially the form set forth in Section 2.06.
If, pursuant to Section 10.18 hereof or otherwise, any Guarantor is
at any time subject to any Indenture Obligations, such Guarantor shall, upon
request of any Holder, endorse the Guarantee of such Guarantor on the Security
of such Holder or any replacement thereof; provided, however, that every
Guarantor shall be jointly and severally liable for Indenture Obligations and
each Security shall have the full bene-
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fit of and every right and privilege relating to each Guarantee notwithstanding
that such Guarantee is not endorsed thereon.
Section 3.04 Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities. Temporary Securities may be printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
conclusively evidenced by their execution of such Securities.
If temporary Securities are issued, the Company will cause
definitive Securities to be prepared without unreasonable delay but in no event
later than the date that the Registered Exchange Offer is consummated. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 10.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged the temporary Securities shall in all respects be entitled to the same
benefits under this Indenture as definitive Securities.
Section 3.05 Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 10.02 being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as the Security Registrar may prescribe, the Company shall provide
for the registration of Securities and of transfers of Securities. The Trustee
is hereby initially appointed "Security Registrar" for the purpose of
registering Securities and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pur-
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suant to Section 10.02, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any authorized denomination or
denominations, of a like aggregate principal amount.
At the option of the Holder, Securities in certificated form may be
exchanged for other Securities of any authorized denomination or denominations,
of a like aggregate principal amount, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Holder making the exchange is entitled to
receive.
If a Series A Security is a U.S. Physical Security, then as provided
in this Indenture and subject to the limitations herein set forth, the Holder,
provided it is a Qualified Institutional Buyer, may exchange such Security for a
book-entry security by instructing the Trustee to arrange for such Series A
Security to be represented by a beneficial interest in a Global Security.
All Securities issued upon any registration of transfer or exchange
of Securities including, without limitation, any exchange pursuant to an
Exchange Offer shall be the valid obligations of the Company, evidencing the
same Indebtedness, and entitled to the same benefits under this Indenture, as
the Securities surrendered upon such registration of transfer or exchange and no
such transfer or exchange shall constitute a repayment of any obligation nor
create any new obligations of the Company.
Every Security presented or surrendered for registration of
transfer, or for exchange or redemption shall (if so required by the Company or
the Security Registrar) be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar, duly executed by the Holder thereof or his attorney duly authorized
in writing.
Every Restricted Security shall be subject to the restrictions on
transfer provided in the legend required to be set forth on the face of each
Restricted Security pursuant to Section 2.05, Section 2.02(a) and the
restrictions set forth in this Section 3.05, and the Holder of each Restricted
Security, by such Holder's acceptance thereof, agrees to be bound by such
restrictions on transfer.
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The restrictions imposed by this Section 3.05 and Section 2.05 upon
the transferability of any particular Restricted Security shall cease and
terminate on (x) the later of June 6, 1999 or two years (or such shorter period
of time as permitted by Rule 144(k) under the Securities Act or any successor
provision thereunder) after the later of the Issue Date or the last date on
which the Company or any Affiliate of the Company was the owner of such
Restricted Security (or any predecessor of such Restricted Security) or (y) (if
earlier) if and when such Restricted Security has been sold pursuant to an
effective registration statement under the Securities Act or, unless the Holder
thereof is an affiliate of the Company within the meaning of Rule 144 (or such
successor provision), transferred pursuant to Rule 144 or Rule 904 under the
Securities Act (or any successor provision). Any Restricted Security as to which
such restrictions on transfer shall have expired in accordance with their terms
or shall have terminated may, upon surrender of such Restricted Security for
exchange to the Trustee or any transfer agent in accordance with the provisions
of this Section 3.05, be exchanged for a new Security, of like series, tenor and
aggregate principal amount, which shall not bear the restrictive legend required
by Section 2.05 and shall thereafter be deemed not to be a Restricted Security
for any purpose under this Indenture. The Company shall inform the Trustee in
writing of the effective date of any registration statement registering any
Restricted Securities under the Securities Act.
No service charge shall be made to a Holder for any registration of
transfer or exchange or redemption of Securities, but the Company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Securities, other than exchanges pursuant to Section 3.03, 3.04, 9.06, 10.15,
10.16 or 11.08 not involving any transfer.
The Company shall not be required (a) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the mailing of a notice of redemption of the Securities
selected for redemption under Section 11.04 and ending at the close of business
on the day of such mailing, or (b) to register the transfer of or exchange any
Security so selected for redemption in whole or in part, except the unredeemed
portion of Securities being redeemed in part.
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Any Holder of a Global Security shall, by acceptance of such Global
Security, agree that transfers of beneficial interests in such Global Security
may be effected only through a book-entry system maintained by the Holder of
such Global Security (or its agent), and that ownership of a beneficial interest
in the Security shall be required to be reflected in a book entry.
When Securities are presented to the Security Registrar with a
request to register the transfer or to exchange them for an equal principal
amount of Securities of other authorized denominations, the Security Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transactions are met. To permit registrations of transfers
and exchanges, the Company shall execute and the Trustee shall authenticate
Securities at the Security Registrar's request.
Section 3.06 Mutilated, Destroyed, Lost and Stolen Securities.
If (a) any mutilated Security is surrendered to the Trustee, or (b)
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Security, and there is delivered to the
Company, each Guarantor, if any, and the Trustee, such security or indemnity, in
each case, as may be required by them to save each of them harmless from any
loss which any of them may suffer if a Security is replaced, then, in the
absence of notice to the Company, any Guarantor or the Trustee that such
Security has been acquired by a bona fide purchaser, the Company shall execute
and upon a Company Order the Trustee shall authenticate and deliver, in exchange
for any such mutilated Security or in lieu of any such destroyed, lost or stolen
Security, a replacement Security of like tenor and principal amount, bearing a
number not contemporaneously outstanding and each Guarantor, if any, under this
Indenture as of such date shall duly endorse its Guarantee thereon.
Upon the issuance of any replacement Securities under this Section,
the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every replacement Security issued pursuant to this Section in lieu
of any destroyed, lost or stolen Security shall
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constitute an original additional contractual obligation of the Company and each
Guarantor, whether or not the destroyed, lost or stolen Security shall be at any
time enforceable by anyone, and shall be entitled to all benefits of this
Indenture equally and proportionately with any and all other Securities duly
issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
Section 3.07 Payment of Interest; Interest Rights Preserved.
Interest, including any additional interest payable pursuant to the
Notes Registration Rights Agreement relating to increases in the interest rate
on the Securities, on any Security (and any Additional Amounts payable in
respect thereof) which is payable, and is punctually paid or duly provided for,
on any Interest Payment Date shall be paid to the person in whose name that
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest.
Any interest on any Security (and any Additional Amounts payable in
respect thereof) which is payable, but is not punctually paid or duly provided
for, on any Interest Payment Date and interest (and any Additional Amounts
payable in respect thereof) on such defaulted interest at the then applicable
interest rate borne by the Securities, to the extent lawful (such defaulted
interest and interest thereon herein collectively called "Defaulted Interest")
shall forthwith cease to be payable to the Holder on the Regular Record Date;
and such Defaulted Interest may be paid by the Company or any Guarantor, at its
election in each case, as provided in subsection (a) or (b) below:
(a) The Company or any Guarantor may elect to make payment of any
Defaulted Interest to the persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company or a Guarantor shall
notify the Trustee in writing of the amount of Defaulted Interest proposed
to be paid on each Security and the date of the proposed payment, and at
the same time the Company or a Guarantor shall deposit
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with the Trustee an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the persons entitled to such Defaulted Interest
as in this Subsection (a) provided. Thereupon the Trustee shall fix a
Special Record Date for the payment of such Defaulted Interest which shall
be not more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company and, if applicable, such Guarantor in writing of such
Special Record Date. In the name and at the expense of the Company or such
Guarantor, the Trustee shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at its address as it appears
in the Security Register, not less than 10 days prior to such Special
Record Date. Notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor having been so mailed, such Defaulted
Interest shall be paid to the persons in whose names the Securities (or
their respective Predecessor Securities) are registered on such Special
Record Date and shall no longer be payable pursuant to the following
subsection (b).
(b) The Company or a Guarantor may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Securities may be listed, and upon
such notice as may be required by such exchange, if, after written notice
given by the Company or such Guarantor to the Trustee of the proposed
payment pursuant to this subsection (b), such payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
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Section 3.08 Paying Agents; Discharge of Payment Obligations;
Indemnity of Holders.
(a) The Company may from time to time appoint one or more Paying
Agents and may designate a Paying Agent as Principal Paying Agent under this
Indenture and the Securities. By its execution and delivery of this Indenture,
the Company hereby initially designates and appoints Chase Trust Company as
Principal Paying Agent. Subject to Section 10.03, the Company may act as Paying
Agent.
(b) Unless the Company shall be acting as Paying Agent as provided
in Section 10.03, the Company shall, by 10:00 A.M. New York time, no later than
one Business Day prior to each interest payment date or principal payment date
on any Securities (whether on maturity, redemption or otherwise) (each, a
"Payment Date"), deposit with the Principal Paying Agent in immediately
available funds a sum sufficient to pay such principal, any premium, and
interest when so becoming due (including any Additional Amounts). The Company
shall request that the bank through which such payment is to be made agree to
supply to the Principal Paying Agent by 10:00 A.M. (New York time) two Business
Days prior to the due date for any such payment an irrevocable confirmation (by
tested telex or authenticated SWIFT MT 100 Message) of its intention to make
such payment. The Principal Paying Agent shall arrange with all Paying Agents
for the payment, from funds furnished by the Company or any Guarantor to the
Trustee pursuant to this Indenture, of the principal, and premium, if any, and
interest (including Additional Amounts, if any) on the Securities and of the
compensation of such Paying Agents for their services as such. All Paying Agents
will hold in trust, for the benefit of Holders or the Trustee, all money held by
such Paying Agent for the payment of principal, or premium, if any, of or
interest on the Securities and shall notify the Trustee of any default by the
Company in making any such payment. The Company at any time may require a Paying
Agent to pay all money held by it to the Trustee and to account for any funds
disbursed by it. Upon complying with this Section 3.08 and the applicable
provisions of Section 10.03, the Paying Agents shall have no further liability
for the money delivered to the Trustee.
(c) Any payment to be made in respect of the Securities or
Guarantees by the Company or any Guarantor to or to the order of a Paying Agent
shall be in satisfaction pro tanto of the obligations of the Company under the
Securities. The Company shall indemnify the Holders against any failure on the
part of any Paying Agent to pay any sum due in respect of the
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Securities and shall pay such sum to the Trustee on demand. This indemnity
constitutes a separate and independent obligation from the other obligations of
the Company under the Securities, shall give rise to a separate and independent
cause of action, will apply irrespective of any waiver granted by the Trustee
and/or any holder of Securities and shall continue in full force and effect
despite any judgment, order, claim, or proof for a liquidated amount in respect
of any sum due under the Indenture, the Securities or any judgment or order.
Section 3.09 Persons Deemed Owners.
Prior to and at the time of due presentment for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the person in whose name any Security is registered in the Security
Register as the owner of such Security for the purpose of receiving payment of
principal of, premium, if any, and (subject to Section 3.07) interest on such
Security and for all other purposes whatsoever, whether or not such Security
shall be overdue, and neither the Company, the Trustee nor any agent of the
Company or the Trustee shall be affected by notice to the contrary.
Section 3.10 Cancellation.
All Securities surrendered for payment, redemption, repurchase,
registration of transfer or exchange shall be delivered to the Trustee and, if
not already cancelled, shall be promptly cancelled by it. The Company and any
Guarantor may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company or such
Guarantor may have acquired in any manner whatsoever, and all Securities so
delivered shall be promptly cancelled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section 3.09, except as expressly permitted by this Indenture. All
cancelled Securities held by the Trustee shall be destroyed and certification of
their destruction delivered to the Company unless by a Company Order the Company
shall direct that the cancelled Securities be returned to it. The Trustee shall
provide the Company a list of all Securities that have been cancelled from time
to time as requested by the Company.
Section 3.11 Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
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Section 3.12 Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, date
established for the payment of Defaulted Interest or Stated Maturity of any
Security shall not be a Business Day, then (notwithstanding any other provision
of this Indenture or of the Securities) payment of principal, premium, if any,
or interest need not be made on such date, but may be made on the next
succeeding Business Day with the same force and effect as if made on the
Interest Payment Date, Redemption Date, date established for the payment of
Defaulted Interest or at the Stated Maturity, as the case may be, and no
interest shall accrue with respect to such payment for the period from and after
such Interest Payment Date, Redemption Date, date established for the payment of
Defaulted Interest or Stated Maturity, as the case may be, to the next
succeeding Business Day.
Section 3.13 CUSIP Number.
The Company in issuing the Securities may use a "CUSIP" number (if
then generally in use), and if so, the Trustee may use the CUSIP numbers in
notices of redemption or exchange as a convenience to Holders; provided,
however, that any such notice may state that no representation is made as to the
correctness or accuracy of the CUSIP number printed in the notice or on the
Securities, and that reliance may be placed only on the other identification
numbers printed on the Securities. All Series B Securities shall bear identical
CUSIP numbers. The Company shall promptly notify the Trustee in writing of any
change in the CUSIP number of either series of Securities.
Section 3.14 Book-Entry Provisions for Global Security.
(a) Each Global Security initially shall (i) be registered in the
name of the Depository for such Global Security or the nominee of such
Depository, (ii) be delivered to the Trustee as custodian for such Depository
and (iii) bear legends as set forth in Section 2.06.
Members of, or participants in, the Depository ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depository, or the Trustee as its custodian, or
under such Global Security, and the Depository may be treated by the Company,
the Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein
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shall prevent the Company, the Trustee or any agent of the Company or the
Trustee, from giving effect to any written certification, proxy or other
authorization furnished by the Depository or shall impair, as between the
Depository and its Agent Members, the operation of customary practices governing
the exercise of the rights of a holder of any Security.
(b) Transfers of a Global Security shall be limited to transfers of
such Global Security in whole, but not in part, to the Depository, its
successors or their respective nominees. Interests of beneficial owners in a
Global Security may be transferred in accordance with the rules and procedures
of the Depository and the provisions of Section 3.15. Beneficial owners may
obtain Physical Securities in exchange for their beneficial interests in a
Global Security upon request in accordance with the Depository's and the
Security Registrar's procedures (x) in the case of any Offshore Global Security,
at any time on or after the 41st day following the Issue Date, and (y) in the
case of any U.S. Global Security, at any time. In addition, Physical Securities
shall be issued in exchange for a Global Security if (i) the Depository notifies
the Company that it is unwilling or unable to continue as Depository for a
Global Security or the Depository ceases to be a "clearing agency" registered
under the Exchange Act and, in each case, a successor depository is not
appointed by the Company within 90 days of such notice or such cessation, as the
case may be or (ii) an Event of Default has occurred and is continuing with
respect to any Securities represented by a Global Security and Holders who hold
more than 25% in aggregate principal amount of the Securities at the time
outstanding represented by such Global Security advise the Trustee through the
Depository in writing that the continuation of a book-entry system through the
Depository (or a successor thereto) with respect to such Global Security is no
longer required and the Security Registrar has received a request from the
Depository to issue Physical Securities.
(c) Any beneficial interest in one of the Global Securities that is
transferred to a person who takes delivery in the form of an interest in the
other Global Security will, upon transfer, cease to be an interest in such
Global Security and become an interest in the other Global Security and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Security for as long as it remains such an interest.
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(d) In connection with any transfer of a portion of the beneficial
interest in any U.S. Global Security to beneficial owners pursuant to subsection
(b) of this Section, the Security Registrar shall reflect on its books and
records the date and a decrease in the principal amount of such U.S. Global
Security in an amount equal to the principal amount of the beneficial interest
in such U.S. Global Security to be transferred, and the Company shall execute,
and the Trustee shall authenticate and deliver, one or more U.S. Physical
Securities of like tenor and amount.
(e) In connection with the transfer of an entire Global Security to
beneficial owners thereof pursuant to subsection (b) of this Section, such
Global Security shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depository in exchange
for its beneficial interest in such Global Security, an equal aggregate
principal amount of Physical Securities of authorized denominations.
(f) Any U.S. Physical Security delivered in exchange for an interest
in any U.S. Global Security pursuant to subsection (b) or subsection (d) of this
Section shall, except as otherwise provided by paragraph (a)(i)(x) or paragraph
(e) of Section 3.15, bear the Private Placement Legend.
(g) The registered holder of any Global Security may grant proxies
and otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
(h) QIBs that are beneficial owners of interests in a Global
Security may receive Physical Securities (which shall bear the Private Placement
Legend if required by Section 2.05) in accordance with the procedures of the
Depository. In connection with the execution, authentication and delivery of
such Physical Securities, the Registrar shall reflect on its books and records a
decrease in the principal amount of the relevant Global Security equal to the
principal amount of such Physical Securities, and the Company shall execute and
the Trustee shall authenticate and deliver one or more Physical Securities
having an equal aggregate principal amount.
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Section 3.15 Special Transfer Provisions for Series A Securities.
(a) Transfers to Non-QIB Institutional Accredited Investors.
The following provisions shall apply with respect to the registration of
any proposed transfer of a Series A Security to any Institutional
Accredited Investor which is not a QIB (excluding Non-U.S. persons):
(i) The Security Registrar shall register the transfer of any
Series A Security, whether or not such Security bears the Private
Placement Legend, if (x) the requested transfer is subsequent to a date
which is two years after the later of the Issue Date and the last date on
which the Company or any of its Affiliates was the owner of such Security
or (y) the proposed transferee has delivered to the Security Registrar a
certificate substantially in the form of Exhibit B hereto.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in a U.S. Global Security seeking to transfer a U.S.
Physical Security to another person, upon receipt by the Security
Registrar of (x) the documents, if any, required by paragraph (i) and (y)
instructions given in accordance with the Depository's and the Security
Registrar's procedures therefor, the Security Registrar shall reflect on
its books and records the date and a decrease in the principal amount of
such U.S. Global Security in an amount equal to the principal amount of
the beneficial interest in such U.S. Global Security to be transferred,
and the Company shall execute, and the Trustee shall authenticate and
deliver, one or more U.S. Physical Certificates of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer to a QIB (x) of a
Restricted Security or (y) at any time prior to the 41st day after the Issue
Date, of an Offshore Physical Security or an interest in the Offshore Global
Security:
(i) If the Security to be transferred consists of (x) Physical
Securities, the Security Registrar shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Series A Security stating, or has otherwise
advised the Company and the Security Registrar in writing, that the sale
has been made in compliance with the provi-
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sions of Rule 144A to a transferee who has signed the certification
provided for on the form of Series A Security stating, or has otherwise
advised the Company and the Security Registrar in writing, that it is
purchasing the Series A Security for its own account or an account with
respect to which it exercises sole investment discretion and that it and
any such account are QIBs within the meaning of Rule 144A, and that it is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company
as it has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A or (y) an interest in the U.S. Global
Security, the transfer of such interest is effected through the book-entry
system maintained by the Depository in accordance with the Depository's
and the Security Registrar's procedures therefor or (z) an interest in the
Offshore Global Security, upon receipt by the Security Registrar of
instructions given in accordance with the Depository's and the Security
Registrar's procedures, the Security Registrar shall reflect on its books
and records the date and an increase in the principal amount of the U.S.
Global Security held by the Depository in an amount equal to the principal
amount of the interest in the Offshore Global Security to be transferred
and the Depository and the Security Registrar shall record the date and a
corresponding decrease in the principal amount of the Offshore Global
Security.
(ii) If the proposed transferee is an Agent Member, and the Series A
Security to be transferred consists of Physical Securities, upon receipt
by the Security Registrar of instructions given in accordance with the
Depository's and the Security Registrar's procedures therefor, the
Security Registrar shall reflect on its books and records the date and an
increase in the principal amount of the U.S. Global Security in an amount
equal to the principal amount of the Physical Securities to be
transferred, and the Trustee shall cancel the Physical Securities so
transferred.
(c) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of a Series A Security to a
Non-U.S. Person:
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(i) The Security Registrar shall register any proposed transfer to
any Non-U.S. Person if the Security to be transferred is a U.S. Physical
Security or an interest in any U.S. Global Security only upon receipt of a
certificate substantially in the form of Exhibit C from the proposed
transferor and, except as provided in clause (ii) of this paragraph (d),
shall authenticate and deliver an Offshore Certificated Security of like
denomination.
(ii) (x) If the proposed transferor is an Agent Member holding a
beneficial interest in any U.S. Global Security, upon receipt by the
Registrar of (1) the documents required by clause (i) of this paragraph
(d) and (2) instructions in accordance with the Depository's and the
Security Registrar's procedures, the Security Registrar shall reflect on
its books and records the date and a decrease in the principal amount of
any U.S. Global Security in an amount equal to the principal amount of the
beneficial interest in such U.S. Global Security to be transferred, and
(y) if the proposed transferee is an Agent Member and there shall at such
time be an Offshore Global Security registered in the name of the
Depository or its nominee, upon receipt by the Security Registrar of
instructions given in accordance with the Depository's and the Security
Registrar's procedures, the Security Registrar shall reflect on its books
and records the date and an increase in the principal amount of such
Offshore Global Security held by the Depository in an amount equal to the
principal amount of the U.S. Physical Securities or the U.S. Global
Security, as the case may be, to be transferred, and the Trustee shall
cancel the Physical Security so transferred or decrease the principal
amount of the U.S. Global Security, as the case may be.
(d) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the Security
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Security Registrar shall deliver only Securities
that bear the Private Placement Legend unless either (i) the Private Placement
Legend is no longer required pursuant to Section 2.05 and Section 3.05, or (ii)
there is delivered to the Security Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
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(e) General. By its acceptance of any Security, or any beneficial
interest in any Global Security, bearing the Private Placement Legend, each
Holder of such Security or beneficial interest acknowledges the restrictions on
transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture. The Security Registrar shall not register a transfer of any
Security unless such transfer complies with the restrictions on transfer of such
Security set forth in this Indenture. In connection with any transfer of
Securities to an Institutional Accredited Investor, each such Holder or
beneficial owner agrees by its acceptance of the Securities to furnish the
Security Registrar or the Company such certifications, legal opinions or other
information as such Person may reasonably require to confirm that such transfer
is being made pursuant to an exemption from, or a transaction not subject to,
the registration requirements of the Securities Act; provided that the Security
Registrar shall not be required to determine (but may rely on a determination
made by the Company with respect to) the sufficiency of any such certifications,
legal opinions or other information.
The Security Registrar shall retain copies of all letters, notices
and other written communications received pursuant to Section 3.13 or this
Section 3.14. The Company shall have the right to inspect and make copies of all
such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Security Registrar.
ARTICLE FOUR
DEFEASANCE OR COVENANT DEFEASANCE
Section 4.01 Company's Option To Effect Defeasance or Covenant
Defeasance.
The Company may, at its option by Board Resolution, at any time
terminate certain of the obligations of the Company and any Guarantor with
respect to Outstanding Securities and the Guarantees, if any, as set forth in
this Article, and elect to have either Section 4.02 or Section 4.03 be applied
to all of the Outstanding Securities of any series(the "Defeased Securities"),
upon compliance with the conditions set forth below in this Article Four.
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Section 4.02 Legal Defeasance and Discharge.
Upon the Company's exercise under Section 4.01 of the option
applicable to this Section 4.02, the Company and each Guarantor, if any, shall
be deemed to have been discharged from its obligations with respect to the
Defeased Securities on the date the conditions set forth below are satisfied
(hereinafter, "legal defeasance"). For this purpose, such legal defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the Defeased Securities, which shall thereafter be
deemed to be "Outstanding" only for the purposes of Section 4.05 and the other
Sections of this Indenture referred to in (a) and (b) below, and to have
satisfied all its other obligations under such Securities and this Indenture
insofar as such Securities are concerned (and the Trustee, at the expense of the
Company, and, upon Company Request, shall execute proper instruments
acknowledging the same), except for the following, which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
Defeased Securities to receive, solely from the trust fund described in Section
4.04 and as more fully set forth in such Section, payments in respect of the
principal of, premium, if any, and interest on such Securities when such
payments are due, (b) the Company's obligations with respect to such Defeased
Securities under Sections 1.19, 1.20, 3.05, 3.06, 3.07 (first and final
paragraphs only), 7.01, 10.02, 10.03 and 10.08 (for the purposes of applying
section 10.08, if the Trustee (or any qualifying trustee pursuant to Section
4.04) is required by law or by the administration or interpretation thereof to
withhold or deduct any amount for or on account of Taxes from any payment made
from the trust fund described in Section 4.04 under or with respect to the
Securities, such payment shall be deemed to have been made by the Company and
the Company shall be deemed to have been so required to deduct or withhold),
10.11 (but only to the extent such section is applicable to Default of an
Indenture Obligation not defeased) and (c) the rights, powers, trusts, duties
and immunities of the Trustee hereunder, including, without limitation, the
Trustee's rights under Section 6.07, and (d) this Article Four. Subject to
compliance with this Article Four, the Company may exercise its option under
this Section 4.02 notwithstanding the prior exercise of its option under Section
4.03 with respect to the Securities.
Section 4.03 Covenant Defeasance.
Upon the Company's exercise under Section 4.01 of the option
applicable to this Section 4.03, the Company and each
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Guarantor, if any, shall be released from its obligations under any covenant or
provision contained in Sections 10.05, 10.06, 10.07, 10.09, 10.10, 10.12, 10.13,
10.14, 10.15, 10.16, 10.17, 10.18, 10.19, 10.20 and 10.21 and the provisions of
Article Eight shall not apply, with respect to the Defeased Securities on and
after the date the conditions set forth below are satisfied (hereinafter,
"covenant defeasance"), and the Defeased Securities shall thereafter be deemed
not to be "Outstanding" for the purposes of any direction, waiver, consent or
declaration or Act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "Outstanding"
for all other purposes hereunder. For this purpose, such covenant defeasance
means that, with respect to the Defeased Securities, the Company and each
Guarantor, if any, may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such Section or
Article, whether directly or indirectly, by reason of any reference elsewhere
herein to any such Section or Article or by reason of any reference in any such
Section or Article to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 5.01(c) or, to the extent it relates to such Section or Article,
Section 5.01(d), but, except as specified above, the remainder of this Indenture
and such Defeased Securities shall be unaffected thereby.
Section 4.04 Conditions to Legal Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 4.02 or Section 4.03 to the Defeased Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 6.09 who shall agree to comply with the provisions of this
Article Four applicable to it) as trust funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of such Securities, (a)
money in an amount, or (b) U.S. Government Obligations which through the
scheduled payment of principal, premium, if any, and interest in respect
thereof in accordance with their terms will provide, not later than one
day before the due date of any payment, money, in an amount, or (c) a
combination thereof, in any such case, sufficient, in the opinion of an
internationally recognized firm of independent public
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accountants expressed in a written certification thereof delivered to the
Trustee, to pay and discharge and which shall be applied by the Trustee
(or other qualifying trustee) to pay and discharge, the principal of,
premium, if any, and interest on the Defeased Securities (including any
Additional Amounts payable in respect thereof) on the Stated Maturity of
such principal or installment of principal, premium, if any, or interest
or (if the Company has made irrevocable arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name
and at the expense of the Company) the Redemption Date, as the case may
be; provided, however, that the Trustee shall have been irrevocably
instructed to apply such money or the proceeds of such U.S. Government
Obligations to said payments with respect to the Securities; and provided,
further, that from and after the time of deposit, the money or U.S.
Government Obligations deposited shall not be subject to the rights of the
holders of other Indebtedness of the Company or any Guarantor;
(2) No Default shall have occurred and be continuing on the date of
such deposit and after giving effect thereto or, in the case of a legal
defeasance, insofar as Section 5.01(i), (j) or (k) is concerned, at any
time during the period ending on the ninety-first day after the date of
such deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period);
(3) Neither the Company nor any Guarantor of the Company is an
"insolvent person" within the meaning of any applicable Bankruptcy Law on
the date of such deposit or at any time during the period ending on the
ninety-first day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until the expiration of such
period);
(4) Such legal defeasance or covenant defeasance shall not cause the
Trustee for the Securities to have a conflicting interest in violation of
Section 6.08 and for purposes of the Trust Indenture Act with respect to
any securities of the Company or any Guarantor;
(5) Such legal defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, or cause or
permit acceleration of any Indebtedness under, this Indenture or any other
agree-
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ment or instrument to which the Company or any Guarantor is a party or by
which it is bound;
(6) In the case of an election under Section 4.02, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee stating that (x) the Company has
received from, or there has been published by, the Internal Revenue
Service a ruling or (y) since the date hereof, there has been a change in
the applicable United States Federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that, the
Holders of the Outstanding Securities will not recognize income, gain or
loss for United States Federal income tax purposes as a result of such
legal defeasance and will be subject to United States Federal income tax
on the same amounts, in the same manner and at the same times as would
have been the case if such legal defeasance had not occurred;
(7) In the case of an election under Section 4.03, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee to the effect that the Holders of the
Outstanding Securities will not recognize income, gain or loss for United
States Federal income tax purposes as a result of such covenant defeasance
and will be subject to United States Federal income tax on the same
amounts, in the same manner and at the same times as would have been the
case if such covenant defeasance had not occurred;
(8) The Company shall have delivered to the Trustee an Opinion of
Counsel in Brazil reasonably acceptable to the Trustee to the effect that
the Holders of the Outstanding Securities will not recognize income, gain
or loss for Brazilian federal or state income tax or other tax purposes as
a result of such legal defeasance or covenant defeasance, as applicable,
and will be subject to Brazilian federal and state income tax and other
tax on the same amounts, in the same manner and at the same times as would
have been the case if such legal defeasance or covenant defeasance, as
applicable, had not occurred. Notwithstanding anything to the contrary in
this Indenture, this condition may not be waived by any Holder or the
Trustee;
(9) The Company shall have delivered to the Trustee, an Opinion of
Counsel in Brazil and an Opinion of Counsel in the United States each of
which shall be reasonably ac-
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ceptable to the Trustee to the effect that, (x) the trust funds
established pursuant to this Article will not be subject to any rights of
any other creditors of the Company, any of its Affiliates or Subsidiaries
or of any Guarantor or holders of other Indebtedness of the Company, any
of its Affiliates or Subsidiaries or of any Guarantor, and (y) immediately
following the ninety-first day after the deposit, the trust funds
established pursuant to this Article will not be subject to the effect of
any applicable Bankruptcy Law;
(10) The Company shall have delivered to the Trustee an Officers'
Certificate reasonably acceptable to the Trustee stating that the deposit
made by the Company pursuant to its election under Section 4.02 or 4.03
was not made by the Company with the intent of preferring the Holders or
any Guarantor over the other creditors of the Company or with the intent
of defeating, hindering, delaying or defrauding creditors of the Company
or others; and
(11) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel in the United States, the Federative
Republic of Brazil and such other jurisdictions as the Trustee may
reasonably request, in each case, reasonably acceptable to the Trustee and
each stating that all conditions precedent (other than conditions
requiring the passage of time) provided for relating to either the
defeasance under Section 4.02 or the covenant defeasance under Section
4.03 (as the case may be) have been complied with as contemplated by this
Section 4.04.
Opinions required to be delivered under this Section may have such
qualifications as are customary for opinions of the type required and acceptable
to the Trustee.
Section 4.05 Deposited Money and U.S. Government Obligations To Be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 10.03,
all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other person that would qualify to act as
successor trustee under Article Six, collectively for purposes of this Section
4.05, the "Trustee") pursuant to Section 4.04 in respect of the Defeased
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities
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and this Indenture, to the payment, either directly or through any Paying Agent
(other than the Company) as the Trustee may determine, to the Holders of such
Securities of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee and hold it harmless
against any tax, fee or other charge imposed on or assessed against the U.S.
Government Obligations deposited pursuant to Section 4.04 or the principal and
interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the Defeased
Securities.
Section 4.06 Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 4.02 or 4.03, as the case may
be, by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then the
obligations of the Company and of any Guarantor under this Indenture, the
Securities and the Guarantees, if any, shall be revived and reinstated as though
no deposit had occurred pursuant to Section 4.02 or 4.03, as the case may be,
until such time as the Trustee or Paying Agent is permitted to apply all such
money and U.S. Government Obligations in accordance with Section 4.02 or 4.03,
as the case may be; provided, however, that if the Company makes any payment of
principal, premium, if any, or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money and
U.S. Government Obligations held by the Trustee or Paying Agent.
ARTICLE FIVE
REMEDIES
Section 5.01 Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment,
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decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of the principal of or premium, if any,
on the Securities, when due, at Maturity, upon redemption or otherwise
(including pursuant to a Change of Control Offer or an Asset Sale Offer);
or
(b) default in the payment of interest on the Securities, when it
becomes due and payable, and continuance of such default for a period of
30 days or more; provided, however, that a failure to pay interest (but
not Additional Amounts or Additional Interest) on the Securities in a
timely manner through June 6, 2000 will constitute an immediate Event of
Default, with no grace or cure period; or
(c) default in the performance, or breach, of any other term,
covenant or agreement contained in (i) Article Eight hereof or (ii) the
Securities, any Guarantees or this Indenture (other than a default
specified in (a) or (b) or (c)(i) above) and continuance of such default
for a period of 45 days or more after written notice specifying such
default or breach and requiring the same to be remedied and stating that
such notice is a "Notice of Default" hereunder shall have been given (x)
to the Company by the Trustee or (y) to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of the Securities
then Outstanding; or
(d) (i) failure to pay, following any applicable grace period, any
installment of principal due (whether at maturity or otherwise) under one
or more classes or issues of Indebtedness in an aggregate principal amount
of US$5,000,000 (or, to the extent non-U.S. dollar denominated, the U.S.
Dollar Equivalent of such amount) or more or (ii) failure by the Company
or any Restricted Subsidiary to perform any other term, covenant,
condition or provision of one or more classes or issues of Indebtedness in
an aggregate principal amount of US$5,000,000 (or, to the extent non-U.S.
Dollar denominated, the U.S. Dollar Equivalent of such amount) or more
and, in the case of this clause (ii), such failure results in an
acceleration of the maturity thereof; provided, that, in the case of a
termination or expiration of an Interest Rate Protection Obligation or
Currency Agreement requiring that the monetary liability thereunder be
paid, no Event of Default
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shall occur if such payment is made within 30 days after such payment is
due; or
(e) one or more judgments, orders or decrees for the payment of
money shall be entered in an amount or amounts of US$5,000,000 (or, to the
extent non-U.S. Dollar denominated, the U.S. Dollar Equivalent of such
amount) or more, either individually or in the aggregate against the
Company or any Restricted Subsidiary or any of their respective properties
and shall not be discharged and there shall have been a period of 60 days
during which a stay of enforcement of such judgment, order or decree, by
reason of pending appeal or otherwise, shall not be in effect; or
(f) there shall have occurred any seizure, compulsory acquisition,
expropriation or nationalization of substantially all of the assets of the
Company and the Restricted Subsidiaries, taken as a whole; or
(g) any Guarantee ceases to be in full force and effect or is
declared null and void or any Guarantor denies that it has any further
liability under, or disaffirms it obligations under, any Guarantee, or
gives notice to such effect (other than by reason of the termination of
this Indenture or the release of any such Guarantee in accordance with
Section 13.04 hereof); or
(h) the Company asserts or admits in writing that the Escrow
Agreement is unenforceable or is not in full force and effect; or
(i) the Company or any Material Restricted Subsidiary of the Company
pursuant to or under or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case or proceeding;
(ii) consents to the making of a Bankruptcy Order in an
involuntary case or proceeding or the commencement of any case
against it;
(iii) consents to the appointment of, or taking possession by,
a Custodian of it or for any substantial part of its property;
(iv) makes a general assignment for the benefit of its
creditors or files a proposal or other scheme
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or arrangement involving the rescheduling or composition of its
indebtedness;
(v) files a petition in bankruptcy or an answer or consent
seeking reorganization or relief;
(vi) admits in writing its inability to pay its debts
generally as they become due; or
(vii) consents to the filing of a petition in bankruptcy; or
(j) a court of competent jurisdiction in any involuntary case or
proceeding enters a Bankruptcy Order against the Company or any Material
Restricted Subsidiary, and such Bankruptcy Order remains unstayed and in
effect for 30 consecutive days; or
(k) a Custodian shall be appointed out of court (other than under
any circumstance described in the preceding paragraphs (h) or (i)) with
respect to the Company or any Material Restricted Subsidiary or with
respect to all or any substantial part of the assets or properties of the
Company or any Material Restricted Subsidiary, and such appointment shall
remain unstayed and in effect for 30 consecutive days.
Section 5.02 Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in
Section 5.01(i), (j) or (k) with respect to the Company or in Section 5.01(f))
occurs and is continuing, then and in every such case the Trustee or the Holders
of at least 25% in aggregate principal amount of the Securities Outstanding may,
by written notice, and the Trustee upon the request of the Holders of not less
than 25% in aggregate principal amount of the Securities Outstanding shall,
declare all principal of, premium, if any, on and any accrued and unpaid
interest to the date the Securities become due and payable on all outstanding
Securities (and any Additional Amounts relating thereto) to be immediately due
and payable by a notice in writing to the Company (and to the Trustee, if given
by the Holders). Upon any such declaration such principal, premium, if any, and
interest and any Additional Amounts with respect thereto, shall become
immediately due and payable. If an Event of Default specified in Section
5.01(i), (j) or (k) with respect to the Company or Section 5.01(f) occurs and is
continu-
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ing, then the principal of, premium, if any, and accrued and unpaid interest, if
any, on all the Securities and any Additional Amounts with respect thereto shall
ipso facto become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder. Except in the case of a
default of a specific amount of premium due, the amount of any premium shall be
determined by interpolation between (a) the premium payable on the next
succeeding date on which either Holders of Securities or the Company may
optionally redeem Securities or on which the Securities mature, as applicable (a
"Payment Date"), and (b) the immediately preceding Payment Date or, if there is
no immediately preceding Payment Date, 0%.
At any time after a declaration of acceleration has been made or
after any ipso facto acceleration following an Event of Default specified in
Section 5.01(i), (j) or (k) with respect to the Company or in Section 5.01(f)
above and, in any such case, before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter provided in this
Article, the Holders of a majority in aggregate principal amount of the
Securities Outstanding, by written notice to the Trustee, may rescind and annul
such declaration of acceleration or such ipso facto acceleration following an
Event of Default specified in Section 5.01(i), (j), (k) or (f), as the case may
be, and its consequences if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all amounts due the Trustee under Section 6.07, including
the reasonable compensation, fees, expenses, disbursements and
advances of the Trustee, its agents and counsel,
(ii) all overdue interest on all Securities (including any
Additional Amounts payable in respect thereof),
(iii) the principal of and premium, if any, on any Securities
(including any Additional Amounts payable in respect thereof) which
have become due otherwise than by such declaration of acceleration
and interest thereon (including any Additional Amounts payable in
respect thereof) at the rate then borne by the Securities, and
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(iv) to the extent that payment of such interest is lawful,
interest (including any Additional Amounts payable in respect
thereof) upon overdue interest at the rate then borne by the
Securities;
(b) all Events of Default, other than the non-payment of principal
of, premium, if any, and any accrued and unpaid interest on, the
Securities which have become due solely as a result of such declaration of
acceleration, have been cured or waived as provided in Section 5.13; and
(c) such recission or annulment of such declaration of acceleration
would not conflict with any judgment or decree of any court of competent
jurisdiction.
No such rescission shall affect any subsequent Default or impair any
right consequent thereon.
Section 5.03 Collection of Indebtedness and Suits for Enforcement by
Trustee
The Company and each Guarantor, if any, covenant that if:
(a) default is made in the payment of any interest on any Security
when such interest becomes due and payable and such default continues for
a period of 30 days or more, or
(b) default is made in the payment of the principal of or premium,
if any, on any Security at the Stated Maturity thereof,
the Company and each Guarantor, if any, will, jointly and severally, upon demand
of the Trustee, pay to the Trustee, for the benefit of the Holders of such
Securities, the whole amount then due and payable on such Securities for
principal, premium, if any, and interest, with interest upon the overdue
principal, premium, if any, and, to the extent that payment of such interest
shall be legally enforceable, upon overdue installments of interest, at the rate
then borne by the Securities; and, in addition thereto, such further amount as
shall be sufficient to cover the costs and expenses of collection, including the
reasonable compensation, fees, expenses, disbursements and advances of the
Trustee, its agents and counsel.
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If the Company and each Guarantor, if any, fail to pay such amounts
forthwith upon such demand, the Trustee, in its own name and as trustee of an
express trust, may, but is not obligated under this paragraph to, institute a
judicial proceeding for the collection of the sums so due and unpaid and may,
but is not obligated under this paragraph to, prosecute such proceeding to
judgment or final decree, and may, but is not obligated under this paragraph to,
enforce the same against the Company, any Guarantor or any other obligor upon
the Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any Guarantor or
any other obligor upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion, but is not obligated under this paragraph to, (i) proceed to
protect and enforce its rights and the rights of the Holders under this
Indenture or any Guarantees by such appropriate private or judicial proceedings
as the Trustee shall deem most effectual to protect and enforce such rights,
whether for the specific enforcement of any covenant or agreement contained in
this Indenture or in aid of the exercise of any power granted herein, including,
without limitation, seeking recourse against any Guarantor or (ii) proceed to
protect and enforce any other proper remedy, including, without limitation,
seeking recourse against any Guarantor. No recovery of any such judgment upon
any property of the Company or any Guarantor shall affect or impair any rights,
powers or remedies of the Trustee or the Holders.
Section 5.04 Trustee May File Proofs of Claims.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Securities, including each Guarantor, if any, or the property of the Company or
of such other obligor, the Trustee (irrespective of whether the principal of the
Securities shall then be due and payable as therein expressed or by declaration
or otherwise and irrespective of whether the Trustee shall have made any demand
on the Company for the payment of overdue principal or interest) shall be
entitled and empowered, by intervention in such proceeding or otherwise, but is
not obligated under this paragraph
(a) to file and prove a claim for the whole amount of principal,
premium, if any, and interest owing and unpaid in respect of the
Securities and to file such other
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papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable
compensation, fees, expenses, disbursements and advances of the Trustee,
its agents and counsel) and of the Holders allowed in such judicial
proceeding, and
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any Custodian, in any such judicial proceeding, is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay the
Trustee any amount due it for the reasonable compensation, fees, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 6.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
Section 5.05 Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture, the Securities
or any Guarantee may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any proceeding
relating thereto, and any such proceeding instituted by the Trustee shall be
brought in its own name and as trustee of an express trust, and any recovery of
judgment shall, after provision for the payment of the reasonable compensation,
fees, expenses, disbursements and advances of the Trustee, its agents and
counsel, be for the ratable benefit of the Holders of the Securities in respect
of which such judgment has been recovered.
Section 5.06 Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of
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such money on account of principal, premium, if any, or interest, upon
presentation of the Securities and the notation thereon of the payment if only
partially paid and upon surrender thereof if fully paid:
First: to the Trustee for amounts due under Section 6.07;
Second: to Holders for interest accrued on the Securities (including
Additional Amounts payable in respect thereof), ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Securities for interest;
Third: to Holders for principal and premium amounts owing under the
Securities (including Additional Amounts payable in respect thereof),
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for principal and premium; and
Fourth: the balance, if any, to the Company or, to the extent the
Trustee collects any amounts from any Guarantor, to such Guarantor.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to this
Section 5.06.
Section 5.07 Limitation on Suits.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
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(d) the Trustee for 45 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(e) no direction inconsistent with such written request has been
given to the Trustee during such 45-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture, any Security or any Guarantee to affect, disturb or prejudice
the rights of any other Holders, or to obtain or to seek to obtain priority or
preference over any other Holders or to enforce any right under this Indenture,
any Security or any Guarantee, except in the manner provided in this Indenture
and for the equal and ratable benefit of all the Holders.
Section 5.08 Unconditional Right of Holders To Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the
Securities or any Guarantee, the Holder of any Security shall have the right,
which is absolute and unconditional, to receive cash payment, in United States
dollars, of the principal of, premium, if any, and (subject to Section 3.07
hereof) interest on such Security (including any Additional Amounts payable in
respect thereof) on the respective Stated Maturities expressed in such Security
(or, in the case of redemption, on the respective Redemption Date) and to
institute suit for the enforcement of any such payment, and such rights shall
not be impaired without the consent of such Holder.
Section 5.09 Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture, any Security or any Guarantee
and such proceeding has been discontinued or abandoned for any reason, or has
been determined adversely to the Trustee or to such Holder, then and in every
such case the Company, each of the Guarantors, the Trustee and the Holders
shall, subject to any determination in such proceeding, be restored severally
and respectively to their former positions hereunder, and thereafter all rights
and remedies of the Trustee and the Holders shall continue as though no such
proceeding had been instituted.
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Section 5.10 Rights and Remedies Cumulative.
Except as provided in Section 3.06, no right or remedy herein
conferred upon or reserved to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other right and
remedy given hereunder or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy hereunder, or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
Section 5.11 Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
Section 5.12 Control by Majority.
The Holders of a majority in aggregate principal amount of the
Outstanding Securities shall have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, provided, however, that:
(a) such direction shall not be in conflict with any rule of law or
with this Indenture, any Security or any Guarantee or expose the Trustee
to personal liability; and
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
Section 5.13 Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities may on behalf of the Holders of all the
Securities waive any past Default hereunder and its consequences, except a
Default
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(a) in the cash payment in U.S. dollars of the principal of,
premium, if any, or interest on any Security and any Additional Amount
payable in respect thereof, or
(b) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Outstanding Security affected.
Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or Event of Default or impair any right consequent thereon.
Section 5.14 Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Securities,
or to any suit instituted by any Holder for the enforcement of the payment of
the principal of, premium, if any, or interest on any Security on or after the
respective Stated Maturities expressed in such Security (or, in the case of
redemption, on or after the respective Redemption Dates).
Section 5.15 Waiver of Stay, Extension or Usury Laws.
Each of the Company and the Guarantors covenants (to the extent that
it may lawfully do so) that it will not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury or other law wherever enacted, now or at any time
hereafter in force, which would prohibit or forgive the Company or any Guarantor
from paying all or any portion of the princi-
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pal of, premium, if any, or interest on the Securities contemplated herein or in
the Securities or which may affect the covenants or the performance of this
Indenture; and each of the Company and the Guarantors (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
Section 6.01 Certain Duties and Responsibilities.
(a) Except during the continuance of an Event of Default,
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture; but
in the case of any such certificates or opinions which by provision hereof
are specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture.
(b) In case an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that no provision of this
Indenture
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shall require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section 6.01.
Section 6.02 Notice of Defaults.
Within 30 days after the occurrence of any Default, the Trustee
shall transmit by mail to all Holders, as their names and addresses appear in
the Security Register, notice of such Default hereunder known to the Trustee,
unless such Default shall have been cured or waived; provided, however, that,
except in the case of a Default in the payment of the principal of, premium, if
any, or interest on any Security (including any Additional Amounts payable in
respect thereof) or a Default arising from the occurrence of a Change of
Control, the Trustee shall be protected in withholding such notice if and so
long as a trust committee of Responsible Officers of the Trustee in good faith
determines that the withholding of such notice is in the interest of the
Holders.
Section 6.03 Certain Rights of Trustee.
Subject to Section 6.01 hereof and the provisions of Section 315 of
the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
approval, appraisal, bond, debenture, note, coupon, security, other
evidence of indebtedness or other paper or document believed by it to be
genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of the Company or any Guarantor may be
sufficiently evidenced by a Board Resolution thereof;
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(c) the Trustee may consult, at the expense of the Company, with
counsel and any written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon in accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or
direction of any of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by the
Trustee in compliance with such request or direction;
(e) the Trustee shall not be liable for any action taken or omitted
by it in good faith and believed by it to be authorized or within the
discretion, rights or powers conferred upon it by this Indenture other
than any liabilities arising out of its own negligence;
(f) the Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
approval, appraisal, bond, debenture, note, coupon, security, other
evidence of indebtedness or other paper or document unless requested in
writing so to do by the Holders of not less than a majority in aggregate
principal amount of the Securities then Outstanding; provided, however,
that, if the payment within a reasonable time to the Trustee of the costs,
expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to
the Trustee by the security afforded to it by the terms of this Indenture,
the Trustee may require reasonable indemnity against such expenses or
liabilities as a condition to proceeding; the reasonable expenses of every
such investigation shall be paid by the Company or, if paid by the Trustee
or any predecessor Trustee, shall be repaid by the Company upon demand;
provided, further, the Trustee in its discretion may make such further
inquiry or investigation into such facts or matters as it may deem fit,
and, if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books, records and
premises of the Company, personally
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or by agent or attorney during the reasonable business hours of the
Company; and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder.
Section 6.04 Trustee Not Responsible for Recitals, Dispositions of
Securities or Application of Proceeds Thereof.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company and the Guarantors, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities or of any Guarantee. The
Trustee shall not be accountable for the use or application by the Company of
Securities or the proceeds thereof.
Section 6.05 Trustee and Agents May Hold Securities; Collections;
Etc.
The Trustee, any Paying Agent, Security Registrar or any other agent
of the Company, in its individual or any other capacity, may become the owner or
pledgee of Securities, with the same rights it would have if it were not the
Trustee, Paying Agent, Security Registrar or such other agent and, subject to
Sections 6.08 and 6.13 hereof and Sections 310 and 311 of the Trust Indenture
Act, may otherwise deal with the Company and receive, collect, hold and retain
collections from the Company with the same rights it would have if it were not
the Trustee, Paying Agent, Security Registrar or such other agent.
Section 6.06 Money Held in Trust.
All moneys received by the Trustee shall, until used or applied as
herein provided, be held in trust for the purposes for which they were received,
but need not be segregated from other funds except to the extent required herein
or by law. The Trustee shall not be under any liability for interest on any
moneys received by it hereunder.
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Section 6.07 Compensation and Indemnification of Trustee and Its
Prior Claim.
The Company and each Guarantor covenant and agree: (a) to pay to the
Trustee from time to time, and the Trustee shall be entitled to, reasonable
compensation for all services rendered by it hereunder (which shall not be
limited by any provision of law in regard to the compensation of a trustee of an
express trust); (b) to reimburse the Trustee and each predecessor Trustee upon
its request for all reasonable expenses, fees, disbursements and advances
incurred or made by or on behalf of it in accordance with any of the provisions
of this Indenture (including the reasonable compensation, fees, and the expenses
and disbursements of its counsel and of all agents and other persons not
regularly in its employ), except any such reasonable expense, disbursement or
advance as may arise from its negligence or bad faith; and (c) to indemnify the
Trustee and each predecessor Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its part,
arising out of or in connection with the acceptance or administration of this
Indenture or the trusts hereunder and its duties hereunder, including
enforcement of this Section 6.07. The obligations of the Company and each
Guarantor under this Section to compensate and indemnify the Trustee and each
predecessor Trustee and to pay or reimburse the Trustee and each predecessor
Trustee for expenses, fees, disbursements and advances shall constitute an
additional obligation hereunder and shall survive the satisfaction and discharge
of this Indenture. To secure the obligations of the Company and of each
Guarantor to the Trustee under this Section 6.07, the Trustee shall have a prior
Lien upon all property and funds held or collected by the Trustee as such,
except funds and property paid by the Company or any Guarantor and held in trust
for the benefit of the Holders of particular Securities under this Indenture.
All such payments and reimbursements shall be made with interest at the base
(Prime) rate charged at the time by the Trustee for loans to commercial
customers. The Trustee shall be entitled to file a proof of claim in any
bankruptcy proceeding as a secured creditor for its reasonable compensation,
fees and expenses under this Section 6.07.
Section 6.08 Conflicting Interests.
The Trustee shall be subject to and shall comply with the provisions
of Section 310(b) of the Trust Indenture Act.
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Section 6.09 Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
eligible to act as Trustee under Trust Indenture Act Sections 310(a)(1) and
310(a)(5) and which shall be a United States banking institution with a combined
capital and surplus of at least US$300,000,000, and have a Corporate Trust
Office in the Borough of Manhattan in The City of New York. If such corporation
publishes reports of condition at least annually, pursuant to law or to the
requirements of United States Federal, state, territorial or District of
Columbia supervising or examining authority, then for the purposes of this
Section, the combined capital and surplus of such corporation shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall resign
immediately in the manner and with the effect hereinafter specified in this
Article.
Section 6.10 Resignation and Removal; Appointment of Successor
Trustee.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee under Section 6.11.
(b) The Trustee, or any trustee or trustees hereinafter appointed,
may at any time resign by giving written notice thereof to the Company. Upon
receiving such notice of resignation, the Company shall promptly appoint a
successor trustee by written instrument executed by authority of the Board of
the Company, a copy of which shall be delivered to the resigning Trustee and a
copy to the successor Trustee. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 20 Business Days
after the giving of such notice of resignation, the resigning Trustee may, or
any Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Trustee. Such court
may thereupon, after such notice, if any, as it may deem proper, appoint a
successor Trustee.
(c) The Trustee may be removed at any time by an Act of the Holders
of a majority in principal amount of the Out-
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standing Securities, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of Section
310(b) of the Trust Indenture Act in accordance with Section 6.08 hereof
after written request therefor by the Company or by any Holder who has
been a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.09 hereof
and shall fail to resign after written request therefor by the Company or
by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose or
rehabilitation, conservation or liquidation,
then, in any case, (i) the Company by a Board Resolution of its Board may remove
the Trustee, or (ii) subject to Section 5.14, the Holder of any Security who has
been a bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution of its Board, shall promptly appoint a successor
Trustee. If, within one year after such resignation, removal or incapability, or
the occurrence of such vacancy, a successor Trustee shall be appointed by Act of
the Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders of the Securities and accepted appointment in the manner hereinafter
provided, the Holder of any Security who has been a bona fide Holder for at
least six months may, subject to Sec-
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tion 5.14, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee by mailing
written notice of such event by first-class mail, postage prepaid, to the
Holders of Securities as their names and addresses appear in the Security
Register. Each notice shall include the name of the successor Trustee and the
address of its Corporate Trust Office.
Section 6.11 Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee as if originally named as
Trustee hereunder; but, nevertheless, on the written request of the Company or
the successor Trustee, upon payment of amounts due it pursuant to Section 6.07,
such retiring Trustee shall duly assign, transfer and deliver to the successor
Trustee all moneys and property at the time held by it hereunder and shall
execute and deliver an instrument transferring to such successor Trustee all the
rights, powers, duties and obligations of the retiring Trustee. Upon request of
any such successor Trustee, the Company shall execute any and all instruments
for more fully and certainly vesting in and confirming to such successor Trustee
all such rights and powers. Any Trustee ceasing to act shall, nevertheless,
retain a prior claim upon all property or funds held or collected by such
Trustee to secure any amounts then due it pursuant to the provisions of Section
6.07.
No successor Trustee with respect to the Securities shall accept
appointment as provided in this Section 6.11 unless at the time of such
acceptance such successor Trustee shall be eligible to act as Trustee under this
Article.
Upon acceptance of appointment by any successor Trustee as provided
in this Section 6.11, the successor shall give notice thereof to the Holders of
the Securities, by mailing such notice to such Holders at their addresses as
they shall appear on the Security Register. If the acceptance of appoint-
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ment is substantially contemporaneous with the resignation, then the notice
called for by the preceding sentence may be combined with the notice called for
by Section 6.10(f).
Section 6.12 Merger, Conversion, Amalgamation, Consolidation or
Succession to Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated or amalgamated, or any corporation resulting
from any merger, conversion, amalgamation or consolidation to which the Trustee
shall be a party, or any corporation succeeding to all or substantially all of
the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder without the execution or filing of any paper or any further
act on the part of any of the parties hereto, provided such corporation shall be
eligible under this Article to serve as Trustee hereunder.
In case at the time such successor to the Trustee under this Section
6.12 shall succeed to the trusts created by this Indenture any of the Securities
shall have been authenticated but not delivered, any such successor to the
Trustee may adopt the certificate of authentication of any predecessor Trustee
and deliver such Securities so authenticated; and, in case at that time any of
the Securities shall not have been authenticated, any successor to the Trustee
under this Section 6.12 may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor Trustee; and in all
such cases such certificate shall have the full force which it is anywhere in
the Securities or in this Indenture provided that the certificate of the Trustee
shall have.
Section 6.13 Preferential Collection of Claims Against Company.
The Trustee shall comply with Section 311(a) of the Trust Indenture
Act, excluding any creditor relationship listed in Section 311(b) of that Act.
If the present or any future Trustee shall resign or be removed, it shall be
subject to Section 311(a) of the Trust Indenture Act to the extent provided
therein.
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ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
Section 7.01 Preservation of Information; Company To Furnish Trustee
Names and Addresses of Holders.
(a) The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders; provided, however, that if and for so long as the Trustee shall be
the Security Registrar, the Security Register shall satisfy the requirements
relating to such list. Neither the Company nor the Trustee shall be under any
responsibility with regard to the accuracy of such list.
(b) The Company will furnish or cause to be furnished to the Trustee
(i) semiannually, not more than 10 days after each Regular Record
Date, a list, in such form as the Trustee may reasonably require, of the
names and addresses of the Holders as of such Regular Record Date; and
(ii) at such other times as the Trustee may request in writing,
within 30 days after receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Security
Registrar, no such list need be furnished pursuant to this Subsection 7.01(b).
Section 7.02 Communications of Holders.
Holders may communicate with other Holders with respect to their
rights under this Indenture or under the Securities pursuant to Section 312(b)
of the Trust Indenture Act. The Company and the Trustee and any and all other
persons benefited by this Indenture shall have the protection afforded by
Section 312(c) of the Trust Indenture Act.
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Section 7.03 Reports by Trustee.
Within 60 days after June 15 of each year commencing with the first
June 15 following the date of this Indenture, the Trustee shall mail to all
Holders, as their names and addresses appear in the Security Register, a brief
report dated as of such June 15 that complies with Section 313(a) of the Trust
Indenture Act. The Trustee shall also comply with Sections 313(b), 313(c) and
313(d) of the Trust Indenture Act. At the time of its mailing to Holders, a copy
of each report shall be filed with the Company, the Commission and with each
securities exchange on which the Securities are listed. The Company shall notify
the Trustee when the Securities are listed on any stock exchange.
Section 7.04 Reports by Company.
The Company shall file with the Trustee, copies of the reports and
of the information and documents which the Company is required to provide to any
person under Section 10.09 hereof.
ARTICLE EIGHT
AMALGAMATION, CONSOLIDATION, MERGER,
SALE OF ASSETS, ETC.
Section 8.01 Company or Guarantor May Consolidate, etc., Only on
Certain Terms.
(a) The Company will not, in a single transaction or through a
series of transactions, consolidate, combine or amalgamate with or merge with or
into or, directly or indirectly, sell, assign, convey, lease, transfer or
otherwise dispose of all or substantially all of its properties and assets to,
any person or persons, or permit any of the Restricted Subsidiaries to enter
into any such transaction or series of transactions if such transaction or
series of transactions, in the aggregate, would result in the sale, assignment,
conveyance, lease, transfer or disposition of all or substantially all of the
properties and assets of the Company and the Restricted Subsidiaries, taken as a
whole, to any person or persons, unless:
(i) the Company shall be the continuing person or the resulting,
surviving or transferee person (in either case, the "surviving entity")
shall be a corporation or-
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ganized and validly existing under the laws of the Federative Republic of
Brazil or any State or political subdivision thereof;
(ii) the surviving entity shall expressly assume all of the
obligations of the Company under the Securities and this Indenture, and
shall execute a supplemental indenture to effect such assumption which
supplemental indenture shall be delivered to the Trustee and shall be in
form reasonably satisfactory to the Trustee;
(iii) immediately after giving effect to such transaction or series
of transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction or series of transactions), the Company or
the surviving entity (assuming such surviving entity's assumption of the
Company's obligations under the Securities and this Indenture), as the
case may be, would be able to incur US$1.00 of Indebtedness under the
proviso of Section 10.12 hereof;
(iv) immediately after giving effect to such transaction or series
of transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction or series of transactions), no Default
shall have occurred and be continuing;
(v) each Guarantor shall have delivered a written instrument
in form satisfactory to the Trustee confirming its Guarantee; and
(vi) the Company or the surviving entity, as the case may be, shall
have delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel stating that such transaction or series of transactions and, if a
supplemental indenture is required in connection with such transaction or
series of transactions to effectuate such assumption, such supplemental
indenture complies with this Indenture and that all conditions precedent
provided for in this Indenture relating to such transaction or series of
transactions have been satisfied.
(b) Any Guarantor (other than any Restricted Subsidiary whose
Guarantee is being released pursuant to Section 14.04 hereof as a result of such
transaction) shall not, and the Company shall not permit any Guarantor to, in a
single
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transaction or through a series of transactions, consolidate, combine or
amalgamate with or merge with or into or, directly or indirectly, sell, assign,
convey, lease, transfer or otherwise dispose of all or substantially all of its
properties and assets to any other person or persons, or permit any of its
Subsidiaries to enter into any such transaction or series of transactions if
such transaction or series of transactions, in the aggregate, would result in
the sale, assignment, conveyance, lease, transfer or other disposition of all or
substantially all of the properties and assets of the Guarantor and its
Subsidiaries, taken as a whole, to any person or persons, unless at the time and
after giving effect thereto:
(i) such Guarantor shall be the continuing person or the resulting,
surviving or transferee person (in either case, the "Surviving Guarantor")
shall be a corporation organized and validly existing under the laws of
such predecessor Guarantor's organization, or of the Federative Republic
of Brazil or any State or political subdivision thereof, or of any State
of the United States of America and such Surviving Guarantor shall
expressly assume, by a supplemental indenture or Guarantee, executed and
delivered to the Trustee, in form reasonably satisfactory to the Trustee,
all the obligations of such Guarantor under the Securities, its Guarantee
and this Indenture;
(ii) immediately after giving effect to such transaction or series
of transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction or series of transactions and assuming such
Surviving Guarantor's assumption of the Guarantor's obligations under its
Guarantee and this Indenture), the Company could incur US$1.00 of
additional Indebtedness under the proviso of Section 10.12 hereof;
(iii) immediately after giving effect to such transaction or series
of transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or
in respect of such transaction or series of transactions), no Default
shall have occurred and be continuing;
(iv) such Guarantor, unless it is the other party to the transaction
or transactions described above, shall have by supplemental indenture
confirmed that its Guarantee shall apply to the obligations of the Company
under this Indenture and the Securities;
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(v) such Guarantor shall have delivered to the Trustee an Opinion
of Counsel reasonably satisfactory to the Trustee, to the effect that the
transaction will not result in the Guarantor or the Surviving Guarantor
being required to make any deduction or withholding on account of
Brazilian taxes from any payments made under or with respect to the
Securities, which deduction or withholding is greater than any such
deduction or withholding which is or would be required had such
transaction not occurred (unless the Company's and Guarantors' obligations
to pay Additional Amounts pursuant to Section 10.08 would be sufficient to
protect all Holders from any liability in respect of such withholding or
deduction, in which case, the Company shall deliver to the Trustee an
Officer's Certificate to such effect and confirming the Company's
obligation to pay such Additional Amounts); and
(vi) such Guarantor or the Surviving Guarantor, as the case may be,
shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel, each reasonably satisfactory to the Trustee, each
stating that such consolidation, merger, sale, assignment, conveyance,
transfer, lease or other disposition and, if a supplemental indenture or
Guarantee is required in connection with such transaction or series of
transactions to effectuate such assumption, such supplemental indenture or
Guarantee complies with this Indenture and that all conditions precedent
provided for in this Indenture relating to such transaction or series of
transactions have been complied with.
Section 8.02 Successor Substituted.
Upon any consolidation, combination or merger, or any sale,
assignment, conveyance, transfer, lease or disposition of all or substantially
all of the properties and assets of the Company or any Guarantor in accordance
with Section 8.01 hereof, the successor person formed by such consolidation or
into which the Company or such Guarantor, as the case may be, is merged or the
successor person to which such sale, assignment, conveyance, transfer, lease or
other disposition is made, shall succeed to, and be substituted for, and may
exercise every right and power of, the Company or such Guarantor, as the case
may be, under this Indenture, the Securities and/or the Guarantee of any such
Guarantor, as the case may be, with the same effect as if such successor had
been named as the Company or such Guarantor, as the case may be, herein, in the
Securities and/or in the Guarantees, as the case may be, provided
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that, solely for purposes of computing Cumulative Adjusted Available Cash Flow
for purposes of clause (a)(iii) of Section 10.13 hereof, the Cumulative Adjusted
Available Cash Flow of any persons other than the Company and the Restricted
Subsidiaries shall only be included for periods subsequent to the effective time
of such merger, consolidation, combination or transfer of assets; and
thereafter, except in the case of (a) a lease or (b) any sale, assignment,
conveyance, transfer, lease or other disposition to a Subsidiary of the Company
or such Guarantor, the Company or such Guarantor, as the case may be, shall be
discharged from all obligations and covenants under this Indenture and the
Securities and/or the Guarantee of such Guarantor, as the case may be.
Section 8.03 Subsidiaries of Surviving Entity; Certain Indebtedness
and Liens.
For all purposes of this Indenture and the Securities (including the
provisions of Sections 10.12, 10.13 and 10.17), subsidiaries of any surviving
entity or Surviving Guarantor shall, upon such transaction or series of
transactions, become Restricted Subsidiaries or Unrestricted Subsidiaries as
provided pursuant to Section 10.10 and all Indebtedness, and all Liens on
property or assets of the Company and the Restricted Subsidiaries immediately
prior to such transaction or series of transactions shall be deemed to have been
incurred upon such transaction or series of transactions.
ARTICLE NINE
SUPPLEMENTAL INDENTURES AND WAIVERS
Section 9.01 Supplemental Indentures, Agreements and Waivers Without
Consent of Holders.
Without the consent of any Holders, the Company and the Guarantors,
if any, when authorized by a Board Resolution of the Board of the Company and
each Guarantor, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto or agreements or other
instruments with respect to any Guarantee, in form and substance satisfactory to
the Trustee, or waiver for any of the following purposes:
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(a) to evidence the succession, in compliance with Article Eight
hereof, of another person to the Company or a Guarantor, and the
assumption by any such successor of the covenants of the Company or such
Guarantor herein and in the Securities and/or in any Guarantee, as the
case may be;
(b) to add to the covenants of the Company, any of its Subsidiaries
or any Guarantor for the benefit of the Holders, or to surrender any right
or power herein conferred upon the Company or any Guarantor, as
applicable, herein, in the Securities or in any Guarantee, as the case may
be;
(c) to cure any ambiguity, to correct or supplement any provision
herein, in the Securities or in any Guarantee which may be defective or
inconsistent with any other provision herein or to make any other
provisions with respect to matters or questions arising under this
Indenture, the Securities or any Guarantee; provided, however, that, in
each case, such provisions shall not adversely affect the interests of the
Holders;
(d) to comply with the requirements of the Commission in order to
(i) effect or maintain the qualification of this Indenture under the Trust
Indenture Act, as contemplated by Section 9.05 hereof or otherwise or (ii)
satisfy the requirements of any change to Rule 144A, Regulation D or
Regulation S during any period that any Security issued hereunder is
required to bear the Private Placement Legend or other similar restrictive
legend;
(e) to add a Guarantor pursuant to the terms of Article Fourteen and
Section 10.18 hereof;
(f) to evidence and provide for the acceptance of the appointment of
a successor Trustee hereunder; or
(g) to mortgage, pledge, hypothecate or grant a security interest in
any property or assets in favor of the Trustee for the benefit of the
Holders as security for the payment and performance of the Indenture
Obligations.
Section 9.02 Supplemental Indentures, Agreements and Waivers with
Consent of Holders.
With the written consent of the Holders of not less than a majority
in aggregate principal amount of the Outstand-
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ing Securities, by Act of said Holders delivered to the Company, each Guarantor,
if any, and the Trustee, the Company, and each Guarantor (if a party thereto)
when authorized by a Board Resolution, and the Trustee may enter into an
indenture or indentures supplemental hereto or agreements or other instruments
with respect to any Guarantee satisfactory to the Trustee for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture, the Securities or any Guarantee, or of modifying
in any manner the rights of the Holders under this Indenture, the Securities or
any Guarantee. The Holders of not less than a majority in aggregate principal
amount of the Outstanding Securities may waive compliance by the Company and
each Guarantor with any provision of this Indenture or the Securities or any
Guarantee. However, no such supplemental indenture, agreement or instrument,
including any waiver pursuant to Section 5.13, shall, without the written
consent or waiver of the Holder of each Outstanding Security affected thereby:
(a) extend the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof or any Additional Amounts in respect thereof, alter the
redemption provisions of the Securities or this Indenture, or change the
coin or currency in which any Security or Guarantee or any premium or the
accrued interest thereon or any Additional Amounts in respect thereof is
payable, or impair the right to institute suit for the enforcement of any
payment on or with respect to the Securities, any Guarantee, or any
Additional Amount in respect thereof;
(b) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any amendment or
supplemental indenture, or the consent of whose Holders is required for
any waiver (of compliance with certain provisions of this Indenture or
certain Defaults hereunder and their consequences) or consent provided for
in this Indenture or with respect to any Security or Guarantee;
(c) modify any of the provisions of this Section 9.02 or Sections
1.04, 5.08, 5.13 and 10.11, except to increase any such percentage, if
applicable thereto, or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the Holder
of each Security affected thereby;
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(d) following the occurrence of an Asset Sale, alter the Company's
obligation with respect to such Asset Sale to purchase Securities in
accordance with the provisions of Section 10.15 or waive any default in
the performance thereof;
(e) following the occurrence of a Change of Control, alter the
Company's obligation to make a Change of Control Offer and to purchase all
Securities validly tendered pursuant thereto in accordance with the
provisions of Section 10.16 or waive any default in the performance
thereof.
(f) adversely affect the ranking of the Securities or any Guarantee
in a manner adverse to any Holder;
(g) except as provided in Section 13.04, release any Guarantor from
any of its obligations under its Guarantee or this Indenture;
(h) make any change that would result in the Company or any
Guarantor being required to make any withholding or deduction from
payments made under or with respect to the Securities (including payments
made pursuant to any Guarantee);
(i) amend or modify the provisions of Section 10.08; or
(j) permit the creation of any Lien other than the Lien of the
Trustee on the Collateral pursuant to the Escrow Agreement.
Upon the written request of the Company and each Guarantor
accompanied by a copy of a Board Resolution of the Board of each of them
authorizing the execution of any such supplemental indenture or other agreement,
instrument or waiver, and upon the filing with the Trustee of evidence of the
consent of Holders as aforesaid, the Trustee shall join with the Company and
each Guarantor in the execution of such supplemental indenture or other
agreement, instrument or waiver.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture or other
agreement, instrument or waiver, but it shall be sufficient if such Act shall
approve the substance thereof.
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Section 9.03 Execution of Supplemental Indentures, Agreements and
Waivers.
In executing, or accepting the additional trusts created by, any
supplemental indenture, agreement, instrument or waiver permitted by this
Article Nine or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
6.01 hereof) shall be fully protected in relying upon, an Opinion of Counsel and
an Officers' Certificate from each obligor under the Securities entering into
such supplemental indenture, agreement, instrument or waiver, each stating that
the execution of such supplemental indenture, agreement, instrument or waiver
(a) is authorized or permitted by this Indenture and (b) does not violate the
provisions of any agreement or instrument evidencing any other Indebtedness of
the Company, any Guarantor or any Subsidiary of the Company. The Trustee may,
but shall not be obligated to, enter into any such supplemental indenture,
agreement, instrument or waiver which affects the Trustee's own rights, duties
or immunities under this Indenture, the Securities, any Guarantee or otherwise.
Section 9.04 Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article
Nine, this Indenture, the Securities, if applicable, and/or the applicable
Guarantee shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture, the Securities, if applicable,
and/or the applicable Guarantee, as the case may be, for all purposes; and every
Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
Section 9.05 Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article Nine
shall conform to the requirements of the Trust Indenture Act as then in effect.
Section 9.06 Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so deter-
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mine, new Securities so modified as to conform, in the opinion of the Trustee
and the Board of the Company, to any such supplemental indenture may be prepared
and executed by the Company and each Guarantor and authenticated and delivered
by the Trustee in exchange for Outstanding Securities.
Section 9.07 Record Date.
The Company may, but shall not be obligated to, fix, with the
approval of the Trustee, a record date for the purpose of determining the
Holders entitled to consent to any supplemental indenture, agreement or
instrument or any waiver, and shall promptly notify the Trustee of any such
record date. If a record date is fixed, those persons who were Holders at such
record date (or their duly designated proxies), and only those persons, shall be
entitled to consent to such supplemental indenture, agreement or instrument or
waiver or to revoke any consent previously given, whether or not such persons
continue to be Holders after such record date. No such consent shall be valid or
effective for more than 90 days after such record date.
Section 9.08 Revocation and Effect of Consents.
Until an amendment or waiver becomes effective, a consent to it by a
Holder of a Security is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if a notation of the consent is not made
on any Security. However, any such Holder, or subsequent Holder, may revoke the
consent as to his Security or portion of a Security if the Trustee receives the
notice of revocation before the date the amendment or waiver becomes effective.
An amendment or waiver shall become effective in accordance with its terms and
thereafter bind every Holder.
ARTICLE TEN
COVENANTS
Section 10.01 Payment of Principal, Premium and Interest.
The Company shall pay the principal of, premium, if any, and
interest on the Securities, and any Additional Amounts
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payable in respect thereof, in accordance with the terms of the Securities and
this Indenture.
Section 10.02 Maintenance of Office or Agency.
The Company shall maintain in The City of New York an office or
agency where Securities may be presented or surrendered for payment, where
Securities may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The office of the Trustee at its Corporate Trust Office
shall be such office or agency of the Company, unless the Company shall
designate and maintain some other office or agency for one or more of such
purposes. The Company shall give prompt written notice to the Trustee of any
change in the location of any such office or agency. If at any time the Company
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office, and the
Company hereby appoints the Trustee as its agent to receive all such
presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Securities
may be presented or surrendered for any or all such purposes, and may from time
to time rescind such designation; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in The City of New York for such purposes. The Company shall
give prompt written notice to the Trustee of any such designation or rescission
and any change in the location of any such other office or agency.
Section 10.03 Money for Security Payments To Be Held in Trust
If the Company shall at any time act as its own Paying Agent, it
shall, on or before each due date of the principal of, premium, if any, or
interest on any of the Securities, segregate and hold in trust for the benefit
of the Holders entitled thereto a sum sufficient to pay the principal, premium,
if any, or interest so becoming due (and any Additional Amounts related thereto)
until such sums shall be paid to such persons or otherwise disposed of as herein
provided, and shall promptly notify the Trustee of its action or failure so to
act.
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If the Company is not acting as Paying Agent, the Company shall, on
or before each due date of the principal of, premium, if any, or interest on,
any Securities, deposit with a Paying Agent a sum in same day funds sufficient
to pay the principal, premium, if any, or interest so becoming due (and any
Additional Amounts related thereto) in the manner set forth in Section 3.08,
such sum to be held in trust for the benefit of the Holders entitled to such
principal, premium or interest, and (unless such Paying Agent is the Trustee)
the Company shall promptly notify the Trustee of such action or any failure so
to act.
If the Company is not acting as Paying Agent, the Company shall
cause each Paying Agent other than the Trustee to execute and deliver to the
Trustee an instrument in which such Paying Agent shall agree with the Trustee,
subject to the provisions of this Section 10.03, that such Paying Agent shall:
(a) hold all sums held by it for the payment of the principal of,
premium, if any, or interest on Securities (and any Additional Amounts
related thereto) in trust for the benefit of the Holders entitled thereto
until such sums shall be paid to such Holders or otherwise disposed of as
herein provided;
(b) give the Trustee notice of any Default by the Company or any
Guarantors (or any other obligor upon the Securities) in the making of any
payment of principal of, premium, if any, or interest on the Securities
(or any Additional Amounts related thereto);
(c) at any time during the continuance of any such Default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent; and
(d) acknowledge, accept and agree to comply in all aspects with the
provisions of this Indenture relating to the duties, rights and
liabilities of such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any
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Paying Agent to the Trustee, such Paying Agent shall be released from all
further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Security (or any Additional Amounts related thereto) and
remaining unclaimed for two years after such principal, premium, if any, or
interest has become due and payable shall be paid to the Company upon receipt of
a Company Request therefor, or (if then held by the Company) shall be discharged
from such trust; and the Holder of such Security shall thereafter, as an
unsecured general creditor, look only to the Company for payment thereof, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in The New York Times and The Wall Street Journal (national
edition), notice that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the date of such
notification or publication, any unclaimed balance of such money then remaining
shall be repaid to the Company.
Section 10.04 Corporate Existence.
Subject to Article Eight, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory), licenses and franchises of the
Company and each of the Restricted Subsidiaries; provided, however, that the
Company shall not be required to preserve any such right, license or franchise
if the Board of the Company shall determine that the preservation thereof is no
longer desirable in the conduct of the business of the Company and the
Restricted Subsidiaries as a whole and that the loss thereof is not adverse in
any material respect to the Holders; provided, further, that the foregoing shall
not prohibit a sale, transfer or conveyance of a Restricted Subsidiary of the
Company or any of its assets in compliance with the terms of this Indenture.
Section 10.05 Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed (i) upon the Company or any of its
Restricted Subsidi-
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aries or (ii) upon the income, profits or property of the Company or any of its
Restricted Subsidiaries and (b) all lawful claims for labor, materials and
supplies, which, if unpaid, could reasonably be expected to become a Lien upon
the property of the Company or any of its Restricted Subsidiaries; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim which (i) is
being contested in good faith by appropriate proceedings properly instituted and
diligently conducted and (ii) if unpaid, would not materially adversely affect
the business, properties or financial condition of the Company and Restricted
Subsidiaries, taken as a whole.
Section 10.06 Maintenance of Properties.
The Company shall cause all properties owned by the Company or any
of the Restricted Subsidiaries or used or held for use in the conduct of their
respective businesses to be maintained and kept in good condition, repair and
working order (reasonable wear and tear excepted) and supplied with all
necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof except where the failure to
do so would not materially adversely affect the business, properties or
financial condition of the Company and the Restricted Subsidiaries, taken as a
whole. Section 10.06 shall not prevent the Company from discontinuing the
maintenance of any of such properties if such discontinuance is, in the judgment
of the Company, desirable in the conduct of its business or the business of any
of the Restricted Subsidiaries and is not disadvantageous in any material
respect to the Holders.
Section 10.07 Insurance.
The Company shall at all times keep its material properties and the
Restricted Subsidiaries' material properties which are of an insurable nature
insured with insurers, believed by the Company in good faith to be financially
sound and responsible, against loss or damage to the extent that property of
similar character is usually and customarily so insured by corporations
similarly situated and owning like properties (which may include self-insurance,
if reasonable and in comparable form to that maintained by companies similarly
situated).
Section 10.08 Payment of Additional Amounts.
(a) All payments made by the Company or any Guarantor under or with
respect to the Securities or any Guarantee
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shall be made free and clear of and without withholding or deduction for or on
account of any present or future Taxes imposed or levied by or on behalf of any
Taxing Authority of the Federative Republic of Brazil or of Japan, unless the
Company or such Guarantor, as the case may be, is required to withhold or deduct
any amount for or on account of Taxes by law or by the interpretation or
administration thereof. If the Company or any Guarantor is required to withhold
or deduct any amount for or on account of Taxes imposed by a Taxing Authority of
the Federative Republic of Brazil or of Japan from any payment made under or
with respect to the Securities or any Guarantee of such Guarantor, the Company
or such Guarantor, as the case may be, shall pay such additional amounts
("Additional Amounts") as may be necessary so that the net amount received by
each Holder of Securities (including Additional Amounts) after such withholding
or deduction shall not be less than the amount the Holder would have received if
such Taxes had not been withheld or deducted. No such Additional Amounts shall
be payable with respect to a payment made to a Holder of Securities (an
"Excluded Holder") with respect to any Tax which would not have been imposed,
payable or due: (i) but for the fact that the Holder (or where the Holder is an
estate, nominee, trust, partnership or corporation, any fiduciary, settlor,
beneficiary, member or shareholder) is a domiciliary, national or resident of,
or engaging in business, maintaining a permanent establishment or physically
present in, Brazil or Japan; (ii) but for the failure to comply with a request
by the Company or any Guarantor to satisfy any certification, identification or
other reporting requirements, whether imposed by statute, treaty, regulation or
administrative practices, concerning nationality, residence or connection with
Brazil or Japan; or (iii) if, where presentation is required, the presentation
for payment had occurred within 30 days after the date such payment was due and
payable or was provided for, whichever is later. The obligation to pay Taxes
shall not apply to (a) any estate, inheritance, gift, sales, transfer, personal
property or any similar Tax or (b) any Tax which is payable otherwise than by
deduction or withholding from payments made under or with respect to the
Securities. The Company or the Guarantor, as applicable, shall (i) make such
withholding or deduction and (ii) remit the full amount deducted or withheld to
the relevant authority (the "Taxing Authority") in accordance with applicable
law. The Company or the Guarantor, as applicable, shall obtain certified copies
of tax receipts evidencing the payment of any Taxes so deducted or withheld from
each Taxing Authority imposing such Taxes and shall provide such certified copy
to the Principal Paying Agent for prompt forwarding to the holder. The Company
or the Guarantor, as applicable, shall attach to each certified
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copy a certificate stating (x) that the amount of withholding tax evidenced by
the certified copy was paid in connection with payments in respect of the
principal amount of Securities then outstanding and (y) the amount of such
withholding tax paid per US$1,000 of principal amount of the Securities. If the
Company or any Guarantor conducts business in any jurisdiction (the "Taxing
Jurisdiction") other than the Federative Republic of Brazil or Japan in a manner
which causes Holders to be liable for taxes on payments under the Securities or
any Guarantee, as the case may be, for which they would not have been so liable
but for such conduct of business in the Taxing Jurisdiction, the Additional
Amounts provision described above shall be considered to apply to such Holders
as if references in such provision to "Taxes" included taxes imposed by way of
deduction or withholding by such Taxing Jurisdiction.
(b) The Company or such Guarantor, as the case may be, shall
indemnify and hold harmless each Holder of Securities (other than an Excluded
Holder) and upon written request of each Holder of Securities (other than an
Excluded Holder), reimburse each such Holder, for the amount of (i) any such
Taxes so levied or imposed on and paid by such Holder as a result of payments
made under or with respect to the Securities, (ii) any liability (including
penalties, interest and expenses) arising under or with respect to the foregoing
clause (i), and (iii) any Taxes so levied or imposed with respect to any
reimbursement under the foregoing clauses (i) or (ii), so that the net amount
received by such Holder after such reimbursement shall not be less than the net
amount the Holder would have received if Taxes on such reimbursement had not
been imposed or levied, but excluding any Taxes on such Holder's net income.
(c) At least 30 days prior to each date on which any payment under
or with respect to the Securities is due and payable (unless such obligation to
pay Additional Amounts arises after the 30th day prior to such date, in which
case it shall be promptly thereafter), if the Company or any Guarantor shall be
obligated to pay Additional Amounts with respect to such payment, the Company or
such Guarantor shall deliver to the Trustee and each Paying Agent an Officers'
Certificate stating the fact that such Additional Amounts shall be payable and
shall specify by country the amounts to be payable and shall set forth such
other information necessary to enable the Trustee and each Paying Agent to pay
such Additional Amounts to Holders on the payment date. Each Officers'
Certificate shall be relied upon until receipt of a further Officers'
Certificate addressing such matters. The Company and any such Guarantor shall
indemnify the Trustee and any Paying Agent for, and hold
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them harmless against, any loss, liability or expense reasonably incurred
without negligence or bad faith on their part arising out of or in connection
with actions taken or omitted by any of them in reliance on any Officers'
Certificate furnished pursuant to this Section. Whenever in this Indenture there
is mentioned, in any context, the payment of principal, premium, if any,
interest or any other amount payable under or with respect to any Security, such
mention shall be deemed to include mention of the payment of Additional Amounts
provided for in this Section 10.08, to the extent that, in such context,
Additional Amounts are, were or would be payable in respect thereof pursuant to
the provisions of this Section 10.08 and express mention of the payment of
Additional Amounts in any provisions hereof shall not be construed as excluding
Additional Amounts in those provisions hereof where such express mention is not
made.
(d) The obligations of the Company and the Guarantors under this
Section 10.08 shall survive the termination of this Indenture and the payment of
all other amounts under or with respect to the Securities.
Section 10.09 Provision of Financial Statements and Other
Information.
(a) Whether or not the Company has a class of securities registered
under the Exchange Act, the Company shall furnish without cost to each Holder of
Securities and file with the Commission (whether or not the Company is a public
reporting company at the time), the Trustee and the Initial Purchasers: (i)
within 120 days after the end of each fiscal year of the Company, annual reports
on Form 20-F (or any successor form) containing the information required to be
contained therein (or required in such successor form); (ii) within 60 days
after the end of each of the first three fiscal quarters of each fiscal year,
reports on Form 6-K (or any successor form) containing substantially the same
information required to be contained in Form 10-Q (or required in any successor
form); and (iii) promptly from time to time after the occurrence of an event
required to be therein reported, such other reports on Form 6-K (or any
successor form) containing substantially the same information required to be
contained in Form 8-K (or required in any successor form). Each of the reports
shall be prepared in accordance with U.S. GAAP consistently applied and shall be
prepared in accordance with the applicable rules and regulations of the
Commission. Prior to the effectiveness of the Exchange Offer Registration
Statement (as defined in the Registration Rights Agreement) or the filing of any
Shelf Reg-
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istration Statement with the Commission, the Company shall file with the Trustee
and provide the Initial Purchasers all of the information that would have been
required to have been filed with the Commission pursuant to clauses (i), (ii)
and (iii) of this Section 10.09(b). Each report pursuant to this Section
10.09(b) shall be prepared in accordance with U.S. GAAP consistently applied and
shall be prepared in accordance with the applicable rules and regulations of the
Commission.
(b) At its own expense, the Company shall supply without cost to
each Holder of the Securities and file with the Trustee within fifteen days
after the Company is required to file the same with the Commission, copies of
any other annual or quarterly reports or other information, documents or reports
which the Company may be required to file with the Commission pursuant to
Section 13(a), 13(c) or 15(d) of the Exchange Act. The Company shall also comply
with the other provisions of Section 314(a) of the Trust Indenture Act.
(c) At any time when the Company is not subject to Section 13 or
15(d) of the Securities Exchange Act of 1934, upon the request of a Holder of a
Series A Security, the Company shall promptly furnish or cause to be furnished
such information as is specified pursuant to Rule 144A(d)(4) under the
Securities Act (or any successor provision thereto) to such Holder or to a
prospective purchaser of such Series A Security designated by such Holder, as
the case may be, in order to permit compliance by such Holder with Rule 144A
under the Securities Act.
Section 10.10 Limitation on Designations of Unrestricted
Subsidiaries.
(a) The Company may designate any Subsidiary of the Company as an
"Unrestricted Subsidiary" under this Indenture (a "Designation") only if:
(i) no Default shall have occurred and be continuing at the
time of or after giving effect to such Designation; and
(ii) the Company would be permitted under this Indenture to make an
Investment under all applicable provisions of Section 10.13 at the time of
Designation (assuming the effectiveness of such Designation) in an amount
(the "Designation Amount") equal to the Fair Market Value of the
Investment of the Company and the Restricted Subsidiaries in such
Subsidiary on such date.
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In the event of any such Designation, the Company shall be deemed to
have made an Investment constituting a Restricted Payment pursuant to Section
10.13 hereof for all purposes of this Indenture in the Designation Amount and
upon such Designation, the Subsidiary that is the subject of such Designation
shall be deemed to be released from its Guarantee, if any. Further, the Company
shall not, and shall not permit any Restricted Subsidiary to, at any time (x)
guarantee any Indebtedness of any Unrestricted Subsidiary (including any
undertaking, agreement or instrument evidencing such Indebtedness); provided
that the Company or any Restricted Subsidiary may pledge Capital Stock or
Indebtedness of any Unrestricted Subsidiary on a non-recourse basis such that
the pledgee has no claim whatsoever against the pledgor other than to obtain
such pledged property or (y) become or be directly or indirectly liable for any
Indebtedness of any Unrestricted Subsidiary or (z) be directly or indirectly
liable for any Indebtedness which provides that the holder thereof may (upon
notice, lapse of time or both) declare a default thereon or cause the payment
thereof to be accelerated or payable prior to its final scheduled maturity upon
the occurrence of a default with respect to any Indebtedness of any Unrestricted
Subsidiary (including any right to take enforcement action against such
Unrestricted Subsidiary), except in the case of clause (x) or (y) to the extent
permitted under Section 10.13 hereof.
(b) In addition, the Company may revoke any Designation of a
Subsidiary as an Unrestricted Subsidiary (a "Revocation") if:
(i) no Default shall have occurred and be continuing at the time of
and after giving effect to such Revocation; and
(ii) all Liens and Indebtedness of such Unrestricted Subsidiary
outstanding immediately following such Revocation would, if incurred at
such time, have been permitted to be incurred for all purposes of this
Indenture; and
(iii) such Subsidiary issues a Guarantee to the extent required
under Section 10.18.
All Designations and Revocations shall be evidenced by Board
Resolutions of the Company delivered to the Trustee certifying compliance with
the foregoing provisions.
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Section 10.11 Statement by Officers as to Default.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each Fiscal Year of the Company ending after the date hereof, an
Officers' Certificate of the Company signed by the chairman or a chief executive
officer of the Company, and by the principal financial officer or principal
accounting officer of the Company, stating (i) that a review of the activities
of the Company during the preceding Fiscal Year has been made under the
supervision of the signing officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture, and (ii) that, to the knowledge of each officer signing such
certificate, the Company has kept, observed, performed and fulfilled each and
every covenant and condition contained in this Indenture and is not in default
in the performance or observance of any of the terms, provisions, conditions and
covenants hereof (or, if a Default shall have occurred, describing all such
Defaults of which such officers may have knowledge, their status and what action
the Company is taking or proposes to take with respect thereto).
(b) When any Default has occurred and is continuing, or if the
Trustee or any Holder or the trustee for or the holder of any other evidence of
Indebtedness of the Company or any Restricted Subsidiary gives any notice or
takes any other action with respect to a claimed default (other than with
respect to Indebtedness (other than Indebtedness evidenced by the Securities) in
an aggregate principal amount of less than US$5,000,000 (or, if non-U.S. dollar
denominated, the U.S. Dollar Equivalent thereof)), the Company shall promptly
notify the Trustee of such Default, notice or action and shall deliver to the
Trustee by registered or certified mail or by telegram, telex or facsimile
transmission an Officers' Certificate specifying such event, notice or other
action within ten Business Days after the Company becomes aware of such
occurrence and what action the Company is taking or proposes to take with
respect thereto.
Section 10.12 Limitation on Additional Indebtedness and Preferred
Stock of Restricted Subsidiaries.
The Company (i) shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume, issue, guarantee
or in any manner become directly or indirectly liable for or with respect to,
contingently or otherwise, the payment of (collectively, to "incur"), any
In-
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debtedness (including any Acquired Indebtedness) and (ii) shall not permit any
Restricted Subsidiary that is not a Guarantor to issue any Preferred Stock, in
each case, except for Permitted Indebtedness; provided that (a) the Company and
any Guarantor shall be permitted to incur Indebtedness (including Acquired
Indebtedness) and (b) any Restricted Subsidiary that is not a Guarantor shall be
permitted to issue Preferred Stock, if, in each case, after giving pro forma
effect to such incurrence or issuance and any concurrent financing (including
the application of the net proceeds therefrom), the ratio of (x) Total
Consolidated Indebtedness and Subsidiary Preferred Stock to (y) Annualized Pro
Forma Consolidated Operating Cash Flow for the latest fiscal quarter for which
consolidated financial statements of the Company are available preceding the
date of such incurrence or issuance would be either (1) less than or equal to
5.75 to 1.00 if such incurrence or issuance is on or prior to December 31, 2000
or (2) less than or equal to 5.00 to 1.00 if such incurrence or issuance is on
or after January 1, 2001.
Section 10.13 Limitation on Restricted Payments.
(a) The Company shall not, and shall not permit any of the
Restricted Subsidiaries to make, directly or indirectly, any Restricted Payment
unless:
(i) no Default shall have occurred and be continuing at the time of
or after giving effect to such Restricted Payment;
(ii) immediately after giving effect to such Restricted Payment, the
Company would be able to incur US$1.00 of Indebtedness under the proviso
of Section 10.12 hereof; and
(iii) immediately after giving effect to such Restricted Payment,
the aggregate amount of all Restricted Payments declared or made on or
after the Issue Date (including any Designation Amount) does not exceed an
amount equal to the sum of (a) the difference between (x) the Cumulative
Adjusted Available Cash Flow determined at the time of such Restricted
Payment and (y) 150% of the cumulative Consolidated Interest Expense of
the Company determined for the period commencing on the Issue Date and
ending on the last day of the latest fiscal quarter for which consolidated
financial statements of the Company are available preceding the date of
such Restricted Payment plus (b) the aggregate net cash proceeds received
by the
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Company (x) as capital contributions to the Company after the Issue Date
or (y) from the issue or sale (other than to a Restricted Subsidiary) of
its Capital Stock (other than Disqualified Stock) on or after the Issue
Date (including, without duplication, upon the exercise of options,
warrants or rights) plus (c) the aggregate net proceeds received by the
Company from the issuance (other than to a Restricted Subsidiary) on or
after the Issue Date of its Capital Stock (other than Disqualified Stock)
upon the conversion of, or exchange for, Indebtedness of the Company or a
Restricted Subsidiary plus (d) in the case of the disposition or repayment
of any Investment constituting a Restricted Payment (other than an
Investment made pursuant to clause (v) of Section 10.13(b)) made after the
Issue Date an amount equal to the lesser of the return of capital with
respect to such Investment and the cost of such Investment, in either
case, less the cost of the disposition of such Investment plus (e) in the
case of the Revocation of the Designation of a Subsidiary as an
Unrestricted Subsidiary, an amount equal to the consolidated net
Investment (exclusive of the net amount of any Investment made in such
Subsidiary while it was an Unrestricted Subsidiary) in such Subsidiary on
the date of Revocation but not in an amount exceeding the sum of (1) the
Designation Amount with respect to such Subsidiary and (2) the net amount
of any Investment made in such Subsidiary while it was an Unrestricted
Subsidiary, minus (f) 50% of the aggregate outstanding principal amount of
Indebtedness incurred pursuant to clause (e) of the definition of
"Permitted Indebtedness." For purposes of the preceding clauses (b)(y) and
(c) and without duplication, the value of the aggregate net cash proceeds
received by the Company upon the issuance of Capital Stock either upon the
conversion of convertible Indebtedness or in exchange for outstanding
Indebtedness or upon the exercise of options, warrants or rights shall be
the net cash proceeds received upon the issuance of such Indebtedness,
options, warrants or rights plus the incremental amount received by the
Company upon the conversion, exchange or exercise thereof.
For purposes of determining the amount expended for Restricted Payments, cash
distributed shall be valued at the face amount thereof and property other than
cash shall be valued at its Fair Market Value.
(b) The provisions of this Section 10.13 shall not prohibit (i) the
payment of any dividend or other distribution
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within 60 days after the date of declaration thereof, if at such date of
declaration such payment would comply with the provisions of this Indenture;
(ii) so long as no Default shall have occurred and be continuing, the purchase,
redemption, retirement or other acquisition of any shares of Capital Stock of
the Company (A) in exchange for or conversion into or (B) out of the net cash
proceeds of the substantially concurrent issue and sale (other than to a
Restricted Subsidiary) of, shares of Capital Stock of the Company (other than
Disqualified Stock); provided that any such net cash proceeds pursuant to the
immediately preceding clause (B) are excluded from clause (iii)(b) of Section
10.13(a); (iii) so long as no Default shall have occurred and be continuing, the
purchase, redemption, retirement, defeasance or other acquisition of (A)
Preferred Stock of any Restricted Subsidiary that is not a Guarantor made by
exchange for or conversion into, or out of the net cash proceeds of, a
substantially concurrent issue and sale (other than to a Restricted Subsidiary)
of (x) Capital Stock (other than Disqualified Stock) of the Company or (y) other
Preferred Stock of such Restricted Subsidiary having an Average Life to Stated
Maturity equal to or greater than the Average Life to Stated Maturity of the
Preferred Stock being purchased, redeemed, retired, defeased or otherwise
acquired or (B) Subordinated Indebtedness made by exchange for or conversion
into, or out of the net cash proceeds of, a substantially concurrent issue and
sale (other than to a Restricted Subsidiary) of (x) Capital Stock (other than
Disqualified Stock) of the Company or (y) other Subordinated Indebtedness having
an Average Life to Stated Maturity equal to or greater than the Average Life to
Stated Maturity of the Subordinated Indebtedness being purchased, redeemed,
retired, defeased or otherwise acquired; provided that any such net cash
proceeds pursuant to the immediately preceding clause (iii) (A) or (iii)(B) are
excluded from clause (iii) (b) of Section 10.13(a); (iv) from and after the date
that any Shareholder Commitments shall cease to be effective under applicable
law, so long as no Default shall have occurred and be continuing, dividends in
respect of Capital Stock of the Company, after taking account of all preceding
and contemporaneous dividends and distributions in respect of Capital Stock of
the Company, in an amount not exceeding the amount mandated by applicable law;
(v) so long as no Default shall have occurred and be continuing, any Investment
constituting a Restricted Payment by the Company or any Restricted Subsidiary in
any person (including any Unrestricted Subsidiary) in an amount not to exceed
US$10,000,000 (or, to the extent non-U.S. dollar denominated, the U.S. Dollar
Equivalent thereof) in the aggregate at any time outstanding; (vi) so long as no
Default shall have occurred and be continuing and prior to a Liquida-
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tion Event (as defined in the LLC Agreement) with respect to Holding LLC,
dividends to Holding LLC in an amount not exceeding the amount necessary for
Members of Holding LLC to pay Taxes attributable solely to their interest in
Holding LLC; (vii) the redemption, repurchase, retirement or other acquisition
of any Capital Stock of the Company from an employee or former employee of the
Company or any of its Subsidiaries in connection with such employee's death,
disability or termination of employment; provided that the amount expended by
the Company or any of its Restricted Subsidiaries in connection with such
redemption, repurchase, retirement or other acquisition does not exceed
US$500,000 (or, to the extent non-U.S. dollar denominated, the U.S. Dollar
Equivalent thereof) per year; provided, further, that any portion of such
permitted amount which is not expended in one year may be carried forward for up
to two consecutive years; or (viii) so long as no Default shall have occurred
and be continuing, the making of a direct or indirect Investment constituting a
Restricted Payment out of the proceeds of a concurrent capital contribution in
respect of existing Capital Stock (other than Disqualified Capital Stock) of the
Company or from the issue or sale (other than Disqualified Capital Stock) of the
Company or from the issue or sale (other than to a Subsidiary) of Capital Stock
(other than Disqualified Capital Stock) of the Company; provided that any such
net cash proceeds are excluded from clause (iii)(b) of Section 10.13(a).
Restricted Payments of the type set forth in the preceding clauses (iv), (v),
(vi) and (vii) shall be included in making the determination of available
amounts under clause (iii) of Section 10.13(a).
Section 10.14 Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit, cause, or suffer any
Restricted Subsidiary to, conduct any business or enter into any transaction or
series of related transactions with or for the benefit of any of their
respective Affiliates or any beneficial holder of ten percent or more of any
class of Capital Stock of the Company or any officer or director of the Company
or any Restricted Subsidiary (each an "Affiliate Transaction"), except on terms
that are fair and reasonable to the Company or such Restricted Subsidiary, as
the case may be. Each Affiliate Transaction involving aggregate payments or
other property having a Fair Market Value in excess of US$2,000,000 (or, to the
extent non-U.S. dollar denominated, the U.S. Dollar Equivalent of such amount)
shall be approved by the Board of Directors of the Company, such approval to be
evidenced by a Board Resolution (delivered to the Trustee) stating
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that the Board of Directors of the Company (including a majority of the
Disinterested Directors) has determined that such transaction complies with the
foregoing provisions. In addition to the foregoing, with respect to any
Affiliate Transaction involving aggregate consideration in excess of
US$5,000,000 (or, to the extent non-U.S. dollar denominated, the U.S. Dollar
Equivalent of such amount) or more, the Company must obtain a written opinion
(delivered to the Trustee) from an Independent Financial Advisor stating that
the terms of such Affiliate Transaction to the Company or the Restricted
Subsidiary, as the case may be, are fair from a financial point of view.
Notwithstanding the foregoing, the restrictions set forth in this
covenant shall not apply to (i) transactions with or among, the Company and/or
any of the Restricted Subsidiaries; provided in any such case, no officer,
director or beneficial holder of 10% or more of any class of Capital Stock of
the Company shall beneficially own any Capital Stock of any such Restricted
Subsidiary, (ii) transactions between the Company and any Restricted Subsidiary
that are solely for the benefit of the Company or a Guarantor, (iii)
transactions between or among Unrestricted Subsidiaries, (iv) any dividend
permitted by Section 10.13, (v) directors' fees, indemnification and similar
arrangements, officers' indemnification, employee stock option or employee
benefit plans, employee salaries and bonuses or legal fees paid or created in
the ordinary course of business, (vi) payments made to a License Vehicle in
reimbursement of expenses to the extent incurred to maintain the effectiveness
of any paging licenses used by the Company or any Restricted Subsidiary and
(vii) payments pursuant to each of the following arrangements as in effect on
the Issue Date: (A) the Technical Services Agreement, (B) the Subscription
Agreement, (C) the Paging License Operating Agreements and (D) the Paging
License Transfer Agreements.
Section 10.15 Disposition of Proceeds of Asset Sales.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Sale unless (i) the Company or such Restricted
Subsidiary, as the case may be, receives consideration at the time of such Asset
Sale at least equal to the Fair Market Value of the shares or assets sold or
otherwise disposed of and (ii) at least 75% of such consideration consists of
cash or Cash Equivalents (provided that the following shall be deemed cash for
purposes of this provision and be treated as Net Cash Proceeds, subject to
application as
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hereinafter provided: the amount of (x) any liabilities (as shown on the balance
sheet or in the notes thereto of the Company or such Restricted Subsidiary) of
the Company or such Restricted Subsidiary that are assumed (and from which the
Company or such Restricted Subsidiary is unconditionally released) in connection
with such Asset Sale by the transferee or purchaser of such assets or on behalf
of such transferee or purchaser by a third party and (y) any notes or other
assets received by the Company or such Restricted Subsidiary from such
transferee or purchaser that are immediately sold or transferred (on a
non-recourse basis) for cash or Cash Equivalents). To the extent the Net Cash
Proceeds of any Asset Sale are not required to be applied to repay, and
permanently reduce the commitments under, any Specified Indebtedness or are
required but are not so applied, the Company or such Restricted Subsidiary, as
the case may be, may apply such Net Cash Proceeds within 365 days thereof, to an
investment in properties and assets that shall be used in a Permitted Business
(or in Capital Stock of any person that shall become a Restricted Subsidiary as
a result of such investment if such person principally owns properties and
assets that shall be used in a Permitted Business) of the Company or any
Restricted Subsidiary ("Replacement Assets"). Pending the final application of
any such Net Cash Proceeds in accordance with the second sentence of this
paragraph or to an Asset Sale Offer, the Company or such Restricted Subsidiary
may invest such Net Cash Proceeds in any manner not prohibited by this Indenture
and may temporarily repay Specified Indebtedness. The Pro Rata Share of Net Cash
Proceeds from any Asset Sale that are neither used to repay, and permanently
reduce the commitments under, any Specified Indebtedness nor invested in
Replacement Assets within such 365-day period shall constitute "Excess Proceeds"
subject to disposition as provided in Section 10.15(b).
(b) Within 30 days after the aggregate amount of Excess Proceeds
equals or exceeds US$10,000,000 (or, to the extent non-U.S. Dollar denominated,
the U.S. Dollar Equivalent of such amount), the Company shall make an offer to
purchase (an "Asset Sale Offer"), from all Holders of the Securities, Securities
having an aggregate purchase price equal to such Excess Proceeds at a price in
cash equal to 100% of the outstanding principal amount thereof plus accrued and
unpaid interest, if any, to the purchase date (including any Additional Amounts
payable in respect thereof). Each Asset Sale Offer shall remain open for a
period of 20 Business Days or such longer period as may be required by law. To
the extent that the aggregate purchase price for Securities tendered pursuant to
an Asset Sale Offer is less than the Excess Proceeds available for
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such offer, the Company and the Restricted Subsidiaries may use such deficiency
for general corporate purposes. If the aggregate purchase price for the
Securities validly tendered and not withdrawn by Holders thereof exceeds the
Excess Proceeds available for such offer, Securities to be purchased shall be
selected on a pro rata basis or as nearly pro rata as practicable. Upon
completion of such Asset Sale Offer, the amount of Excess Proceeds shall be
reset to zero.
(c) The Company shall comply with all applicable tender offer laws
and regulations, including, to the extent applicable, the requirements of
Section 14(e) of, and Rule 14e-1 under, the Exchange Act, and any other
applicable United States or foreign securities laws or regulations, including
applicable laws of the Federative Republic of Brazil or any State thereof, and
any applicable requirements of any securities exchange on which the Notes are
listed, in connection with the repurchase of Securities pursuant to the Asset
Sale Offer. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 10.15, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 10.15 by virtue
thereof.
Section 10.16 Change of Control Offer.
In the event of a Change of Control (the date of such occurrence,
the "Change of Control Date"), the Company shall notify the Holders of
Securities in writing of such occurrence and will make an offer to purchase (the
"Change of Control Offer"), on a Business Day (the "Change of Control Payment
Date") not later than 60 days following the Change of Control Date, all
Securities then Outstanding at a purchase price equal to 101% of the principal
amount thereof plus accrued and unpaid interest, if any, to the Change of
Control Payment Date (including any Additional Amounts payable in respect
thereof) (the "Change of Control Purchase Price"). Failure to mail the notice on
the date specified below or to have satisfied the foregoing condition precedent
by the date that the notice is required to be mailed shall constitute an Event
of Default under Section 5.01(c).
Notice of a Change of Control Offer shall be mailed by the Company
not later than 10 days after the Change of Control Date to the Trustee, who, not
less than 25 days nor more than 45 days before the Change of Control Payment
Date, shall mail such notice to each of the Holders of Securities at their last
registered address with a copy to the Paying Agent. The
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Change of Control Offer shall remain open from the time of mailing for at least
20 Business Days and until 5:00 p.m., New York City time, on the Change of
Control Payment Date. The notice, which shall govern the terms of the Change of
Control Offer, shall include such disclosures as are required by law and shall
state:
(a) that the Change of Control Offer is being made pursuant to this
Section 10.16 and that all Securities tendered into the Change of Control
Offer will be accepted for payment;
(b) the purchase price (including the amount of accrued interest, if
any) for each Security, the Change of Control Payment Date, the last date
on which the Change of Control Notice (as defined below) must be given to
a Paying Agent, the date on which the Change of Control Offer expires and
the names and addresses of any Paying Agent;
(c) that any Security not tendered for payment will continue to
accrue interest in accordance with its terms;
(d) that, unless the Company shall default in the payment of the
Change of Control Purchase Price, any Security accepted for purchase
pursuant to the Change of Control Offer shall cease to accrue interest
after the Change of Control Payment Date;
(e) that Holders electing to have Securities purchased pursuant to a
Change of Control Offer will be required to surrender their Securities to
a Paying Agent at the address specified in the notice prior to 5:00 p.m.,
New York City time, on the Change of Control Payment Date and must
complete a notice of such election in the form of Exhibit D hereto or such
other form proposed by the Company and acceptable to the Trustee and the
Paying Agent (the "Change of Control Purchase Notice");
(f) that Holders of Securities will be entitled to withdraw their
election if the Paying Agent receives, not later than 5:00 p.m., New York
City time, on the Change of Control Payment Date, a tested telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Securities the Holder delivered for purchase, the
Security certificate number (if any) and a statement that such Holder is
withdrawing his election to have such Securities purchased;
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(g) that Holders whose Securities are purchased only in part will be
issued Securities equal in principal amount to the unpurchased portion of
the Securities surrendered;
(h) the instructions that Holders must follow in order to tender
their Securities and the procedures for withdrawing a Change in Control
Purchase Notice; and
(i) information concerning the business of the Company, the most
recent annual and quarterly reports of the Company filed with the
Commission pursuant to the Exchange Act and/or such other information or
reports prepared pursuant to Section 10.09, a description of material
developments in the Company's business, information with respect to pro
forma historical financial information after giving effect to such Change
of Control and such other information concerning the circumstances and
relevant facts regarding such Change of Control and Change of Control
Offer as would be material to a Holder of Securities in connection with
the decision of such Holder as to whether or not it should tender
Securities pursuant to the Change of Control Offer, including, but not
limited to, the events causing such Change of Control and the date such
Change of Control is deemed to have occurred.
On the Change of Control Payment Date, the Company shall (i) accept
for payment Securities or portions thereof properly tendered and not withdrawn
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
money in United States dollars, in immediately available funds, sufficient to
pay the Change of Control Purchase Price of all Securities or portions thereof
so tendered and accepted (including any Additional Amounts payable in respect
thereof) and (iii) deliver to the Trustee the Securities so accepted together
with an Officers' Certificate setting forth the Securities or portions thereof
tendered to and accepted for payment by the Company. The Paying Agent shall
promptly mail or deliver to the Holders of Securities so accepted payment in an
amount equal to such Change of Control Purchase Price, and the Trustee shall
promptly authenticate and mail or deliver to such Holders a new Security equal
in principal amount to any unpurchased portion of each Security surrendered. Any
Securities not so accepted shall be promptly mailed or delivered by the Company
to the Holder thereof. The Company will publicly announce the results of the
Change of Control Offer not later than the first Business Day following the
Change of Control Payment Date. Notwithstanding the foregoing provisions of this
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Section 10.16, the Company shall not be required to make a Change of Control
Offer in order to satisfy the requirements of this Section 10.16 if a third
party makes the Change of Control Offer in the manner, at the times and
otherwise in full compliance with the requirements applicable to a Change of
Control Offer made by the Company and purchases all Securities validly tendered
and not withdrawn pursuant to such Change of Control Offer; provided, however,
that any such third party shall be subject to Section 10.08 in respect of any
amounts paid by such third party hereunder (for this purpose, Section 10.08 is
modified by replacing "Company" with the name of the third party) and this
covenant shall be deemed satisfied only if such third party complies with
Section 10.08 (as modified) or if the Company satisfies such third party's
obligations under such Section.
The Company shall comply, to the extent applicable, with the
requirements of all applicable tender offer laws and regulations, including, to
the extent applicable, Section 14(e) of and Rule 14e-1 under the Exchange Act,
and the Company or any third party making a Change of Control Offer shall comply
with any other applicable United States or foreign securities laws or
regulations, including applicable laws or regulations of the Federative Republic
of Brazil or any State thereof, and any applicable requirements of any
securities exchange on which the Securities are listed, in connection with the
repurchase of Securities pursuant to a Change of Control Offer. To the extent
that the provisions of any securities laws or regulations conflict with the
provisions of this Section 10.16, the Company shall comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations under this Section 10.16 by virtue thereof.
Notwithstanding anything herein to the contrary, any Holder
delivering to the Paying Agent, at the office of the Paying Agent or an office
or agency referred to in Section 10.02, the Change in Control Purchase Notice
contemplated by this Section 10.16 shall have the right to withdraw such Change
in Control Purchase Notice at any time prior to the close of business on the
Change in Control Purchase Date by delivery of a written notice of withdrawal to
the Paying Agent or to an office or agency referred to in Section 10.02.
For purposes of this Section 10.16, the Trustee shall act as Paying
Agent unless the Company shall designate one or more other Paying Agents.
Notwithstanding Section 3.08 and Section 10.03, the Company may not act as
Paying Agent under this Section 10.16.
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Section 10.17 Limitation on Liens Securing Certain Indebtedness.
The Company shall not, and shall not permit any Restricted
Subsidiary to, create, incur, assume or suffer to exist any Liens of any kind
against or upon any of its property or assets, or any proceeds therefrom, which
secure either (x) Subordinated Debt Securities unless the Securities and the
Guarantees, as applicable, are secured by a Lien on such property, assets or
proceeds that is senior in priority to the Liens securing such Subordinated Debt
Securities or (y) Pari Passu Debt Securities unless the Securities and the
Guarantees, as applicable, are equally and ratably secured with the Liens
securing such Pari Passu Debt Securities. The Company shall not create, incur or
suffer to exist any Lien of any kind (other than the Lien of the Trustee
pursuant to the Escrow Agreement) against or upon the Collateral and will not
terminate the Lien of the Trustee pursuant to the Escrow Agreement on the
Collateral.
Section 10.18 Issuance of Guarantees by Material Restricted
Subsidiaries; Release of Guarantees.
Each Material Restricted Subsidiary shall be a guarantor of the
Securities (each, a "Guarantor" and, collectively the "Guarantors"). Each
Guarantor shall fully and unconditionally guarantee (collectively, the
"Guarantees"), jointly and severally, on a senior unsecured basis to each holder
of a Security the due and punctual payment of the principal of, premium, if any,
and interest on, and all other amounts owing in respect of such Security (and
any Additional Amounts payable in respect thereof) and under this Indenture.
Each Guarantor shall deliver a written instrument in the form attached to this
Indenture evidencing its Guarantee and shall, upon request by the Trustee or any
Holder promptly endorse its Guarantee on any Security for which such request is
made; provided, however, that every Holder shall have the full benefit of and
every right and privilege relating to each Guarantee whether or not such
Guarantee shall have been endorsed upon any Security.
Pursuant to each Guarantee, if the Company defaults in payment of
any amount owing in respect of any Security, the Guarantor will be obligated to
duly and punctually pay the same. Each Guarantor covenants and agrees that its
obligations under its Guarantee shall be unconditional, irrespective of the
validity, regularity or enforceability of the Securities or this Indenture, the
absence of any action to enforce the same
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or any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.
If no Default exists or would exist under this Indenture,
concurrently with any sale or disposition (by merger or otherwise) of any
Guarantor (other than a transaction subject to the provisions described under
Section 8.01) by the Company or a Restricted Subsidiary to any person that is
not an Affiliate of the Company or any of the Restricted Subsidiaries which is
in compliance with the terms of this Indenture, such Guarantor will
automatically and unconditionally be released from all obligations under its
Guarantee.
Section 10.19 Business of the Company; Restriction on Transfers of
Existing Business.
The Company shall not, and shall not permit any of the Restricted
Subsidiaries to, be principally engaged in any business or activity other than a
Permitted Business.
Section 10.20 Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or otherwise enter into or cause
to become effective any consensual encumbrance or consensual restriction of any
kind on the ability of any Restricted Subsidiary to (a) pay dividends, in cash
or otherwise, or make any other distributions on its Capital Stock or any other
interest or participation in, or measured by, its profits owned by the Company
or any Restricted Subsidiary, (b) pay any Indebtedness owed to the Company or a
Restricted Subsidiary, (c) make any Investment in the Company or any Restricted
Subsidiary or (d) transfer any of its property or assets to the Company or to
any Restricted Subsidiary, except for (i) any such customary encumbrance or
restriction contained in a security document creating a Lien permitted under
this Indenture to the extent such encumbrance or restriction applies to action
following a default in respect of the applicable secured obligation, (ii) any
such encumbrance or restriction pursuant to any agreement existing on the Issue
Date, (iii) any such encumbrance or restriction with respect to a Restricted
Subsidiary that is not a Restricted Subsidiary on the Issue Date which
encumbrance or restriction is in existence at the time such person becomes a
Restricted Subsidiary but not created in contemplation thereof, (iv) any such
encumbrance or restriction existing under any agreement that refinances,
re-
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places or amends an agreement containing a restriction permitted by clause (iii)
above, provided that the terms and conditions of any such restrictions are not
materially less favorable to the Holders of Securities than those under or
pursuant to the agreement being replaced or amended or the agreement evidencing
the indebtedness refinanced, (v) any such encumbrance or restriction imposed
pursuant to an agreement which has been entered into for the sale or disposition
of all or substantially all of the Capital Stock or assets of such Restricted
Subsidiary and (vi) customary non-assignment provisions in leases entered into
in the ordinary course of business and consistent with past practices.
Section 10.21 Shareholder Commitments.
The Company shall maintain enforceable written commitments (the
"Shareholder Commitments") from each shareholder of the Company (at a duly
convened meeting of its shareholders, if required) agreeing that such
shareholder shall not exercise its voting rights to receive mandatory statutory
dividends (without limiting such shareholder's right otherwise to receive
dividends pursuant to and in compliance with Section 10.13); provided that a
Shareholder Commitment shall cease to be effective on the first to occur of (w)
the date that shares of Capital Stock of the Company are issued and listed on a
Brazilian securities exchange in connection with a bona fide public offering of
such shares or the date that any shares of the Capital Stock of the Company are
otherwise effectively listed and traded on a Brazilian securities exchange, (x)
the date that none of the Securities remain outstanding, (y) June 6, 2002 or (z)
the date that such commitment is no longer effective, enforceable or legal under
applicable Brazilian laws and regulations (including without limitation any
construction or interpretation thereof by the CVM, any court or any other
governmental authority). The Company shall obtain Shareholder Commitments in
connection with any future issuances of Capital Stock to the extent the
Shareholder Commitment would then be effective, enforceable and legal under the
terms of the foregoing proviso.
Section 10.22 Limitation on Status as Investment Company.
The Company shall not, and shall not permit any of its Subsidiaries
or controlled Affiliates to, conduct its business in a fashion that would cause
the Company to be required to register as an "investment company" (as that term
is defined in the Investment Company Act of 1940, as amended (the
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"Investment Company Act")), or otherwise become subject to regulation under the
Investment Company Act. For purposes of establishing the Company's compliance
with this Section 10.22, any exemption which is or would become available under
Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act shall be
disregarded.
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
Section 11.01 Redemption Generally.
The Securities may be redeemed (i) in whole or in part, at any time
on or after June 6, 2001, at the option of the Company, subject to the
conditions and at the redemption prices specified in the forms of Security,
together with accrued but unpaid interest to the redemption date or (ii) on or
prior to June 6, 2000, at the option of the Company, subject to the conditions
and at the redemption price specified in the form of Security, with the proceeds
of one or more Significant Equity Offerings or (iii) in whole, but not in part,
at the option of the Company, at any time, if pursuant to the tax redemption
provisions of the Securities, at the price specified in the forms of Security.
Section 11.02 Applicability of Article.
Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture or the
Securities, shall be made in accordance with such provision and this Article.
Section 11.03 Election To Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 11.01 shall be evidenced by a Board Resolution and an Officers'
Certificate. In case of any redemption at the election of the Company, the
Company shall, at least 45 days prior to the Redemption Date fixed by the
Company in such Board Resolution and Officers' Certificate (unless a shorter
notice period shall be satisfactory to the Trustee), notify the Trustee in
writing of such Redemption Date and of the principal amount of Securities to be
redeemed.
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Section 11.04 Selection by Trustee of Securities To Be Redeemed.
If less than all the Securities are to be redeemed pursuant to
Section 11.01, the particular Securities or portions thereof to be redeemed
shall be selected not more than 60 days and not less than 30 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption by lot, pro rata or by such other method as the Trustee in
its sole discretion deems fair and appropriate and in such manner as complies
with the requirements of the principal securities exchange, if any, on which the
Securities being redeemed are listed and the Depository; provided that any
redemption pursuant to the provisions of the Securities relating to a
Significant Equity Offering shall be made on a pro rata basis or as nearly pro
rata basis as practicable (subject to the procedures of the Depository). In any
such proration, the Trustee shall make such adjustments, reallocations and
eliminations as it shall deem proper to the end that the principal amount of
each Security so prorated shall be equal to an authorized denomination, by
increasing or decreasing or eliminating the amount which would be allocable to
any Security on the basis of exact proportion by an amount not exceeding
US$5,000. The Trustee shall make the selection from the Securities Outstanding
and not previously called for redemption. The Trustee shall promptly notify the
Company and the Security Registrar in writing of such Securities selected for
redemption and, in the case of Securities selected for partial redemption, the
principal amount to be redeemed. The Trustee may select for redemption portions
of the principal amount of Securities that have denominations equal to or larger
than US$1,000 principal amount.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
Section 11.05 Notice of Redemption.
(a) In the case of any redemption pursuant to Section 11.01, notice
of redemption shall be given by first-class mail, postage prepaid, mailed not
less than 30 nor more than 60 days prior to the Redemption Date, to each Holder
of Securities to be redeemed, at the address of such Holder appearing in the
Security Register.
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All notices of redemption pursuant to Section 11.01 shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) if less than all Outstanding Securities are to be redeemed,
the identification of the particular Securities to be redeemed;
(iv) in the case of a Security to be redeemed in part, the principal
amount of such Security to be redeemed and that after the Redemption Date
upon surrender of such Security, a new Security or Securities in the
aggregate principal amount equal to the unredeemed portion thereof shall
be issued;
(v) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(vi) that on the Redemption Date the Redemption Price shall become
due and payable upon each such Security or portion thereof, together with
accrued and unpaid interest to the Redemption Date (and any Additional
Amounts related thereto), and that (unless the Company shall default in
payment of the Redemption Price) interest thereon shall cease to accrue on
and after said date;
(vii) the place or places where such Securities are to be
surrendered for payment of the Redemption Price;
(viii) the CUSIP number, if any, relating to such Securities; and
(ix) the paragraph of the Securities pursuant to which the
Securities are being redeemed.
(b) Notice of redemption pursuant to Section 11.05(a) shall be given
by the Company or, at the Company's written request, by the Trustee in the name
and at the expense of the Company.
(c) The notice if mailed in the manner herein provided shall be
conclusively presumed to have been given, whether or not the Holder receives
such notice. In any case, failure to give such notice by mail or any defect in
the notice
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to the Holder of any Security designated for redemption as a whole or in part
shall not affect the validity of the proceedings for the redemption of any other
Security.
Section 11.06 Deposit of Redemption Price.
One day prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 10.03) an
amount of money in same day funds sufficient to pay the Redemption Price of, and
accrued interest on, all the Securities or portions thereof which are to be
redeemed on that date (together with any Additional Amounts).
Section 11.07 Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified and from and after such date (unless the
Company shall default in the payment of the Redemption Price) such Securities
shall cease to bear interest. Upon surrender of any such Security for redemption
in accordance with said notice, such Security shall be paid by the Company at
the Redemption Price; provided, however, that installments of interest whose
Stated Maturity is on or prior to the Redemption Date, shall be payable to the
Holders of such Securities, or one or more Predecessor Securities, registered as
such on the relevant Regular Record Dates according to the terms and the
provisions of Section 3.07.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and premium, if any, shall,
until paid, bear interest from the Redemption Date, at the rate then borne by
such Security.
Section 11.08 Securities Redeemed or Purchased in Part.
Any Security which is to be redeemed or purchased only in part shall
be surrendered to the Paying Agent at the office or agency maintained for such
purpose pursuant to Section 10.02 (with, if the Company, the Security Registrar
or the Trustee so requires, due endorsement by, or a written instrument of
transfer in form satisfactory to, the Company, the Security Registrar or the
Trustee duly executed by the Holder thereof or such Holder's attorney duly
authorized in writing),
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and the Company shall execute, and the Trustee shall authenticate and deliver to
the Holder of such Security without service charge, a new Security or
Securities, of any authorized denomination as requested by such Holder in
aggregate principal amount equal to, and in exchange for, the portion of the
principal of the Security so surrendered that is not redeemed or purchased.
ARTICLE TWELVE
COLLATERAL AND SECURITY
Section 12.01 Escrow Agreement.
(a) The due and punctual payment of the interest on the Securities
when and as the same shall be due and payable on each Interest Payment Date, at
maturity or by acceleration, and interest on the overdue principal of and
interest (to the extent permitted by law), if any, on the Securities and
performance of all other obligations of the Company to the Holders of Securities
or the Trustee under this Indenture and the Escrow Agreement with respect to the
Securities and the Securities, according to the terms hereunder or thereunder,
shall be secured as provided in the Escrow Agreement which the Company, the
Escrow Agent and the Trustee have entered into simultaneously with the execution
of this Indenture. Upon the acceleration of the maturity of the Securities, the
Escrow Agreement will provide for the foreclosure by the Trustee of the net
proceeds of the Escrow Account. Each Holder of Securities, by its acceptance
thereof, consents and agrees to the terms of the Escrow Agreement (including,
without limitation, the provisions providing for foreclosure and disbursement of
Collateral) as the same may be in effect or may be amended from time to time in
accordance with its terms and authorizes and directs the Escrow Agent and the
Trustee to enter into the Escrow Agreement and to perform its obligations and
exercise its rights thereunder in accordance therewith. The Company shall
deliver to the Trustee copies of the Escrow Agreement, and shall do or cause to
be done all such acts and things as may be necessary or proper, or as may be
required by the provisions of the Escrow Agreement, to assure and confirm to the
Trustee the security interest in the Collateral contemplated by the Escrow
Agreement or in any part thereof, as from time to time constituted, so as to
render the same available for the security and benefit of this Indenture with
respect to, and of, the Securities, according to the intent and purposes
expressed in the Escrow Agree-
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ment. The Company shall take any and all actions reasonably required to cause
the Escrow Agreement to create and maintain (to the extent possible under
applicable Law) as security for the obligations of the Company hereunder, a
valid and enforceable perfected first priority Lien in and on all the
Collateral, in favor of the Trustee for the benefit of the Trustee, predecessor
trustees, and the Holders of Securities, superior to and prior to the rights of
all third Persons and subject to no other Liens. The Trustee shall have no
responsibility for perfecting or maintaining the perfection of the Trustee's
security interest in the Collateral or for filing any instrument, document or
notice in any public office at any time or times.
(b) The Escrow Agreement shall further provide that in the event a
portion of the Securities has been retired by the Company, depending upon the
amount available in the Escrow Account, funds representing the interest payments
which have not previously been made on such retired Securities shall, upon the
written request of the Company to the Escrow Agent and the Trustee, be paid to
the Company upon compliance with the release of collateral provisions of the TIA
and upon the receipt of a notice relating thereto from the Trustee.
Section 12.02 Recording and Opinions.
(a) The Company shall furnish to the Trustee promptly after the
execution and delivery of this Indenture an Opinion of Counsel either (i)
stating that in the opinion of such counsel all action has been taken with
respect to the recording, registering and filing of this Indenture, financing
statements or other instruments necessary to make effective the Lien intended to
be created by the Escrow Agreement and reciting with respect to the security
interests in the Collateral the details of such action, or (ii) stating that in
the opinion of such counsel no such action is necessary to make such Lien
effective.
(b) The Company shall furnish to the Escrow Agent and the Trustee on
June 1, and on each June 1 thereafter until the date upon which the balance of
Available Funds (as defined in the Escrow Agreement) shall have been reduced to
zero, an Opinion of Counsel, dated as of such date, either (i) stating that (A)
in the opinion of such counsel, action has been taken with respect to the
recording, registering, filing, re-recording, re-registering and refiling of all
supplemental indentures, financing statements, continuation statements and other
instruments of further assurance as is necessary to maintain the Lien of the
Escrow Agreement and reciting with respect
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to the security interests in the Collateral the details of such action or
referring to prior Opinions of Counsel in which such details are given and (B)
based on relevant laws as in effect on the date of such Opinion of Counsel, all
financing statements and continuation statements have been executed and filed
that are necessary as of such date and during the succeeding 12 months fully to
preserve and protect, to the extent such protection and preservation are
possible by filing, the rights of the Holders of Securities and the Trustee
hereunder and under the Escrow Agreement with respect to the security interests
in the Collateral or (ii) stating that, in the opinion of such counsel, no such
action is necessary to maintain such Lien and assignment.
Section 12.03 Release of Collateral.
(a) Subject to subsections (b), (c) and (d) of this Section 12.03,
Collateral may be released from the Lien and security interest created by the
Escrow Agreement only in strict accordance with the provisions of the Escrow
Agreement.
(b) Except to the extent that any Lien on proceeds of Collateral is
automatically released by operation of Section 9-306 of the Uniform Commercial
Code or other similar law, no Collateral shall be released from the Lien and
security interest created by the Escrow Agreement pursuant to the provisions of
the Escrow Agreement, other than to the Holders pursuant to the terms thereof,
unless there shall have been delivered to the Trustee the certificate required
by Section 12.03(d) and Section 12.04.
(c) At any time when a Default shall have occurred and be continuing
and the maturity of the Securities issued on the Issue Date shall have been
accelerated (whether by declaration or otherwise), no Collateral shall be
released pursuant to the provisions of the Escrow Agreement, and no release of
Collateral in contravention of this Section 12.03(c) shall be effective as
against the Holders of Securities, except for the disbursement of all Available
Funds (as defined in the Escrow Agreement) to the Trustee pursuant to Section
6(b) of the Escrow Agreement.
(d) The release of any Collateral from the Liens and security
interests created by the Escrow Agreement shall not be deemed to impair the
security under this Indenture in contravention of the provisions hereof if and
to the extent the Collateral is released pursuant to the terms hereof or
pursuant to the terms of the Escrow Agreement. To the extent applicable,
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the Company shall cause TIA ss. 314(d) relating to the release of property or
securities from the Lien and security interest of the Escrow Agreement to be
complied with. Any certificate or opinion required by TIA ss. 314(d) may be made
by an Officer of the Company except in cases where TIA ss. 314(d) requires that
such certificate or opinion be made by an independent Person, which Person shall
be an independent engineer, appraiser or other expert selected or approved by
the Trustee in the exercise of reasonable care.
Section 12.04 Certificates of the Company.
The Company shall furnish to the Trustee, prior to any proposed
release of Collateral other than pursuant to the express terms of the Escrow
Agreement, (i) all documents required by TIA ss. 314(d) and (ii) an Opinion of
Counsel, which may be rendered by internal counsel to the Company, to the effect
that such accompanying documents constitute all documents required by TIA ss.
314(d). The Trustee may, to the extent permitted by Section 6.01 and Section
6.03, accept as conclusive evidence of compliance with the foregoing provisions
the appropriate statements contained in such documents and such Opinion of
Counsel.
Section 12.05 Authorization of Actions To Be Taken by the Trustee
Under the Escrow Agreement.
Subject to the provisions of Section 6.01 and Section 6.03, the
Trustee may, without the consent of the Holders of Securities, on behalf of the
Holders of Securities, take all actions it deems necessary or appropriate in
order to (a) enforce any of the terms of the Escrow Agreement and (b) collect
and receive any and all amounts payable in respect of the obligations of the
Company hereunder. The Trustee shall have power to institute and maintain such
suits and proceedings as it may deem expedient to prevent any impairment of the
Collateral by any acts that may be unlawful or in violation of the Escrow
Agreement or this Indenture, and such suits and proceedings as the Trustee may
deem expedient to preserve or protect its interests and the interests of the
Holders of Securities in the Collateral (including power to institute and
maintain suits or proceedings to restrain the enforcement of or compliance with
any legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security interest hereunder or be
prejudi-
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cial to the interests of the Holders of Securities or of the Trustee).
Section 12.06 Authorization of Receipt of Funds by the Trustee Under
the Escrow Agreement.
The Trustee is authorized to receive any funds for the benefit of
the Holders of Securities disbursed under the Escrow Agreement, and to make
further distributions of such funds to the Holders of Securities according to
the provisions of this Indenture.
Section 12.07 Termination of Security Interest.
Upon the earliest to occur of (i) the date upon which the balance of
Available Funds (as defined in the Escrow Agreement) shall have been reduced to
zero, (ii) the payment in full of all interest payments pursuant to this
Indenture and the Securities through June 6, 2000 (assuming that at such date
there shall not exist any Default hereunder or any event or condition which,
upon the giving of notice or passage of time or both would constitute a Default
or an Event of Default) hereunder, (iii) legal defeasance pursuant to Article
Four and (iv) covenant defeasance pursuant to Article Four, the Trustee shall,
at the written request of the Company, release the Liens on the Collateral
pursuant to this Indenture and the Escrow Agreement upon the Company's
compliance with the provisions of the TIA pertaining to release of collateral.
ARTICLE THIRTEEN
SATISFACTION AND DISCHARGE
Section 13.01 Satisfaction and Discharge of Indenture
This Indenture shall cease to be of further effect (except as to
surviving rights or registration of transfer or exchange of Securities herein
expressly provided for, obligations to pay Additional Amounts hereunder, the
Company's obligations under Section 6.07 hereof, and the Trustee's and Paying
Agent's obligations under Section 4.06 hereof) and the Trustee, on written
demand of and at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when either
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(a) all Securities theretofore authenticated and delivered (other
than (A) Securities which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 3.06 hereof and (B)
Securities for whose payment money has theretofore been deposited in trust
or segregated and held in trust by the Company and thereafter repaid to
the Company or discharged from such trust, as provided in Section 10.03)
have been delivered to the Trustee for cancellation; or
(b) (i) all such Securities not theretofore delivered to the Trustee
for cancellation have become due and payable under irrevocable
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the sole expense, of the
Company and the Company or any of the Guarantors has irrevocably deposited
or caused to be deposited with the Trustee in trust for the purpose an
amount of money in U.S. Dollars sufficient to pay and discharge the entire
Indebtedness on such Securities not theretofore delivered to the Trustee
for cancellation, for the principal of, premium, if any, and interest to
the date of such deposit;
(ii) the Company or any Guarantor has paid or caused to be paid all
other sums payable hereunder by the Company and the Guarantors; and
(iii) the Company and each of the Guarantors, if any, have delivered
to the Trustee (i) irrevocable instructions to apply the deposited money
toward payment of the Securities at the Stated Maturities and the
Redemption Dates thereof, and (ii) an Officers' Certificate and an Opinion
of Counsel each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been
complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 6.07 and, if money shall
have been deposited with the Trustee pursuant to subclause (a)(ii) of this
Section 13.01, the obligations of the Trustee under Section 13.02 and the last
paragraph of Section 10.03 shall survive.
Section 13.02 Application of Trust Money.
Subject to the provisions of the last paragraph of Section 10.03,
all money deposited with the Trustee pursuant to Section 13.01 shall be held in
trust and applied by it, in ac-
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cordance with the provisions of the Securities and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent) as the Trustee may determine, to the persons
entitled thereto, of the principal of, premium, if any, and interest on the
Securities for whose payment such money has been deposited with the Trustee.
ARTICLE FOURTEEN
GUARANTEE OF SECURITIES
Section 14.01 Unconditional Guarantee.
Subject to the provisions of this Article Fourteen, each Guarantor
upon becoming a Guarantor in accordance with the provisions of Section 10.18 or
otherwise, jointly and severally unconditionally and irrevocably guarantee (such
guarantee to be referred to herein as a "Guarantee") to each Holder of a
Security authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Securities or the obligations of the Company or any other
Guarantors to the Holders or the Trustee hereunder or thereunder, that: (a) the
principal of, premium, if any, and interest on the Securities (and any
Additional Amounts payable thereon) shall be duly and punctually paid in full
when due, whether at maturity, upon redemption at the option of Holders pursuant
to the provisions of the Securities relating thereto, by acceleration or
otherwise, and interest on the overdue principal and (to the extent permitted by
law) interest, if any, on the Securities and all other obligations of the
Company or the Guarantors to the Holders or the Trustee hereunder or thereunder
(including amounts due the Trustee under Section 6.07 hereof) and all other
Indenture Obligations shall be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (b) in case of any extension
of time of payment or renewal of any Securities or any of such other Indenture
Obligations, the same shall be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at Stated
Maturity, by acceleration or otherwise. Failing payment when due of any amount
so guaranteed, or failing performance of any other obligation of the Company to
the Holders, for whatever reason, each Guarantor shall be obligated to pay, or
to perform or cause the performance of, the same immediately. An Event of
Default under this Indenture or the Securities shall
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constitute an event of default under this Guarantee, and shall entitle the
Holders of Securities to accelerate the obligations of the Guarantors hereunder
in the same manner and to the same extent as the obligations of the Company.
Each Guarantor agrees, to the fullest extent permitted by applicable
law, that its obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Securities or this Indenture, the
absence of any action to enforce the same, any waiver or consent by any holder
of the Securities with respect to any provisions hereof or thereof, any release
of any other Guarantor, the recovery of any judgment against the Company, any
action to enforce the same, whether or not a Guarantee is affixed to any
particular Security, or any other circumstance which might otherwise constitute
a legal or equitable discharge or defense of a guarantor. Each Guarantor waives,
to the fullest extent permitted by applicable law, the benefit of diligence,
presentment, demand of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever and covenant,
that its Guarantee shall not be discharged except by complete performance of the
obligations contained in the Securities, this Indenture and its Guarantee. This
Guarantee is a guarantee of payment and not of collection. If any Holder or the
Trustee is required by any court or otherwise to return to the Company or to any
Guarantor, or any custodian, trustee, liquidator or other similar official
acting in relation to the Company or such Guarantor, any amount paid by the
Company or such Guarantor to the Trustee or such Holder, this Guarantee, to the
extent theretofore discharged, shall be reinstated in full force and effect, to
the fullest extent permitted by applicable law. Each Guarantor further agrees
that, as between it, on the one hand, and the Holders of Securities and the
Trustee, on the other hand, (a) subject to this Article Fourteen, the maturity
of the obligations guaranteed hereby may be accelerated as provided in Article
Five hereof for the purposes of this Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (b) in the event of any acceleration of such
obligations as provided in Article Five hereof, such obligations (whether or not
due and payable) shall forthwith become due and payable by the Guarantors for
the purpose of this Guarantee.
This Guarantee shall remain in full force and effect and continue to
be effective should any petition be filed by or against the Company for
liquidation or reorganization, should
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the Company become insolvent or make an assignment for the benefit of creditors
or should a receiver or trustee be appointed for all or any significant part of
the Company's assets, and shall, to the fullest extent permitted by law,
continue to be effective or be reinstated, as the case may be, if at any time
payment and performance of the Securities are, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by any
obligee on the Securities, whether as a "voidable preference," "fraudulent
transfer" or otherwise, all as though such payment or performance had not been
made. In the event that any payment, or any part thereof, is rescinded, reduced,
restored or returned, the Securities shall, to the fullest extent permitted by
law, be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
No stockholder, officer, director, employee or incorporator, past,
present or future, or any Guarantor, as such, shall have any personal liability
under this Guarantee by reason of his, her or its status as such stockholder,
officer, director, employee or incorporator.
Each Guarantor shall have the right to seek contribution from any
other Guarantor so long as the exercise of such right does not impair the rights
of the Holders under this Guarantee.
Section 14.02 Execution and Delivery of Guarantee.
To further evidence the Guarantee set forth in Section 14.01, each
Guarantor hereby agrees that a notation of such Guarantee, substantially in the
form included in Exhibit A of this Indenture, shall be endorsed on each Security
authenticated and delivered by the Trustee upon request by any Holder or the
Trustee. Such Guarantee shall be executed on behalf of each Guarantor by either
manual or facsimile signature of two Officers of each Guarantor, each of whom,
in each case, shall have been duly authorized to so execute by all requisite
corporate action. The validity and enforceability of any Guarantee shall not be
affected by the fact that it is not affixed to any particular Security.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 14.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Security a notation of such Guarantee.
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If an Officer of a Guarantor whose signature is on this Indenture or
a Guarantee no longer holds that office at the time the Trustee authenticates
the Security on which such Guarantee is endorsed or at any time thereafter, such
Guarantor's Guarantee of such Security shall be valid nevertheless.
The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of any Guarantee
set forth in this Indenture on behalf of each Guarantor.
Section 14.03 Additional Guarantors.
Any person may become a Guarantor by executing and delivering to the
Trustee (a) a supplemental indenture satisfactory to the Trustee, which subjects
such person to the provisions of this Indenture as a Guarantor, (b) a Guarantee
substantially in the form of Exhibit A hereto and (c) an Opinion of Counsel to
the effect that such supplemental indenture and Guarantee have been duly
authorized and executed by such person and constitute the legal, valid, binding
and enforceable obligations of such person (subject to customary exceptions
concerning bankruptcy, fraudulent conveyance, creditors' rights, laws of general
application and equitable principles).
Section 14.04 Release of a Guarantor.
(a) If no Default exists or would exist under this Indenture, upon
the sale or disposition of all of the Capital Stock of a Guarantor by the
Company or a Restricted Subsidiary of the Company in a transaction constituting
an Asset Sale the Net Cash Proceeds of which are applied in accordance with
Section 10.15, or upon the consolidation or merger of a Guarantor with or into
any person in compliance with Article Eight (in each case, other than to the
Company or an Affiliate of the Company or a Restricted Subsidiary), such
Guarantor and each Subsidiary of such Guarantor that is also a Guarantor shall
be deemed automatically and unconditionally released and discharged from all
obligations under this Article Fourteen and all related Guarantees without any
further action required on the part of the Trustee or any Holder; provided,
however, that each such Guarantor is sold or disposed of in accordance with
this Indenture.
(b) The Trustee shall deliver an appropriate instrument evidencing
the release of a Guarantor upon receipt of a request of the Company or such
Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel
certifying as to
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the compliance with this Section 14.04. Any Guarantor not so released or the
entity surviving such Guarantor, as applicable, shall remain or be liable under
its Guarantee as provided in this Article Fourteen.
The Trustee shall execute any documents reasonably requested by the
Company or a Guarantor in order to evidence the release of such Guarantor from
its obligations under its Guarantee endorsed on the Securities and under this
Article Fourteen.
Except as set forth in Articles Eight and Ten and this Section
14.04, nothing contained in this Indenture or in any of the Securities shall
prevent any consolidation or merger of a Guarantor with or into the Company or
another Guarantor or shall prevent any sale or conveyance of the property of a
Guarantor as an entirety or substantially as an entirety to the Company or
another Guarantor.
Section 14.05 Waiver of Subrogation.
Until this Indenture is discharged and all of the Securities are
discharged and paid in full, each Guarantor hereby irrevocably waives and agrees
not to exercise any claim or other rights which it may now or hereafter acquire
against the Company that arise from the existence, payment, performance or
enforcement of the Company's obligations under the Securities or this Indenture
and such Guarantor's obligations under this Guarantee and this Indenture, in any
such instance including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, and any right to
participate in any claim or remedy of the Guaranteed Parties against the
Company, whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, including, without limitation, the right to
take or receive from the Company, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim or other rights. If any amount shall be paid to any Guarantor in
violation of the preceding sentence and any amounts owing to the Trustee or the
Holders of Securities under the Securities, this Indenture, or any other
document or instrument delivered under or in connection with such agreements or
instruments, shall not have been paid in full, such amount shall have been
deemed to have been paid to such Guarantor for the benefit of, and held in trust
for the benefit of, the Guaranteed Parties and shall forthwith be paid to the
Trustee for the benefit of such Holders to be credited and applied to the
obligations in favor of the Guaranteed Parties,
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whether matured or unmatured, in accordance with the terms of this Indenture.
Each Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by this Indenture and that the
waiver set forth in this Section 14.05 is knowingly made in contemplation of
such benefits.
Section 14.06 Immediate Payment.
Each Guarantor agrees to make immediate payment to the Trustee on
behalf of the Guaranteed Parties of all Guaranteed Obligations owing or payable
to the respective Guaranteed Parties upon receipt of a demand for payment
therefor by the Trustee to such Guarantor in writing.
Section 14.07 No Set-Off.
Each payment to be made by a Guarantor hereunder in respect of the
Guaranteed Obligations shall be payable in the currency or currencies in which
such Guaranteed Obligations are denominated, and shall be made without set-off,
counterclaim, reduction or diminution of any kind or nature.
Section 14.08 Obligations Absolute.
The obligations of each Guarantor hereunder are and shall be
absolute and unconditional and any monies or amounts expressed to be owing or
payable by each Guarantor hereunder which may not be recoverable from such
Guarantor on the basis of a guarantee shall be recoverable from such Guarantor
as a primary obligor and principal debtor in respect thereof.
Section 14.09 Obligations Continuing.
The obligations of each Guarantor hereunder shall be continuing and
shall remain in full force and effect until all the Guaranteed Obligations have
been paid and satisfied in full. Each Guarantor agrees with the Trustee that it
will from time to time deliver to the Trustee suitable acknowledgments of this
continued liability hereunder and under any other instrument or instruments in
such form as counsel to the Trustee may advise and as will prevent any action
brought against it in respect of any default hereunder being barred by any
statute of limitations now or hereafter in force and, in the event of the
failure of a Guarantor so to do, it hereby irrevocably appoints the Trustee the
attorney and agent of such Guarantor to make, execute and deliver such written
acknowledgment or acknowledgments or other instruments as may from time to time
become nec-
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essary or advisable, in the judgment of the Trustee on the advice of counsel, to
fully maintain and keep in force the liability of such Guarantor hereunder.
Section 14.10 Obligations Not Reduced.
The obligations of each Guarantor hereunder shall not be satisfied,
reduced or discharged by any intermediate payment or satisfaction of any part of
the principal, interest, fees and other monies or amounts which may at any time
be or become owing or payable under or by virtue of or otherwise in connection
with the Securities or this Indenture.
Section 14.11 Obligations Reinstated.
The obligations of each Guarantor hereunder shall, to the fullest
extent permitted by law, continue to be effective or shall be reinstated, as the
case may be, if at any time any payment which would otherwise have reduced the
obligations of any Guarantor hereunder (whether such payment shall have been
made by or on behalf of the Company or by or on behalf of a Guarantor) is
rescinded or reclaimed from any of the Guaranteed Parties upon the insolvency,
bankruptcy, liquidation or reorganization of the Company or any Guarantor or
otherwise, all as though such payment had not been made. If demand for, or
acceleration of the time for, payment by the Company is stayed upon the
insolvency, bankruptcy, liquidation or reorganization of the Company, all such
indebtedness otherwise subject to demand for payment or acceleration shall
nonetheless be payable by each Guarantor as provided herein.
Section 14.12 Obligations Not Affected.
The obligations of each Guarantor hereunder, to the fullest extent
permitted by law, shall not be affected, impaired or diminished in any way by
any act, omission, matter or thing whatsoever, occurring before, upon or after
any demand for payment hereunder (and whether or not known or consented to by
any Guarantor or any of the Guaranteed Parties) which, but for this provision,
might constitute a whole or partial defense to a claim against any Guarantor
hereunder or might operate to release or otherwise exonerate any Guarantor from
any of its obligations hereunder or otherwise affect such obligations, whether
occasioned by default of any of the Guaranteed Parties or otherwise, including,
without limitation:
(1) any limitation of status or power, disability, incapacity or
other circumstance relating to the Company
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or any other person, including any insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, winding-up or
other proceeding involving or affecting the Company or any other person;
(2) any irregularity, defect, unenforceability or invalidity in
respect of any indebtedness or other obligation of the Company or any
other person under this Indenture, the Securities or any other document or
instrument;
(3) any failure of the Company, whether or not without fault on its
part, to perform or comply with any of the provisions of this Indenture or
the Securities, or to give notice thereof to a Guarantor;
(4) the taking or enforcing or exercising or the refusal or neglect
to take or enforce or exercise any right or remedy from or against the
Company or any other person or their respective assets or the release or
discharge of any such right or remedy;
(5) the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to the
Company or any other person;
(6) any change in the time, manner or place of payment of, or in any
other term of, any of the Securities, or any other amendment, variation,
supplement, replacement or waiver of, or any consent to departure from,
any of the Securities or this Indenture, including, without limitation,
any increase or decrease in the principal amount of or premium, if any, or
interest on any of the Securities;
(7) any change in the ownership, control, name, objects, businesses,
assets, capital structure or constitution of the Company or a Guarantor;
(8) any merger or amalgamation of the Company or a Guarantor with
any person or persons;
(9) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise
affecting, or purporting to amend, vary, reduce or otherwise affect, any
of the Guaranteed Obligations or the obligations of a Guarantor under its
Guarantee; and
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(10) any other circumstance (other than by complete, irrevocable
payment or release of its Guarantee in accordance with this Indenture)
that might otherwise constitute a legal or equitable discharge or defense
of the Company under this Indenture or the Securities or of a Guarantor in
respect of its Guarantee hereunder.
Section 14.13 Waiver.
Without in any way limiting the provisions of Section 14.01 hereof,
each Guarantor hereby, to the fullest extent permitted by law, waives notice of
acceptance hereof, notice of any liability of any Guarantor hereunder, notice or
proof of reliance by the Guaranteed Parties upon the obligations of any
Guarantor hereunder, and diligence, presentment, demand for payment on the
Company, protest, notice of dishonor or non-payment of any of the Guaranteed
Obligations, or other notice or formalities to the Company or any Guarantor of
any kind whatsoever. Each of the Guarantors hereby waives, to the fullest extent
permitted by applicable law, all benefits set forth in articles 1491, 1494,
1498, 1499, 1500 and 1503 of the Brazilian Civil Code, articles 261 and 262 of
the Brazilian Commercial Code and article 595 of the Brazilian Civil Procedure
Code.
Section 14.14 No Obligation To Take Action Against Company.
Neither the Trustee nor any of the other Guaranteed Parties shall
have any obligation to enforce or exhaust any rights or remedies or to take any
other steps under any security for the Guaranteed Obligations or against the
Company or any other person or any property of the Company or any other person
before the Trustee is entitled to demand payment and performance by any or all
Guarantors of their liabilities and obligations under their Guarantees or under
this Indenture.
Section 14.15 Dealing with the Company and Others.
The Guaranteed Parties, without releasing, discharging, limiting or
otherwise affecting in whole or in part the obligations and liabilities of any
Guarantor hereunder and without the consent of or notice to any Guarantor, may,
to the fullest extent permitted by applicable law:
(1) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to the Company or any
other person;
<PAGE>
-175-
(2) take or abstain from taking security or collateral from the
Company or from perfecting security or collateral of the Company;
(3) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security given
by the Company or any third party with respect to the obligations or
matters contemplated by this Indenture or the Securities;
(4) accept compromises or arrangements from the Company;
(5) apply all monies at any time received from the Company or from
any security upon such part of the Guaranteed Obligations as the
Guaranteed Parties may see fit or change any such application in whole or
in part from time to time as the Guaranteed Parties may see fit; and
(6) otherwise deal with, or waive or modify their right to deal
with, the Company and all other Persons and any security as the Guaranteed
Parties or the Trustee may see fit.
Section 14.16 Default and Enforcement.
If any Guarantor fails to pay in accordance with Section 14.06
hereof, the Trustee may proceed in its name as trustee hereunder in the
enforcement of the Guarantee of any such Guarantor and such Guarantor's
Obligations thereunder and hereunder by any remedy provided by law, whether by
legal proceedings or otherwise, and to recover from such Guarantor the
Guaranteed Obligations.
Section 14.17 Amendment, Etc.
No amendment, modification or waiver of any provision of this
Indenture relating to any Guarantor or consent to any departure by any Guarantor
or any other person from any such provision will in any event be effective
unless it is signed by such Guarantor and the Trustee.
Section 14.18 Acknowledgment.
Each Guarantor hereby acknowledges communication of the terms of
this Indenture and the Securities and consents to and approves of the same.
<PAGE>
-176-
Section 14.19 Costs and Expenses.
Each Guarantor shall pay on demand by the Trustee any and all costs,
fees and expenses (including, without limitation, legal fees) incurred by the
Trustee, its agents, advisors and counsel or any of the Guaranteed Parties in
enforcing any of their rights under any Guarantee.
Section 14.20 No Merger or Waiver; Cumulative Remedies.
No Guarantee shall operate by way of merger of any of the
obligations of the Guarantor under any other agreement, including, without
limitation, this Indenture. No failure to exercise and no delay in exercising,
on the part of the Trustee or the other Guaranteed Parties, any right, remedy,
power or privilege hereunder or under the Indenture or the Securities, shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder or under this Indenture or the
Securities preclude any other or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights, remedies, powers and
privileges in the Guarantee and under this Indenture, the Securities and any
other document or instrument between a Guarantor and/or the Company and the
Trustee are cumulative and not exclusive of any rights, remedies, powers and
privilege provided by law.
Section 14.21 Guarantee in Addition to Other Obligations.
The obligations of each Guarantor under its Guarantee and this
Indenture are in addition to and not in substitution for any other obligations
to the Trustee or to any of the Guaranteed Parties in relation to this Indenture
or the Securities and any guarantees or security at any time held by or for the
benefit of any of them.
Section 14.22 Severability.
Any provision of this Article Fourteen which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction
unless its removal would substantially defeat the basic intent, spirit and
purpose of this Indenture and this Article Fourteen.
<PAGE>
-177-
Section 14.23 Successors and Assigns.
Each Guarantee shall be binding upon and inure to the benefit of
each Guarantor and the Trustee and the other Guaranteed Parties and their
respective successors and permitted assigns, except that no Guarantor may assign
any of its obligations hereunder or thereunder.
[signatures on following pages]
<PAGE>
-178-
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
PAGING NETWORK DO BRASIL S.A.
By: /s/ Thomas C. Trynin
---------------------------------
Name: Thomas C. Trynin
Title: President
THE CHASE MANHATTAN BANK, A BANKING
CORPORATION
as Trustee
By: /s/ Kevin Binnie
---------------------------------
Name: Kevin Binnie
Title: Vice President
<PAGE>
EXHIBIT A
GUARANTEE
For value received, the undersigned hereby unconditionally
guarantees, as principal obligor and not only as a surety, to the Holder of this
Security the cash payments in United States dollars of principal of, premium, if
any, of and interest on this Security (and including Additional Amounts payable
thereon) in the amounts and at the time when due and, if lawful, interest on the
overdue principal, premium, if any, of and interest, if any, on this Security
and the payment or performance of all other obligations of the Company under the
Indenture or the Securities, to the Holder of this Security and the Trustee, all
in accordance with and subject to the terms and limitations of this Security,
Article Fourteen of the Indenture and this Guarantee. This Guarantee will become
effective in accordance with Article Fourteen of the Indenture and its terms
shall be evidenced therein. The validity and enforceability of any Guarantee
shall not be affected by the fact that it is not affixed to any particular
Security. Capitalized terms used but not defined herein shall have the meanings
ascribed to them in the Indenture dated as of June 1, 1997, between PAGING
NETWORK DO BRASIL S.A., a sociedade anonima organized under the laws of the
Federative Republic of Brazil (the "Company"), as issuer, and The Chase
Manhattan Bank, as trustee (the "Trustee"), as amended or supplemented (the
"Indenture").
The obligations of the undersigned to the Holders of Securities and
to the Trustee pursuant to the Guarantee and the Indenture are expressly set
forth in Article Fourteen of the Indenture and reference is hereby made to the
Indenture for the precise terms of the Guarantee and all of the other provisions
of the Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW, EXCEPT THAT MATTERS RELATING TO THE AUTHORIZATION BY THE
UNDERSIGNED OF THIS GUARANTEE SHALL BE GOVERNED BY THE APPLICABLE LAWS OF THE
FEDERATIVE REPUBLIC OF BRAZIL OR OTHER JURISDICTION OF ITS ORGANIZATION. THE
GUARANTOR HEREUNDER AGREES TO SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF ANY
UNITED STATES FEDERAL OR STATE COURT LOCATED IN THE BOROUGH OF MANHATTAN IN THE
CITY OF
A-1
<PAGE>
NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE
INDENTURE, THE SECURITIES OR THIS GUARANTEE.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
IN WITNESS WHEREOF, each Guarantor has caused its Guarantee to be
duly executed.
Date:____________________
[NAME OF GUARANTOR], as Guarantor
By:
------------------------------
Name:
Title:
By:
------------------------------
Name:
Title:
A-2
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS TO
NON-QIB INSTITUTIONAL ACCREDITED INVESTORS
PAGING NETWORK DO BRASIL S.A.
THE CHASE MANHATTAN BANK, A BANKING CORPORATION
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Corporate Trust Administration
Re: Paging Network do Brasil S.A. (the
"Company") 13 1/2% Senior
Notes due 2005
Ladies and Gentlemen:
We are delivering this letter in connection with our proposed
purchase of 13 1/2% Senior Notes due 2005 (the "Notes") of Paging Network do
Brasil S.A., a Brazilian corporation (the "Company").
We hereby confirm that:
(i) we are an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act") (an "Accredited Investor"), or a "qualified
institutional buyer" as defined in Rule 144A under the Securities Act (a
"QIB") purchasing Notes for the account of one or more Accredited
Investors;
(ii) any purchase of Notes by us will be for our own account or for
an account with respect to which we exercise sole investment discretion
and that we are and any such account are (a) a QIB, and aware that the
sale is being made in reliance on Rule 144A under the Securities Act, (b)
an Accredited Investor, or (c) a person other than a U.S. person ("foreign
purchasers", which term shall
B-1
<PAGE>
include dealers or other professional fiduciaries in the United States
acting on a discretionary basis for foreign beneficial owners (other than
an estate or trust)) in offshore transactions meeting the requirements of
Rule 903 or 904 of Regulation S under the Securities Act;
(iii) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risk of
purchasing Notes and we and any accounts for which we are acting are able
to bear the economic risks of and an entire loss of our or their
investment in the Notes;
(iv) we are not acquiring Notes with a view to any distribution of
Notes in a transaction that would violate the Securities Act or the
securities laws of any state of the United States or any other applicable
jurisdiction; provided that the disposition of our property and the
property of any accounts for which we are acting as fiduciary shall remain
at all times within our and their control;
(v) we have had access to such financial and other information, and
have been afforded the opportunity to ask such questions of
representatives of the Company and receive answers thereto, as we deem
necessary in order to evaluate our proposed investment in the Notes; and
(vi) we acknowledge that the Notes have not been registered under the
Securities Act and that none of the Notes may be offered or sold within
the United States or to, or for the account or benefit of, U.S. persons
except as set forth below.
We agree, on our own behalf and on behalf of each account for which
we acquire any Notes, that, prior to (x) the date which is two years (or such
shorter period of time as permitted by Rule 144(k) under the Securities Act or
any successor provision thereunder) after the later of the date of original
issuance of the Notes and the last date on which the Company or any affiliate of
the Company was the owner of such Notes, or any predecessors thereto and (y)
such later date, if any, as may be required by applicable laws, the Notes may be
offered, resold, pledged or otherwise transferred only (a) to Multicanal or any
of its subsidiaries, (b) inside the United States to a QIB in compliance with
Rule 144A under the Securities Act,
B-2
<PAGE>
(c) inside the United States to an Accredited Investor that, prior to such
transfer, furnishes to the trustee under the Indenture relating to the Notes
(the "Trustee") a signed letter substantially in the form of this letter, (d)
outside the United States to foreign purchasers in offshore transactions meeting
the requirements of Rule 903 or Rule 904 of Regulation S under the Securities
Act, (e) pursuant to the exemption from registration provided by Rule 144 under
the Securities Act (if available), (f) pursuant to an effective registration
statement under the Securities Act or (g) pursuant to another available
exemption from the registration requirements of the Securities Act.
We understand that the Trustee will not be required to accept for
registration of transfer any Notes acquired by us, except upon presentation of
evidence satisfactory to the Company and the Trustee that the foregoing
restrictions on transfer have been complied with. We further understand that the
Notes purchased by us will be in the form of definitive physical certificates
and that such certificates will bear a legend reflecting the substance of this
paragraph. We further agree to provide to any person acquiring any of the Notes
from us a notice advising such person that transfers of such Notes are
restricted as stated herein and that certificates representing such Notes will
bear a legend to that effect.
We acknowledge that the Company and the Trustee and others will rely
upon the truth and accuracy of our acknowledgments, representations and
agreements set forth herein, and we agree to notify you promptly in writing if
any of our acknowledgments, representations or agreements herein cease to be
accurate and complete.
We represent to you that we have full power to make the foregoing
acknowledgments, representations and agreements on our own behalf and on behalf
of any investor account for which we are acting as a fiduciary or agent.
As used herein, the terms "offshore transaction," "United States"
and "U.S. person" have the respective meanings given to them in Regulation S
under the Securities Act.
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK.
B-3
<PAGE>
---------------------------------
(Name of Purchaser)
By:
-----------------------------
Name:
Title:
Address:
Date:
----------------------------
Upon transfer, the Notes should be registered in the name of the new
beneficial owner as follows:
Name:
Address:
Taxpayer ID Number:
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE TO BE DELIVERED
IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S
PAGING NETWORK DO BRASIL S.A.
THE CHASE MANHATTAN BANK, A BANKING CORPORATION
c/o The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Corporate Trust Administration
Re: Paging Network do Brasil S.A. (the
"Company") 13 1/2% Senior
Notes due 2005 (the "Securities")
Ladies and Gentlemen:
In connection with our proposed sale of US$__________ aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Securities was not made to a U.S. Person;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of
C-1
<PAGE>
Rule 903(b) or Rule 904(b) of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933, as amended.
In addition, if the sale is made during a restricted period and the provisions
of Rule 903(c)(3) or Rule 904(c)(1) of Regulation S are applicable thereto, we
confirm that such sale has been made in accordance with the applicable
provisions of Rule 903(c)(3) or Rule 904(c)(1), as the case may be.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
----------------------------------
(Name of Transferor)
By:
-------------------------------
Name:
Title:
Address:
Date:
-----------------------------
Upon transfer, the Notes should be registered in the name of the new
beneficial owner as follows:
Name of Transferee:
Address:
Taxpayer ID Number:
C-2
<PAGE>
EXHIBIT D
FORM OF OPTION OF HOLDER TO ELECT PURCHASE
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased as a whole by the
Company pursuant to Section 10.15 or 10.16 of the Indenture, check the
Box: |_|
If you wish to have a portion of this Security purchased by the
Company, state the amount:
US$______________
Date: _____________ Your Signature:
(Sign exactly as your name
appears on the other side
of this Security)
By:
-----------------------
NOTICE: To be signed
by an executive officer
Signature Guarantee: ______________________
<PAGE>
EXHIBIT E-1
SUBORDINATION PROVISIONS FOR DEEPLY
SUBORDINATED SHAREHOLDER INDEBTEDNESS
15. Terms defined in the Indenture dated as of June 1, 1997 (the
"Indenture") between Paging Network do Brasil S.A., a sociedade anonima
organized under the laws of the Federative Republic of Brazil, as issuer (the
"Company") and The Chase Manhattan Bank, a banking corporation, as trustee (the
"Trustee"), and used herein and not otherwise defined herein have the meanings
attributed to such terms in the Indenture. As used herein, the term "Relevant
Obligor" means the Obligor creating, incurring, assuming or suffering to exist
the Indebtedness evidenced by this agreement or instrument ("Deeply Subordinated
Shareholder Indebtedness"). The term "Obligor" means any of the Company and any
Restricted Subsidiary.
2. The indebtedness represented by this Deeply Subordinated
Shareholder Indebtedness shall be subordinated as follows:
2.1 Definition of Senior Indebtedness. "Senior Indebtedness" means,
at any date all indebtedness under the Securities and the Indenture (including,
without limitation, principal, interest, Additional Amounts, premium, fees,
penalties, indemnities and "post-petition interest" in bankruptcy).
2.2 Agreement to Subordinate. The Relevant Obligor, for itself and
its successors and assigns, and the holder of this Deeply Subordinated
Shareholder Indebtedness (in such capacity, the "Holder") agrees, that the
indebtedness evidenced by this Deeply Subordinated Shareholder Indebtedness
(including, without limitation, principal, interest, premium, fees, penalties,
indemnities and "post-petition interest" in bankruptcy) is subordinate and
junior in right of payment, to the extent and in the manner provided in this
Section 2, to the indefeasible prior payment in United States Dollars in full of
Senior Indebtedness or due provision therefor in accordance with the Indenture.
The provisions of this Section 2 are for the benefit of the holders from time to
time of Senior Indebtedness, and the Trustee on behalf of such holders, and the
Trustee and such holders are hereby made obligees hereunder to the same extent
as if their names were written herein as such, and they (collectively or singly,
but subject in the case of
<PAGE>
-2-
holders of Senior Indebtedness to the provisions of Section 5.07 of the
Indenture) may proceed to enforce such provisions.
2.3 Liquidation; Dissolution; Bankruptcy. (a) Upon any general
distribution of assets of the Relevant Obligor to creditors or upon a
liquidation or dissolution or winding-up of the Relevant Obligor or in a
bankruptcy, arrangement with creditors, liquidation, reorganization, insolvency,
receivership or similar case or proceeding relating to the Relevant Obligor or
its property or other marshalling of property or assets of the Relevant Obligor:
(i) The holders of Senior Indebtedness shall be entitled to receive
payment in full of all Senior Indebtedness before the Holder shall be
entitled to receive any payment of principal of or interest on, or any
other amount owing in respect of, this Deeply Subordinated Shareholder
Indebtedness;
(ii) until payment in full of all Senior Indebtedness, any
distribution of assets of any kind or character in respect of this Deeply
Subordinated Shareholder Indebtedness to which the Holder would be
entitled but for this Section 2 shall be paid by the Relevant Obligor or
by any receiver, trustee in bankruptcy, liquidating trustee, assignee,
agents or other Persons making such payment or distribution to the holders
of Senior Indebtedness, as their interests may appear; and
(iii) in the event that, notwithstanding the foregoing, any payment
or distribution of any assets of any kind or character in respect of this
Deeply Subordinated Shareholder Indebtedness, shall be received by the
Holder from the Relevant Obligor or from any receiver, trustee in
bankruptcy, liquidating trustee, assignee, agents or other Persons making
such payment in respect of this Deeply Subordinated Shareholder
Indebtedness or set-off against liabilities of the Holder to the Relevant
Obligor before all Senior Indebtedness is paid in full, such payment or
distribution shall be held in trust for the benefit of and shall, at the
Holder's expense, be paid over to the holders of Senior Indebtedness, as
their interests may appear, for application to the payment of all Senior
Indebtedness until all Senior Indebtedness shall have been paid in full
after giving effect to any concurrent payment or distribution to the
holders of Senior Indebtedness in respect of such Senior Indebtedness.
<PAGE>
-3-
For purposes of this Section 2, "payment in full", with respect to
Senior Indebtedness, means the receipt on an irrevocable basis of United States
Dollars in an amount equal to the unpaid principal amount of the Senior
Indebtedness and premium, if any, and interest thereon to the date of such
payment, together with all other amounts owing with respect to such Senior
Indebtedness.
(b) If the Holder does not file proper claims or proofs of claim in
the form required in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to the Relevant Obligor or its property prior to 45
days before the expiration of the time to file such claims then (i) upon the
request of the Trustee, the Holder shall file such claims and proofs of claim in
respect of this Deeply Subordinated Shareholder Indebtedness and execute and
deliver such powers of attorney, assignments and proofs of claim as may be
directed by the Trustee to enable it to enforce any and all claims upon or in
respect of this Deeply Subordinated Shareholder Indebtedness and to collect and
receive any and all payments or distributions which may be payable or
deliverable at any time upon or in respect of this Deeply Subordinated
Shareholder Indebtedness, and (ii) whether or not the Trustee shall take action
described in clause (i) above, the Trustee shall nevertheless be deemed to have
such powers of attorney as may be necessary to file appropriate claims and
proofs of claim and otherwise exercise the powers described above.
(c) It is hereby agreed that any provision hereof pursuant to which
one party holds assets in trust for the benefit of the other party is not
intended to (and shall not) constitute, create or give rise to a security
interest of any kind in respect of such assets.
(d) If for any reason a trust in favor of, or a holding of property
for, the holders of Senior Indebtedness or the Trustee is invalid or
unenforceable, the Holder will pay and deliver to the holders of Senior
Indebtedness or the Trustee (as the case may be) for application in accordance
with paragraph (a)(iii) above an amount equal to the payment, receipt or
recovery in cash or in kind which it would otherwise have been bound to hold in
trust for or as property of the holders of Senior Indebtedness or the Trustee
(as the case may be).
2.4 Senior Indebtedness. (a) The Relevant Obligor shall not pay any
principal, interest or premium on, or any other amount in respect of, this
Deeply Subordinated Share-
<PAGE>
-4-
older Indebtedness, acquire this Deeply Subordinated Shareholder Indebtedness
for cash or property (other than capital stock of the Relevant Obligor or other
Deeply Subordinated Shareholder Indebtedness) or make any loans, advances or
extensions of credit to the Holder with respect to this Deeply Subordinated
Shareholder Indebtedness, or pay or acquire any obligation or liability upon
which the Holder is the obligor, and the Holder shall not ask for, demand,
accept, sue, claim, prove for or receive howsoever any payment of any principal,
interest or premium on, or any other amount in respect of, this Deeply
Subordinated Shareholder Indebtedness or any such cash, property (other than
capital stock of the Relevant Obligor or other Deeply Subordinated Shareholder
Indebtedness), loans, advances or extensions of credit at any time when (x) a
Default or an Event of Default in respect of the payment of any Senior
Indebtedness, whether at maturity or at a date fixed for prepayment or by
declaration of an acceleration or otherwise, has occurred and is continuing or
(y) the maturity of any Senior Indebtedness has been accelerated.
(b) If, notwithstanding the foregoing, any payment of any kind or
character, whether in cash, property or otherwise, that may not be made by the
Relevant Obligor pursuant to Section 2.4(a) shall be received by the Holder from
the Relevant Obligor or from receiver, trustee in bankruptcy, liquidating
trustee, assignee, agents or other Persons making such payment or set-off
against liabilities of the Holder to the Relevant Obligor in respect of this
Deeply Subordinated Shareholder Indebtedness before all Senior Indebtedness is
paid in full, such payment shall be held in trust in accordance with Section
2.3(a)(iii).
2.5 Subordination May Not Be Impaired. (a) To the extent permitted
by law, no right of any holder of Senior Indebtedness to enforce the
subordination of indebtedness evidenced by this Deeply Subordinated Shareholder
Indebtedness shall in any way be prejudiced or impaired or in any way affected
by any act or failure to act by the Relevant Obligor or by any act or omission
in good faith, by any such holder or the Trustee, or by any non-compliance by
the Relevant Obligor with the terms, provisions or covenants herein, regardless
of any knowledge thereof which any such holder or the Trustee may have or be
otherwise charged with, or by any other act, omission, matter or thing which,
but for this Section 2.5, would prejudice, impair, reduce, release or otherwise
affect the subordination. To the extent permitted by law, neither the
subordination of this Deeply Subordinated Shareholder Indebtedness as herein
provided nor the rights of the holders of Senior Indebt-
<PAGE>
-5-
dness with respect hereto shall be affected by any extension, renewal or
modification of the terms, or the granting of any security in respect of, any
Senior Indebtedness or any exercise or non-exercise of any right, power or
remedy with respect thereto.
(b) The Holder agrees that all indebtedness evidenced by this Deeply
Subordinated Shareholder Indebtedness will be unsecured by any Lien upon or with
respect to any property of the Relevant Obligor.
(c) The Holder agrees not to exercise any offset or counterclaim or
similar right in respect of the indebtedness evidenced by this Deeply
Subordinated Shareholder Indebtedness except to the extent payment of such
indebtedness is permitted.
(d) The Holder waives any right it might have of first requiring any
holder of Senior Indebtedness or the Trustee to proceed against or to enforce
any other rights or Lien or claim for payment from any person before claiming
the benefit of the subordination herein provided for.
16.Miscellaneous. (a) This Agreement may not be amended or modified
in any respect, nor may any of the terms or provisions hereof be waived, except
by an instrument signed by the Relevant Obligor, the Holder and the Trustee
(with the consent of holders of a majority in aggregate principal amount of
Senior Indebtedness).
(b) This Agreement shall be binding upon each of the parties hereto
and their respective successors and assigns and shall inure to the benefit of
the Trustee and each and every holder of Senior Indebtedness and their
respective successors and assigns.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to principles of conflict
of laws.
(d) The Holder and the Relevant Obligor each hereby irrevocably
agree that any suits, action or proceedings arising out of or in connection with
this Agreement may be brought in any state or federal court sitting in The City
of New York and submit and attorn to the non-exclusive jurisdiction of such
courts.
<PAGE>
-6-
(e) Any payment made by the Holder to the holders of Senior
Indebtedness may be made to the Trustee under the Indenture.
<PAGE>
-7-
EXHIBIT E-2
Form of Opinion of Counsel Relating to
Deeply Subordinated Shareholder Indebtedness(1)
Each of the Relevant Obligor and the Holder has all requisite power
and authority to execute, deliver and perform its respective obligations under
Sections 1, 2 and 3 of the subordination terms of the Deeply Subordinated
Shareholder Indebtedness, and the Deeply Subordinated Shareholder Indebtedness
(including the subordination terms thereof) has been duly and validly
authorized, executed and delivered by the Relevant Obligor and Sections 1, 2 and
3 of the subordination terms of the Deeply Subordinated Shareholder Indebtedness
constitute the valid and binding agreement of each of the Relevant Obligor and
each holder enforceable against each of the Relevant Obligor and holders in
accordance with the terms thereof, except that (a) the enforceability thereof
against such person may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally in the case of a bankruptcy or insolvency
involving such person and (b) the availability of equitable remedies may be
limited by equitable principles of general applicability [Note: language in
clauses (a) and (b) may be varied on a basis consistent with such language and
the opinions delivered to the Underwriters in connection with the issuance of
the Securities depending upon actual jurisdictions involved].
- ----------
(1) May take the form of one or more opinions.
<PAGE>
================================================================================
PAGING NETWORK DO BRASIL S.A.
AND
PAGING BRAZIL HOLDING CO., LLC
PURCHASE AGREEMENT
125,000 UNITS CONSISTING OF
US$125,000,000
13.5% Senior Notes due 2005
AND
125,000 Non-Voting Class B Holding Shares
Dated: May 30, 1997
================================================================================
<PAGE>
125,000 Units
consisting of
US$125,000,000 13 1/2% Senior Notes due 2005 of PAGING NETWORK DO
BRASIL S.A.
(a Brazilian corporation)
and
125,000 Non-Voting Class B Holding Shares of
PAGING BRAZIL HOLDING CO., LLC
(a Delaware limited liability company)
PURCHASE AGREEMENT
May 30, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
BEAR STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1305
Ladies and Gentlemen:
Paging Network do Brasil S.A., a Brazilian corporation (the
"Company"), and Paging Brazil Holding Co., LLC, a Delaware limited liability
company (the "LLC," and together with the Company, the "Issuers"), confirm their
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
In-
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corporated ("Merrill Lynch") and Bear Stearns & Co. Inc. and Goldman, Sachs &
Co. (collectively with Merrill Lynch, the "Initial Purchasers") with respect to
the issue and sale by the Issuers and the purchase by the Initial Purchasers,
acting severally and not jointly, of the respective numbers set forth in
Schedule A of an aggregate of 125,000 Units (the "Units") consisting of
US$125,000,000 aggregate principal amount of 13 1/2% Senior Notes due 2005 of
the Company (the "Notes") and an aggregate of 125,000 Non-Voting Class B Member
Interests (the "Holding Shares") of the LLC. Each Unit will consist of US$1,000
principal amount of Notes and one Holding Share. The Units will be issued under
an agreement (the "Unit Agreement") to be dated as of June 6, 1997 among the
Company, the LLC and The Chase Manhattan Bank, as unit agent (the "Unit Agent").
The Notes are to be issued pursuant to an indenture to be dated as of June 1,
1997 (the "Indenture") between the Company, as issuer of the Notes, and The
Chase Manhattan Bank, as trustee (the "Trustee"). Each of the Trustee and Chase
Trust Bank (the "Principal Paying Agent") will act as a co-paying agent with
respect to the Notes under the Indenture. Pursuant to an agreement (which will
contain customary representations as to, among other things, good title, valid
delivery and lack of claims or encumbrances on such common stock) between the
Company and the LLC to be dated June 6, 1997 (the "Company-LLC Subscription
Agreement"), 125,000 shares of common stock (acoes ordinarias), with no par
value, of the Company (the "Common Stock") representing in the aggregate
approximately 7.0% of the common share capital of the Company, will be issued
and delivered by the Company to the LLC for the capital accounts of the holders
of Holding Shares issued as a part of the Units. The Holding Shares have been
authorized and, at the Closing Time (as defined herein) will be issued in
accordance with the terms of the agreement substantially in the form of Exhibit
C hereto dated as of June 6, 1997 (the "LLC Agreement") among the members from
time to time of the LLC.
Approximately US$46,000,000 of the net proceeds from the sale of the
Units (the "Initial Escrow Amount"), representing funds that, together with the
proceeds from the investment thereof, are intended to be sufficient to pay the
first six in-
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terest payments on the Notes, is to be placed in a collateral account in the
United States and pledged to the Trustee, for the benefit of the holders of the
Notes and the Trustee (in its capacity as such under the Indenture) pursuant to
the Escrow Agreement, dated as of June 6, 1997 (the "Escrow Agreement") among
the Company, Chase Manhattan Bank, as Escrow Agent (the "Escrow Agent"), and the
Trustee.
Unless the context otherwise requires, the term "Securities" refers
collectively to the Notes, the Holding Shares and the Units. This agreement
(this "Agreement" or the "Purchase Agreement"), the Unit Agreement, the
Indenture, the Securities, the Exchange Notes (as defined below), the Private
Exchange Notes (as defined below), the Escrow Agreement, the agreement with CT
Corporation System referred to in Section 18 hereof (the "Agency Agreement"),
the Notes Registration Rights Agreement (as defined below), the LLC Agreement,
the Company-LLC Subscription Agreement and the Equity Registration Rights
Agreement (as defined below) are referred to collectively as the "Operative
Documents."
The Securities will be offered and sold to the Initial Purchasers
without registration under the Securities Act of 1933, as amended (the "Act"),
in reliance upon an exemption from the registration requirements of the Act. The
Issuers have prepared and delivered to each Initial Purchaser copies of
preliminary offering memoranda dated March 16, 1997 (the "March Preliminary
Offering Memorandum") and May 16, 1997 (the "May Preliminary Offering Memorandum
and, together with the March Preliminary Offering Memorandum, the "Preliminary
Offering Memorandum") and have prepared and will deliver to each Initial
Purchaser copies of a final offering memorandum dated May 30, 1997 (the "Final
Offering Memorandum"), each to be used by such Initial Purchaser in connection
with its solicitation of purchases of, or offering of, the Securities. "Offering
Memorandum" means, with respect to any date or time referred to in this
Agreement, the most recent offering memorandum (whether the Preliminary Offering
Memorandum or the Final Offering Memorandum, together with any amendment or
supplement to either such document), which has been prepared and delivered by
the
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Issuers to the Initial Purchasers in connection with their solicitation of
purchases of, or offering of, the Securities. The Issuers hereby confirm that
the use of the Offering Memorandum in connection with the offer and resale of
the Securities by the Initial Purchasers in accordance with the terms hereof is
authorized by each of them. If the Issuers prepare a supplement dated the date
hereof to the Preliminary Offering Memorandum containing only pricing related
information, then the term "Offering Memorandum" for purposes of this Agreement
shall refer collectively to the Preliminary Offering Memorandum and such
supplement.
All references in this Agreement to financial statements and
schedules and other information which is "contained," "included" or "stated" in
the Offering Memorandum (or other references of like import) shall be deemed to
mean and include all such financial statements and schedules in the Offering
Memorandum.
The Issuers understand that the Initial Purchasers propose to make
an offering (the "Offering") of the Securities only on the terms and in the
manner set forth herein to purchasers ("Subsequent Purchasers"), as soon as the
Initial Purchasers deem advisable after this Agreement has been executed and
delivered. The Offering will be made only (i) to persons in the United States
whom the Initial Purchasers reasonably believe to be qualified institutional
buyers ("Qualified Institutional Buyers") as defined in Rule 144A under the Act,
as such rule may be amended from time to time ("Rule 144A"), in transactions
under Rule 144A, (ii) to a limited number of other institutional "accredited
investors" (as defined in Rule 501(a)(1), (2), (3) and (7) under Regulation D of
the Act ("Accredited Investors")) in private sales exempt from registration
under the Act and/or (iii) to non-U.S. persons outside the United States to whom
the Initial Purchasers reasonably believe offers and sales of the Securities may
be made in reliance upon Regulation S under the Act ("Regulation S"), in
transactions meeting the requirements of Regulation S.
The Initial Purchasers and other holders of Securities (including
subsequent transferees) will be entitled to the
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benefits of the registration rights agreement, to be dated as of June 6, 1997
(the "Notes Registration Rights Agreement"), between the Company and the Initial
Purchasers, in the form attached hereto as Exhibit A, and the registration
rights agreement, to be dated as of June 6, 1997 (the "Equity Registration
Rights Agreement") among the Issuers and Warburg, Pincus Ventures, L.P., Paging
Network International N.V., IVP Paging (Cayman) L.P., Multiponto
Telecomunicacoes Ltda. and TVA Sistema de Televisao S.A. (together, the
"Shareholders") and Chase Mellon Shareholder Services, as transfer agent (the
"Holding Share Transfer Agent"), in the form attached hereto as Exhibit B.
Pursuant to the Notes Registration Rights Agreement, the Company will agree to
file with the Securities and Exchange Commission (the "Commission") under the
circumstances set forth therein either (i) a registration statement under the
Act registering the Exchange Notes (as defined in the Notes Registration Rights
Agreement) to be offered in exchange for the Notes and to use its best efforts
to cause such registration statement to be declared effective or (ii) under
certain circumstances set forth therein, to file with the Commission a shelf
registration statement pursuant to Rule 415 under the Act relating to the resale
of the Securities by holders thereof or, if applicable, relating to the resale
of Private Exchange Notes (as defined in the Notes Registration Rights
Agreement) by the Initial Purchasers pursuant to an exchange of the Notes for
Private Exchange Notes, and to use its best efforts to cause such shelf
registration statement to be declared effective. Pursuant to the Equity
Registration Rights Agreement, holders from time to time of Holding Shares or
other Registrable Securities (as defined therein) will have (i) the rights to
Demand Registration (as defined therein) or Piggy-Back Registration (as defined
therein), (ii) a Tag-Along Right (as defined therein) and (iii) a requirement to
sell Holding Shares or other Registrable Securities, in each case, in accordance
with all of the provisions of the Equity Registration Rights Agreement.
SECTION 1. Representations and Warranties. (a) Each of the Issuers
individually represents and both of the Issuers jointly and severally warrant to
each of the Initial Purchasers
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as of the date hereof and as of the Closing Time (as defined in Section 3
hereof) that:
(i) As of their respective dates, none of the Offering Memorandum or
any amendment or supplement thereto, and at all times subsequent thereto
up to and as of the Closing Time, the Offering Memorandum, as amended or
supplemented to such time, contained or will contain an untrue statement
of a material fact or omitted or will omit a statement of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the Issuers make no representations or warranties as to any
information contained in or omitted from the Offering Memorandum, or any
such amendment or supplement, in reliance upon, and in conformity with,
information furnished to the Issuers by or on behalf of any Initial
Purchaser specifically for use in the preparation thereof.
(ii) When the Securities are issued and delivered pursuant to this
Agreement, such Securities will not be of the same class (within the
meaning of Rule 144A) as securities of any of the Issuers which are listed
on a national securities exchange registered under Section 6 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
quoted in a U.S. automated inter-dealer quotation system.
(iii) None of the Issuers or any of their affiliates (as defined in
Rule 501(b) under the Act) has, directly or through any agent, sold,
offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Act) which is or will be
integrated with the sale of the Securities in a manner that would require
the registration of the Securities under the Act.
(iv) None of the Issuers or any of their respective affiliates (as
such term is defined in Rule 501(b) under the Act) or any person (other
than the Initial Purchasers,
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as to which the Issuers make no representation) acting on the Issuers' behalf
has engaged, in connection with the offering of the Securities, (A) in any form
of general solicitation or general advertising within the meaning of Rule 502(c)
under the Act, (B) in any directed selling efforts within the meaning of Rule
902 under the Act in the United States in connection with the Securities being
offered and sold pursuant to Regulation S under the Act, (C) in any manner
involving a public offering within the meaning of Section 4(2) of the Act or (D)
in any action which would require the registration of the offering and sale of
the Securities pursuant to this Agreement or which would violate applicable
state "blue sky" laws.
(v) Assuming that the representations and warranties of the Initial
Purchasers contained in Section 4 are true, correct and complete, and
assuming compliance by the Initial Purchasers with their covenants in
Section 4, and assuming that the representations and warranties contained
in the Accredited Institutional Investor Letter (substantially in the form
of Annex A to the Offering Memorandum) completed by Accredited Investors
purchasing Securities are true and correct as of the Closing Time, and
assuming compliance by such Accredited Investors with the agreements in
such Accredited Institutional Investor Letter, it is not necessary in
connection with the offer, sale and delivery of the Securities to the
Initial Purchasers in the manner contemplated by, or in connection with
the initial resale of such Securities by the Initial Purchasers in
accordance with, this Agreement to register the Securities under the Act
or to qualify any indenture in respect of the Notes under the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act").
(vi) The only subsidiary of the LCC as of the date hereof is the
Company. As of the date hereof, the Company has no subsidiaries. None of
the Issuers owns any shares, quotas or other equity securities or other
equity interests in any firm, partnership, joint venture or other entity
either directly or indirectly (other than the owner-
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ship of equity securities of the Company by the LLC). The Company is a
duly incorporated and validly existing sociedade anonima under the laws of
Brazil. The LLC is a duly organized and validly existing limited liability
company in good standing under the laws of the State of Delaware and has
filed all reports with the Secretary of State of Delaware required to
obtain a certificate of existence from that office. Each of the Issuers
has all requisite power and authority under all applicable laws, and all
necessary authorizations, approvals, orders, licenses (including, without
limitation, all paging licenses), certificates and permits of and from
regulatory or governmental officials, bodies and tribunals, (a) to own,
lease and operate its respective properties and to conduct its respective
businesses as now conducted and as described in the Offering Memorandum
and (b) to enter into, deliver, incur and perform its respective
obligations under the Operative Documents; and is, to the extent
applicable, duly qualified to do business as a foreign corporation in good
standing in all other jurisdictions where the ownership or leasing of its
respective properties or the conduct of its respective businesses requires
such qualification, except where the failure to be so qualified could not
reasonably be expected to have a material adverse effect on (i) the
condition, financial or otherwise, or on the assets, earnings results of
operations, business affairs or business prospects of the Issuers taken as
a whole or (ii) the ability of any of the Issuers to duly and punctually
perform any of its obligations under any of the Operative Documents or to
consummate the transactions contemplated thereby (a "Material Adverse
Effect"); and, to the knowledge of the Issuers, no revocation or
limitation or variation of any such authorization, approval, order,
license or permit is threatened.
(vii) The Company and each of TVA Sistema de Televisao S.A. ("TVA"),
Multiponto Telecomunicacoes Ltda. ("Multiponto") and San Francisco
Telecomunicacoes Ltda ("San Francisco" and together with TVA and
Multiponto, the "Licenseholders") comply in all material respects with the
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terms and conditions of all decisions, policies, authorizations and
licenses announced, rendered, granted or regulated, as the case may be, by
the Brazilian Ministry of Communications (the "Ministry"), and the other
governmental authorities having authority over services provided by the
Company with respect to the construction and operation of the businesses
of the Company, including, without limitation, Brazilian Law No. 9,295 and
Brazilian Presidential Decrees No. 2,056 and 2,196, Ordinances No. 257,
No. 579 and No. 1,306 of the Ministry and Ordinance No. 232 of the
Ministry of Infrastructure and the regulations, orders and instructions
enacted or issued under the authority of such acts. Except as described in
the Offering Memorandum, there exists no reason or cause that could
justify the variation, suspension, cancellation or termination of any such
authorizations or licenses held or controlled by the Company with respect
to the construction or operation of its businesses, which variation,
suspension, cancellation or termination could be reasonably expected to
have a Material Adverse Effect.
(viii) The Operating Agreements between the Company and each of the
Licenseholders and the Agreements of Promise of Assignment and Transfer of
Permission between the Company and each of the Licenseholders do not
violate any provision of applicable law or require the consent or approval
of, or any filing with or notification to, the Ministry of Communications
or any other competent governmental authority in the Federative Republic
of Brazil, to be effective to provide the benefits intended to be provided
thereunder to the Company and are legally valid and provide the Company
with all rights purported to be provided thereunder.
(ix) At the time of deposit with the Escrow Agent of the Initial
Escrow Amount (as such term is defined in the Escrow Agreement) no Lien
(as such term is defined in the Indenture) exists upon such Collateral (as
such term is defined in the Escrow Agreement) and no right or option to
acquire the same exists in favor of any other person or
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entity, except for the pledge and security interest in favor of the
Trustee for the benefit of the holders of the Notes and the Trustee (in
its capacity as such under the Indenture) to be created or provided for in
the Escrow Agreement, which pledge and security interest shall constitute
a first priority perfected pledge and security interest in and to all of
the Collateral.
(x) Each the Issuers has all requisite power and authority to
execute, issue and deliver the Unit Agreement and to incur and perform all
of the obligations provided for therein. The Units, when executed,
authenticated and issued in accordance with the terms of the Unit
Agreement (assuming the due authorization, execution and delivery thereof
by the Unit Agent) and when delivered against payment of the purchase
price therefor to the Issuers as provided in this Agreement, will
constitute the valid and binding obligations of the Issuers and will be
entitled to the benefits of the Unit Agreement.
(xi) The Notes, the Exchange Notes and the Private Exchange Notes
have been duly authorized by the Company and the Company has all requisite
corporate power and authority to execute, issue and deliver the Notes, the
Exchange Notes and the Private Exchange Notes and to incur and perform all
of the obligations provided for therein. The Notes, when executed,
authenticated and issued in accordance with the terms of the Indenture
(assuming the due authorization, execution and delivery of the Indenture
by the Trustee) and when delivered against payment of the purchase price
therefor as provided in this Agreement, will constitute the valid and
binding obligations of the Company, entitled to the benefits of the
Indenture, and the Exchange Notes and the Private Exchange Notes, if any,
when executed, authenticated, issued and delivered in exchange for the
Notes in the manner contemplated by the Notes Registration Rights
Agreement, will constitute valid and binding obligations of the Company,
entitled to the benefits of the Indenture.
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(xii) The Holding Shares to be purchased by the Initial Purchasers
from the LLC as a part of the Units pursuant to this Agreement have been
duly authorized for issuance and sale to the Initial Purchasers pursuant
to this Agreement by the LLC and, upon payment to the Company of the
purchase price for the Units in accordance with this Agreement, will be
duly issued and delivered by the Company and, to the Company's knowledge,
by the LLC, will be validly issued, fully paid and non-assessable; the
Holding Shares conform to all statements relating thereto in the Offering
Memorandum and such description conforms to the rights set forth in the
LLC Agreement; no holder of Holding Shares will be subject to personal
liability by reason of being such a holder.
(xiii) As of the Closing Time, all of the warranties and
representations of the Company contained in Section 3 of the Company-LLC
Subscription Agreement will be true and correct.
(xiv) Each shareholder of the Company has executed and delivered an
enforceable written commitment (together, the "Shareholder Commitments"),
agreeing that such shareholder will not exercise its voting rights to
receive mandatory statutory dividends (dividendo minimo obrigatorio),
which conform in all material respects to the descriptions thereof in the
Offering Memorandum. Each Shareholder Commitment has been duly authorized,
executed and delivered by the Company, to the Company's knowledge, by each
other party thereto and constitutes the valid and binding obligations of
each party thereto. The Shareholder Commitments, taken together, are
effective to preclude payment of any mandatory statutory dividend.
(xv) This Agreement and the Company-LLC Subscription Agreement have
been, and, as of the Closing Time, the Equity Registration Rights
Agreement and the Unit Agreement will have been, duly authorized, executed
and delivered by each of the Issuers. The Agency Agreement has been, and,
as of the Closing Time, the Escrow Agreement, the Notes Registration
Rights Agreement and the Indenture will have
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been, duly authorized, executed and delivered by the Company. Assuming the
due authorization, execution and delivery by parties thereto other than
the Issuers, this Agreement and the Company-LLC Subscription Agreement
constitute, and, as of the Closing Time, the Equity Registration Rights
Agreement and the Unit Agreement will constitute, the valid and binding
obligations of each of the Issuers. The Agency Agreement constitutes, and
as of the Closing Time, the Escrow Agreement and the Notes Registration
Rights Agreement will constitute, the valid and binding obligations of the
Company. No consent, authorization (including the Certificado de Aprovacao
Previa (the "Prior Authorization") of the issuance of the Notes, the
Exchange Notes and the Private Exchange Notes, if any, and all payments in
respect of the Notes (except as disclosed in the Offering Memorandum)
given by Banco Central do Brasil (the "Brazilian Central Bank")),
approval, license or order of, or filing, registration or qualification
with, any court or governmental body or agency, domestic or foreign, is
required for the performance by the Issuers of their respective
obligations under the Operative Documents (including but not limited to
the obligations of the Company to effect payments of principal of, and
premium, interest and Additional Amounts (as defined in the Indenture) on
the Notes, the Exchange Notes or the Private Exchange Notes, if any, in
United States dollars free of any liability on the part of any holder
thereof) or for the consummation of the transactions contemplated hereby
or thereby, except for (A) the registration of the issue of the Notes, the
Exchange Notes and the Private Exchange Notes with the Brazilian Central
Bank in order to allow the remittance of U.S. dollars from Brazil for
payment on each scheduled due date of principal of, premium, and interest
and Additional Amounts on the Notes, the Exchange Notes and the Private
Exchange Notes, if any, and those costs, fees and commissions set forth in
this Agreement, the Indenture, the Escrow Agreement, the Registration
Rights Agreement and the Equity Registration Rights Agreement covered by
the Prior Authorization, which will be evidenced by the Certificado de
Registro (the "Registra-
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tion Certificate") issued by the Brazilian Central Bank; (B) the approval
of the Brazilian Central Bank for the Company to make any payment in U.S.
dollars not set forth in the Registration Certificate or to make any
payment provided for therein earlier than its originally scheduled date
(including amounts payable pursuant to acceleration of the maturity of the
Notes, the Exchange Notes or the Private Exchange Notes, if any, upon any
default or Event of Default (as defined in the Indenture), a Tax
Redemption (as defined in the Indenture), or a redemption upon a
Significant Equity Offering (as defined in the Indenture)); (C) the
payment of additional interest in the event the Company fails to effect
the Note Registration pursuant to the Note Registration Rights Agreement;
(D) registration under the Act of (x) the Notes, the Exchange Notes or the
Private Exchange Notes, if any, pursuant to the Notes Registration Rights
Agreement and (y) the Holding Shares or other Registrable Securities
pursuant to the Equity Registration Rights Agreement (in each case,
including any filing with the National Association of Securities Dealers,
Inc. (the "NASD")), (E) the qualification of the Indenture under the Trust
Indenture Act or (F) qualifications or authorizations by state securities
or "blue sky" laws in connection with the offer and sale of the Notes, the
Exchange Notes or the Private Exchange Notes, if any, pursuant to the
Notes Registration Rights Agreement or the Holding Shares or other
Registrable Securities pursuant to the Equity Registration Rights
Agreement.
(xvi) The issuance, sale and delivery by the Company of the Notes,
the Exchange Notes and the Private Exchange Notes, if any, and by the LLC
of the Holding Shares and the execution, delivery and performance by the
Issuers of this Agreement, the Unit Agreement, the Company-LLC
Subscription Agreement and the Equity Registration Rights Agreement and
the execution, delivery and performance by the Company of the Agency
Agreement, the Escrow Agreement, the Notes Registration Rights Agreement
and the Indenture, the consummation by the Issuers of the transactions
contemplated hereby and thereby and the related transactions
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described in the Offering Memorandum (including the use of the proceeds
from the sale of the Securities as described in the Offering Memorandum
under the caption "Use of Proceeds") and the compliance by the Issuers
with the terms of the foregoing do not, and, at the Closing Date, will
not, (A) conflict with or constitute or result in a breach or violation by
the Company of its Estatutos or by the LLC of the LLC Agreement (each such
document and any other charter, by-laws or similar organizational document
being an "Organizational Document"), in each case, as in effect on the
date hereof or as of the Closing Time, as the case may be, or (B) conflict
with or constitute or result in a breach or violation by the Issuers of
(x) any of the terms or provisions of, or constitute a default (or an
event which, with notice or lapse of time or both, would constitute a
default) by the Issuers or give rise to any right to accelerate the
maturity or require the prepayment of any indebtedness under, or result in
the creation or imposition of any lien (except for liens contemplated by
the Escrow Agreement), charge or encumbrance upon any property or assets
of the Issuers under, any contract, indenture, mortgage, deed of trust,
loan agreement, note, lease, license, franchise agreement, authorization,
permit, certificate or other agreement or document to which either of the
Issuers is a party or by which either of them may be bound, or to which
either of them or any of their respective assets or businesses is subject,
in any such case, which has occurred or will so result, or (y) assuming
compliance by you with all applicable securities and Blue Sky laws, any
law, statute, rule or regulation, or any judgment, decree or order, in any
such case, of any domestic or foreign court or governmental or regulatory
agency or other body having jurisdiction over the Issuers or any of their
respective properties or assets except in the case of the matters set
forth in the preceding clause (B), for any conflicts, breaches or
violations that would not in the aggregate be reasonably expected to have
a Material Adverse Effect.
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(xvii) As of the Closing Date, the Units, the Unit Agreement, the
Notes, the Exchange Notes, the Private Exchange Notes, the Indenture, the
Escrow Agreement, the Notes Registration Rights Agreement, the Company-LLC
Subscription Agreement, the Holding Shares, the Common Stock and the
Equity Registration Rights Agreement will conform in all material respects
to the descriptions thereof in the Offering Memorandum under the captions
"Description of the Units," "Description of the Notes," "Exchange Offer;
Notes Registration Rights," "Description of the Class B Holding Shares,"
"Description of Company Capital Stock," and "Description of Equity
Registration and Other Rights."
(xviii) The financial statements of the Company included in the
Offering Memorandum, together with the related schedules and notes,
present fairly the financial position of the Company at the date indicated
and the statement of operations, stockholders' equity and cash flows of
the Company for the period specified; said financial statements have been
prepared in conformity with United States generally accepted accounting
principles ("U.S. GAAP"). The balance sheet of the LLC dated March 31,
1997 presents fairly the financial position of the LLC at the date
indicated and has been prepared in conformity with U.S. GAAP. The
supporting schedules, if any, included in the Offering Memorandum present
fairly in accordance with U.S. GAAP the information required to be stated
therein. Ernst & Young Auditores Independentes, S.C., which has examined
such financial statements and schedules as set forth in its report
included in the Offering Memorandum, is an independent public accounting
firm with respect to the Company and the LLC within the meaning of
Regulation S-X under the Act.
(xix) Since the respective dates as of which information is given in
the Offering Memorandum, except as otherwise specifically stated therein,
there has been no (A) material adverse change in the financial condition,
properties, assets, results of operations or prospects of either of the
Issuers whether or not arising in the ordi-
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nary course of business (a "Material Adverse Change"), (B) transaction
entered into by the Company, other than in the ordinary course of
business, that is material to the Company, (C) transaction entered into by
the LLC, other than pursuant to the LLC Agreement, the Company-LLC
Subscription Agreement or in connection with its formation or
administration, or (D) dividend or distribution of any kind declared, paid
or made by the Company on its capital stock or by the LLC on its member
interests.
(xx) The Company has the authorized, issued and outstanding
capitalization set forth in the Offering Memorandum under the subheading
"Actual" under the caption "Capitalization" (except that 8,700 additional
shares of the Company's redeemable preferred stock were subsequently
issued); all of the outstanding capital stock of the Company has been duly
authorized and validly issued, is fully paid and nonassessable and was not
issued in violation of any preemptive or similar rights (whether provided
contractually or pursuant to any Organizational Document). No holder of
any securities of either of the Issuers is entitled to (x) have such
securities (other than the Notes, the Exchange Notes and the Private
Exchange Notes, if any) registered under any registration statement
contemplated by the Notes Registration Rights Agreement or (y) have such
securities (other than the Holding Shares and any other Registrable
Securities) registered under any registration statement contemplated by
the Equity Registration Statement, except to the extent expressly set
forth in the Offering Memorandum; no holder of Common Stock is subject to
personal liability by reason of being such a holder; the Common Stock is
not subject to preemptive or similar rights, except to the extent set
forth in the Offering Memorandum; Banco Itau S.A. has been duly appointed
by the Company as Registrar of the Common Stock; pursuant to the Company's
Organizational Documents, ownership of the Common Stock of the Company is
evidenced solely by book entry records of Banco Itau S.A., as Registrar,
and no certificates with respect to such shares of capital stock exist;
the Common Stock conforms to all
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statements relating thereto in the Offering Memorandum and such
description conforms to the rights set forth in the Estatutos of the
Company and any other document or agreement affecting the Common Stock.
(xxi) The capitalization of the LCC consists solely of Class A
Member Interests and Class B Member Interests. As of the date hereof there
are no Class A Member Interests and no Class B Member Interests issued and
outstanding. Upon issuance and delivery of the Holding Shares as
contemplated by this Agreement, as of the Closing Time there will be
814,955 Class A Member Interests and 125,000 Class B Member Interests
issued and outstanding, and all such issued and outstanding member
interests will have been duly authorized and validly issued, will be fully
paid and non-assessable with no personal liability attaching to any holder
thereof by virtue of the ownership thereof, will not have been issued in
violation of any preemptive or similar rights, and will be owned
beneficially and of record by the members of the LLC in the amounts set
forth on Schedule B. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of the Class B
Member Interests are valid, binding, and enforceable in accordance with
the terms of the LLC Agreement under Delaware law. There are no
outstanding or authorized options, warrants, purchase rights, conversion
rights, exchange rights or other contracts or commitments or preemptive
rights that could require the LLC to issue, sell or otherwise cause to
become outstanding any member interests of the LLC or any other security,
and there are no outstanding securities convertible into such member
interests of the LLC or any other security.
(xxii) Neither the Company nor the LCC is (A) in violation of its
respective Organizational Documents, (B) in default (or, with notice or
lapse of time or both, would be in default) in the performance or
observance of any obligation, agreement, covenant or condition contained
in any contract, indenture, mortgage, deed of trust, loan agreement, note,
lease, license, franchise agreement,
<PAGE>
-18-
authorization, permit, certificate or other agreement or instrument to
which it is a party or by which it may be bound, or to which any of its
respective assets or properties is subject, or (C) in violation of any
law, statute, judgment, decree, order, rule or regulation of any domestic
or foreign court with jurisdiction over the Company or the LLC or any of
their respective assets or properties, or other governmental or regulatory
authority, agency or other body, other than, in the case of clauses (B)
and (C), such defaults or violations which, individually or in the
aggregate, could not reasonably be expected to have or result in a
Material Adverse Effect.
(xxiii) The Company owns or possesses, or can acquire on reasonable
terms, adequate licenses, trademarks, service marks, trade names,
copyrights and know-how (including trade secrets and other proprietary or
confidential information, systems or procedures) (collectively,
"intellectual property") necessary to conduct the business now or proposed
to be operated by each of them as described in the Offering Memorandum,
except where the failure to own, possess or have the ability to acquire
any such intellectual property could not, individually or in the
aggregate, be reasonably expected to have a Material Adverse Effect; and,
except as disclosed under the caption "Business - Trademarks" in the Final
Offering Memorandum, no officers or directors of the Company has received
any notice of infringement of or conflict with (and the Company does not
know of any such infringement of or conflict with) asserted rights of
others with respect to any of such intellectual property which, if any
such assertions of infringement or conflict were sustained, individually
or in the aggregate, could reasonably be expected to have or result in a
Material Adverse Effect, the Technical Services Agreement (as defined in
the Offering Memorandum) and the Intellectual Property License (as defined
in the Offering Memorandum) are in full force and effect and the Company
is in compliance with all of its obligations thereunder and the Company
has not received any notice or claim of default with respect thereto.
<PAGE>
-19-
(xxiv) The Company and the LLC have obtained all consents,
approvals, orders, certificates, licenses, permits, franchises and other
authorizations of and from, and have made all declarations and filings
with, all governmental and regulatory authorities, all self-regulatory
organizations and all courts and other tribunals necessary to own, lease,
license and use their respective properties and assets and to conduct
their respective businesses in the manner described in the Offering
Memorandum, except to the extent that the failure to so obtain or file,
individually or in the aggregate, could not reasonably be expected to have
or result in a Material Adverse Effect.
(xxv) There is no legal action, suit, proceeding inquiry or
investigation before or by any court or governmental body or agency,
domestic or foreign, now pending or, to the knowledge of the Issuers,
threatened against the Company or the LLC or affecting the Company or the
LLC or any of their respective properties which would, individually or in
the aggregate, have or result in a Material Adverse Effect; the aggregate
of all pending legal or governmental proceedings to which the Company and
the LLC are a party or of which any of their respective properties or
assets are the subject which are not described in the Offering Memorandum,
including ordinary routine litigation incidental to the business, could
not reasonably be expected to result in a Material Adverse Effect. Except
as set forth in the Offering Memorandum, neither the Company nor the LLC
has received any notice or claim of any default (or event, condition or
omission which with notice or lapse of time or both would result in a
default) under any of its respective contracts or has knowledge of any
breach of any of such contracts by the other party or parties thereto,
except such defaults or breaches as could not reasonably be expected to
have or result in a Material Adverse Effect.
(xxvi) The Company and the LLC have filed all necessary federal,
state and foreign income and franchise tax returns, except where the
failure to so file such returns
<PAGE>
-20-
would not result in a Material Adverse Effect, and each has paid all taxes
shown as due thereon, except where the Company or the LLC, as the case may
be, (a) has established appropriate U.S. GAAP reserves for, and (b) is
contesting in good faith, the payment of, such taxes; and there is no tax
deficiency that has been asserted against the Company or the LLC, as the
case may be, that would result in a Material Adverse Effect.
(xxvii) None of (a) the Operative Documents, (b) the issuance, sale
and delivery of the Securities to the Initial Purchasers upon payment
therefor as contemplated in this Agreement, (c) the issuance of the
Exchange Notes and any Private Exchange Notes, if any, (d) the issuance of
the Common Stock to the LLC pursuant to the Company-LLC subscription
Agreement or (e) the distribution of the Common Stock of the Company to
holders of the Holding Shares upon a Liquidation Event (as defined in the
LLC Agreement), in each case as contemplated in this Agreement and the
Notes Registration Rights Agreement, the Equity Registration Rights
Agreement and the LLC Agreement, are subject to any registration tax,
stamp duty or similar tax, duty, impost or levy imposed by the Federative
Republic of Brazil or any political subdivision thereof.
(xxviii) Except as otherwise described in the Offering Memorandum,
all payments by the Company or any Guarantor (as defined in the Indenture)
in respect of the Notes, the Exchange Notes, the Private Exchange Notes,
the Indenture, this Agreement, the Indenture and the Notes Registration
Rights Agreement (or by any Guarantor upon default by the Company) are not
subject to withholding or deduction for or on account of any present or
future taxes, duties, assessments or other governmental charges of
whatsoever nature imposed or levied by or on behalf of Brazil or Japan or
any political subdivision or authority thereof or therein having power to
tax; provided, however, that if the Notes, the Exchange Notes or the
Private Exchange Notes are redeemed for any reason prior to the eighth
anniversary of their issue, all payments of interest, fees,
<PAGE>
-21-
commissions and original issue discount in respect of the Notes, the
Exchange Notes or the Private Exchange Notes by the Company (or by any
Guarantor upon default by the Company) to holders of the Notes, the
Exchange Notes or the Private Exchange Notes (including payments made
prior to redemption) would be subject to withholding of Brazilian income
tax at a rate of 15 percent, which rate may be reduced to 12 1/2 percent
pursuant to the bilateral treaty aimed at avoiding double taxation entered
into between Brazil and Japan on January 24, 1967 and enacted in Brazil by
Presidential Decree No. 61,899 dated December 14, 1967 (as amended and
supplemented by a protocol dated March 23, 1976 and enacted in Brazil by
Presidential Decree No. 81,194 dated January 9, 1978) and, in accordance
with and subject to the Indenture, the Company will pay such Additional
Amounts (as defined in the Indenture) as may be necessary in order that
the amounts received by the holder of any Note, Exchange Note or Private
Exchange Note after such withholding or deduction shall equal the net
respective amounts which would have been receivable by such holder in the
absence of such withholding imposed by Brazil or by Japan or any political
subdivision or taxing authority thereof or therein.
(xxix) The Company and the LLC each have good and marketable title
to all real and personal property described in the Offering Memorandum as
being owned by it and good and marketable title (subject to limitations on
assignment without the lessor's consent) to a leasehold estate in the real
property described in the Offering Memorandum as being leased by it, free
and clear of all liens, charges, encumbrances or restrictions, except, in
each case, as described in the Offering Memorandum or to the extent the
failure to have such title or the existence of such liens, charges,
encumbrances or restrictions does not result in a Material Adverse Effect.
(xxx) Neither the Company nor the LLC is an "investment company" or
a company "controlled by" an "investment company" as such terms are
defined in the Investment Com-
<PAGE>
-22-
pany Act of 1940, as amended, and the rules and regulations thereunder
(the "Investment Company Act"); neither the Company nor the LLC is
otherwise subject to regulation or registration under the Investment
Company Act nor would either the Company or the LLC be subject to
regulation or registration under the Investment Company Act in the absence
of Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.
(xxxi) Neither the Company nor the LLC nor any of their respective
directors, officers or controlling persons has taken, directly or
indirectly, any action designed, or which might reasonably be expected, to
cause or result, under the Act or otherwise, in, or which has constituted,
stabilization or manipulation of the price of any security of any of the
Issuers to facilitate the sale or resale of the Securities.
(xxxii) Neither the Company nor the LLC has any pension, profit
sharing, deferred compensation, bonus, retirement, stock option, stock
purchase, phantom stock or similar plans, including agreements evidencing
rights to purchase securities of the Company or the LLC, except (A)
certain Management Subscription Agreements, dated as of December 11, 1997,
with Messrs. Trynin and Fregenal, pursuant to which they have subscribed,
respectively, 432 and 324 shares of the Company's Common Stock and (B) the
Company has reserved 2,487 shares of Common Stock which may be issued to
certain executives at the discretion of the Board of Directors.
(xxxiii) None of the Company or the LLC nor any of their properties
or assets has any immunity from the jurisdiction of any court or from any
legal process (whether through service or notice, attachment prior to
judgment, attachment in aid of execution, executing or otherwise) under
the laws of the United States of America or the Federative Republic of
Brazil.
(xxxiv) To ensure the legality, validity, enforceability or
admissibility into evidence of each of this Agreement,
<PAGE>
-23-
the Notes Registration Rights Agreement, the Agency Agreement, the
Indenture, the Escrow Agreement, the Units, the Notes, the Exchange Notes
or the Private Exchange Notes, the Company-LLC Subscription Agreement, the
Equity Registration Rights Agreement or the Unit Agreement or any other
document to be furnished hereunder or thereunder in the Federative
Republic of Brazil it is not necessary that this Agreement, the Notes
Registration Rights Agreement, the Agency Agreement, the Indenture, the
Escrow Agreement, the Units, the Notes, the Exchange Notes or the Private
Exchange Notes, the Company-LLC Subscription Agreement, the Equity
Registration Rights Agreement or the Unit Agreement or any such other
document be filed or recorded with any court or other authority in the
Federative Republic of Brazil or that any stamp or similar tax be paid in
the Federative Republic of Brazil, on or in respect of any of this
Agreement, the Notes Registration Rights Agreement, the Agency Agreement,
the Indenture, the Escrow Agreement, the Units, the Notes, the Exchange
Notes or the Private Exchange Notes, the Company-LLC Subscription
Agreement, the Equity Registration Rights Agreement or the Unit Agreement
or any such other document, other than the translation into Portuguese by
a sworn translator, the notarization by a notary public of signatures of
non-Brazilian parties thereto and the consularization of this Agreement,
the Notes Registration Rights Agreement, the Agency Agreement, the
Indenture, the Escrow Agreement, the Company-LLC Subscription Agreement or
the Equity Registration Rights Agreement at the Brazilian Consulate in New
York which will be effected by the Company as soon as reasonably
practicable after execution of such agreements; the Company is not aware
of any reason why the enforcement in Brazil of a judgment in respect of
any of such agreements would be contrary to Brazilian law, national
sovereignty or public policy or "good morals" (as set forth in Brazilian
law) nor is it aware of any provision of any of such agreements which
would for any reason not be upheld by the courts of Brazil.
<PAGE>
-24-
(b) Any certificate signed by any officer of any of the Issuers and
delivered to the Initial Purchasers or to counsel for the Initial Purchasers
pursuant to the terms of this Agreement shall be deemed a representation and
warranty by the Issuers to the Initial Purchasers as to the matters covered
thereby.
SECTION 2. Purchase and Sale of the Securities. The Issuers agree to
sell to the Initial Purchasers and, subject to the terms and conditions and in
reliance upon the representations and warranties of the Issuers herein set
forth, each of the Initial Purchasers agrees severally to purchase from the
Issuers, at a purchase price of US$967.5 per Unit, representing US$967.476 per
Note and US$0.024 per Holding Share, the respective number of Units set forth in
Schedule A opposite the name of such Initial Purchaser.
SECTION 3. Delivery and Payment. Delivery of and payment for the
Securities shall be made at 10:00 A.M., New York City time, on June 6, 1997, or
such later date and time not more than two (2) business days thereafter as the
Initial Purchasers and the Company shall agree (such date and time of delivery
and payment for the Securities being herein called the "Closing Time"). Delivery
of the Securities shall be made to the Initial Purchasers against payment by the
Initial Purchasers of the purchase price thereof by wire transfer or certified
or official bank check or checks payable in federal (immediately available)
funds to the order of the Company or as the Issuers may direct. Delivery of the
Securities in definitive form shall be made at such location as the Initial
Purchasers shall reasonably designate at least one business day in advance of
the Closing Time and payment for the Securities shall be made at the offices of
Cahill Gordon & Reindel, 80 Pine Street, New York, New York. Certificates for
the Securities shall be registered in such names and in such denominations as
the Initial Purchasers may request not less than two full business days in
advance of the Closing Time.
The Issuers agree to have the Securities available for inspection,
checking and packaging by the Initial Purchas-
<PAGE>
-25-
ers in New York, New York, not later than 10:00 A.M. on the business day prior
to the Closing Time.
SECTION 4. Resale of the Securities. The Initial Purchasers have
advised the Issuers that they propose to offer the Securities for resale upon
the terms and conditions set forth in this Agreement and in the Offering
Memorandum. Each Initial Purchaser hereby represents and warrants (as to itself
only) to, and agrees with, the Issuers that it (i) is a Qualified Institutional
Buyer, (ii) has not and will not solicit offers for, or offer or sell, the
Securities by means of any form of general solicitation or general advertising
(as those terms are used in Regulation D under the Act) or in any manner
involving a public offering within the meaning of Section 4(2) of the Act and
has not and will not engage in any directed selling efforts within the meaning
of Rule 902 under the Act in the United States in connection with the Securities
being offered and sold pursuant to Regulation S under the Act, (iii) is not
purchasing with a view to or for offer or sale in connection with any
distribution that would be in violation of federal or state law and (iv) will
solicit offers for such Securities pursuant to Rule 144A, Regulation S or
resales not involving a public offering, as applicable, only from, and will
solicit offers for or offer, solicit offers to purchase, sell or deliver the
Securities, as part of their initial offering, only to or from (A) persons in
the United States whom the Initial Purchasers reasonably believe to be Qualified
Institutional Buyers or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to the Initial Purchaser that each such
account is a Qualified Institutional Buyer, to whom notice has been given that
such sale or delivery is being made in reliance on Rule 144A, and, in each case,
in transactions under Rule 144A, (B) a limited number of other institutional
investors whom the Initial Purchasers reasonably believe to be Accredited
Investors that are purchasing for their own accounts or for the account of an
Accredited Investor for investment purposes and not with a view to, or for offer
or sale in connection with, any distribution of the Securities in violation of
the Act and (C) non-U.S. persons outside the United
<PAGE>
-26-
States to whom the Initial Purchasers reasonably believe offers and sales of the
Securities may be made in reliance upon Regulation S under the Act in
transactions meeting the requirements of Regulation S; provided that with
respect to clause (B), each such transfer of Securities is effected by the
delivery to such purchaser of Securities in definitive form and registered in
its name (or its nominee's name) on the books maintained by the Unit Agent; and
provided, further, that with respect to clause (B), such institutional investors
shall be required to complete and deliver an Accredited Institutional Investor
Letter (substantially in the form of Annex A to the Offering Memorandum) to the
Initial Purchasers prior to the confirmation of any order.
SECTION 5. Covenants of the Issuers. Each of the Issuers covenant
with the Initial Purchasers as follows:
(a) Each of the Issuers will use its reasonable best efforts to
obtain on or prior to the Closing Time all government authorizations
(including, but not limited to, the Prior Authorization and any other
necessary authorizations from the Brazilian Central Bank) required in
connection with the issue and sale of the Units, the Notes, the Exchange
Notes, the Private Exchange Notes, the Common Stock delivered to the LLC
pursuant to the Company-LLC Subscription Agreement or the Holding Shares
and the performance of their respective obligations thereunder and under
this Agreement, the Notes Registration Rights Agreement, the Indenture,
the Escrow Agreement, the Units, the Notes, the Agency Agreement, the LLC
Agreement, the Company-LLC Subscription Agreement and the Equity
Registration Rights Agreement, and to cause such authorizations to be
continued in effect so long as any of the Units, the Notes, the Exchange
Notes, the Private Exchange Notes, if any, or the Holding Shares remain
outstanding.
(b) The Issuers will promptly, and in any event not more than 10
days after the Closing Time, (i) make application to the Brazilian Central
Bank for the Registration Certificate and thereafter do all things
reasonably necessary to obtain the Registration Certificate and provide
<PAGE>
-27-
evidence thereof to the Initial Purchasers and (ii) do all things
reasonably necessary to obtain the issuance of the Registration
Certificate by the Brazilian Central Bank, as soon as practicable after
such approval is necessitated, to make any payment in dollars not set
forth in the Registration Certificate or to make any payment provided for
therein earlier than its originally scheduled date for payment.
(c) The Issuers will pay such additional amounts as may be necessary
in order that the net amounts receivable by the Initial Purchasers
pursuant to this Agreement after any withholding or deduction for or on
account of any present or future taxes, duties, assessments or other
governmental charges of whatever nature imposed or levied by or on behalf
of Brazil or Japan or any political subdivision thereof or by any
authority therein or thereof having power to tax shall equal the
respective amounts which would have been receivable in the absence of such
withholding or deduction.
(d) The Issuers will furnish to the Initial Purchasers and counsel
for the Initial Purchasers, without charge, such number of copies of the
Preliminary Offering Memorandum and the Offering Memorandum and any
amendments or supplements thereto as the Initial Purchasers and their
counsel may reasonably request.
(e) The Issuers will not at any time make any amendment or
supplement to the Preliminary Offering Memorandum or the Offering
Memorandum without the prior written consent of the Initial Purchasers,
which consent shall not be unreasonably withheld or delayed; provided,
however, that the consent of the Initial Purchasers shall not be required
if in the judgment of the Issuers upon advice of U.S. counsel to the
Issuers any such amendment or supplement is necessary so as to make the
statements contained in the Offering Memorandum not misleading.
(f) If at any time prior to completion of the distribution of the
Securities by the Initial Purchasers to
<PAGE>
-28-
purchasers who are not its affiliates (as determined by the Initial
Purchasers) any event shall occur or condition shall exist as a result of
which it is necessary, in the reasonable opinion of the Initial Purchasers
or counsel for the Initial Purchasers, to amend or supplement the Offering
Memorandum in order that the Offering Memorandum, as then amended or
supplemented, will not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is
delivered to a purchaser, not misleading or if in the reasonable opinion
of the Initial Purchasers or counsel to the Initial Purchasers, such
amendment or supplement is necessary to comply with applicable law, the
Issuers will, subject to paragraph (e) of this Section 5, promptly
prepare, at their own expense, such amendment or supplement as may be
necessary to correct such untrue statement or omission or to effect such
compliance (in form and substance agreed upon by the Initial Purchasers
and counsel to the Initial Purchasers), so that as so amended or
supplemented, the statements in the Offering Memorandum will not include
an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading or so that such Offering Memorandum as so amended or
supplemented will comply with applicable law, as the case may be, and
furnish to the Initial Purchasers such number of copies of such amendment
or supplement as the Initial Purchasers may reasonably request. Each of
the Issuers agrees to notify the Initial Purchasers in writing to suspend
use of the Offering Memorandum as promptly as practicable after the
occurrence of an event specified in this paragraph (f) of which it has
knowledge, and the Initial Purchasers hereby agree upon receipt of such
notice from the Issuers to suspend use of the Offering Memorandum until
the Issuers have amended or supplemented the Offering Memorandum to
correct such misstatement or omission or to effect such compliance.
<PAGE>
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(g) Notwithstanding any provision of paragraph (d) or (e) to the
contrary, however, the Issuers' obligations under paragraphs (d) and (e)
and the Initial Purchasers' obligations under paragraph (f) shall
terminate on the date upon which no Initial Purchaser nor any of their
respective affiliates continues to hold Securities acquired as part of
their initial distribution.
(h) None of the Issuers nor any of their affiliates (as defined in
Rule 501(b) under the Act) will solicit any offer to buy or offer or sell
the Units, the Notes, the Exchange Notes or the Private Exchange Notes, if
any, or the Holding Shares by means of any form of general solicitation or
general advertising (as such terms are used in Regulation D under the
Act), or by means of any directed selling efforts (as defined in Rule 902
under the Act) in the United States in connection with the Securities
being offered and sold pursuant to Regulation S or in any manner involving
a public offering within the meaning of Section 4(2) of the Act prior to
the effectiveness of a registration statement with respect to the Units,
the Notes, the Exchange Notes or the Private Exchange Notes or the Holding
Shares, as applicable.
(i) None of the Issuers nor any of their affiliates (as defined in
Rule 501(b) under the Act) will offer, sell or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
which could be integrated with the sale of the Securities in a manner that
would require the registration of any of the Securities under the Act.
(j) The Company will, so long as any Notes, Exchange Notes, Private
Exchange Notes or Holding Shares are outstanding, furnish to the Initial
Purchasers, the Trustee, the Holding Share Transfer Agent and each holder
of any Notes, Exchange Notes, Private Exchange Notes or Holding Shares on
a timely basis, whether or not the Company has a class of securities
registered under the Exchange Act, (i) within 140 days after the end of
each fiscal year, annual reports on Form 20-F (or any successor form)
contain-
<PAGE>
-30-
ing the information required to be contained therein (or required
in such successor form); (ii) within 60 days after the end of each of the
first three fiscal quarters of each fiscal year reports on Form 6-K (or
any successor form) containing substantially the same information required
to be contained in Form 10-Q (or required in any successor form); and
(iii) promptly from time to time after the occurrence of an event required
to be therein reported, such other reports on Form 6-K (or any successor
form) containing substantially the same information required to be
contained in Form 8-K (or required in any successor form). Notwithstanding
the foregoing, prior to the filing of the Exchange Offer Registration
Statement with the SEC and in the event that the Company never becomes
subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company will file with the Trustee and provide the
Initial Purchasers and the holders of any of the Securities and
prospective purchasers of any of the Securities designated by such
holders, upon request of such holders or prospective purchasers, all of
the information that would have been required to have been filed with the
SEC pursuant to clauses (i), (ii) and (iii) above. In addition to the
above, the Company and the LLC will make available any further information
required to be delivered pursuant to Rule 144A(d)(4) under the Act to
permit compliance with Rule 144A in connection with resales of any of the
Securities. Each of the reports will be prepared in accordance with U.S.
GAAP consistently applied and will be prepared in accordance with the
applicable rules and regulations of the SEC.
(k) Each of the Issuers will use its reasonable best efforts in
cooperation with the Initial Purchasers to (i) permit the Units, the Notes
and the Holding Shares to be eligible for clearance and settlement through
The Depository Trust Company, the Euroclear System and Cedel Bank, societe
anonyme, and (ii) permit the Securities to be designated as PORTAL
securities in accordance with the rules and regulations of the NASD.
<PAGE>
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(l) Each Note, Private Exchange Note, if any, and each Holding Share
will bear the following legend until such legend shall no longer be
necessary or advisable because the applicable Security is no longer
subject to the restrictions on transfer described herein:
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
ANY STATE OR OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY
INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT
FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
"OFFSHORE TRANSACTION" PURSUANT TO RULE 903 OR 904 OF REGULATION S,
(2) AGREES THAT IT WILL NOT, PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k)
UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER)
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR ANY
PREDECESSOR OF THIS SECURITY) OR THE LAST DATE ON WHICH THE COMPANY
OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY OR
ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF ANY,
<PAGE>
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AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION
TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO
A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-US PERSONS THAT OCCUR OUTSIDE THE UNITED
STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
PURSUANT TO RULE 904 OF REGULATION S, (E) TO AN ACCREDITED INVESTOR
THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON
TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE REQUEST
OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED
HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "US
PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT.
<PAGE>
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(m) The Issuers will arrange for the registration and qualification
of the Securities for offering and sale under the applicable securities or
"blue sky" laws of such states and other jurisdictions as the Initial
Purchasers may designate in connection with the resale of the Securities
as contemplated by this Agreement and the Offering Memorandum and will
continue such qualifications in effect for as long as may be necessary to
complete the distribution of the Securities; provided that in no event
shall the Issuers be obligated to (i) qualify as a foreign corporation or
as a dealer in securities in any jurisdiction where it would not otherwise
be required to so qualify but for this Section 5(m), (ii) file any general
consent to service of process in any jurisdiction where it is not at the
Closing Time then so subject or (iii) subject itself to taxation in any
such jurisdiction if it is not so subject. The Issuers will file such
statements and reports as may be required by the laws of each jurisdiction
in which the Securities have been qualified as above provided. The Issuers
shall promptly advise the Initial Purchasers of the receipt by any of the
Issuers of any notification with respect to the suspension of the
qualification or exemption from qualification of the Securities for
offering or sale in any jurisdiction or the institution, threatening or
contemplation of any proceeding for such purpose.
(n) From the date hereof to the Closing Time, none of the Issuers
will issue any press release or other public communication directly or
indirectly or hold any press conference with respect to the Issuers or the
business, financial condition, assets, results of operations or prospects
of the Issuers, without the prior consent of the Initial Purchasers,
unless in the judgment of the Issuers and their counsel, and after
notification to the Initial Purchasers, such press release, communication
or conference is required by law.
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(o) The Company will use the proceeds received from the sale of the
Securities in the manner specified in the Offering Memorandum under the
heading "Use of Proceeds."
(p) Pursuant to the Escrow Agreement, the Company will deposit the
Initial Escrow Amount into a collateral account in the United States,
representing funds that together with the proceeds from the investment
thereof will be sufficient to pay the first six interest payments on the
Notes, and will take all actions necessary to pledge, assign and set over
to the Trustee, for the benefit of the holders of the Notes and the
Trustee (in its capacity as such under the Indenture), and irrevocably
grant to the Trustee for the benefit of the holders of the Notes and the
Trustee (in its capacity as such under the Indenture) a first priority
perfected security interest in, all of its respective right, title and
interest in such collateral account, all funds held therein and all other
Collateral (as such term is defined in the Escrow Agreement) held by the
Escrow Agent or on its behalf, in order to secure the obligations and
indebtedness of the Company under the Indenture, the Escrow Agreement and
the Notes.
(q) The LLC shall comply with all of its obligations under the LLC
Agreement, including but not limited to (i) its obligation pursuant to
Section 7.5 thereof to make a timely QEF Election (as defined therein),
(ii) its obligation to maintain a calendar year as its fiscal year and
(iii) obtaining the consent of Class B members with respect to amendments
of the LLC Agreement to the extent set forth in Section 13.3 thereof.
(r) As soon as reasonably practicable, the Company and Holding LLC
shall register the Common Stock to be held by Holding LLC as a foreign
investment in the name of Holding LLC with the Central Bank of Brazil; the
Company shall, prior to any distribution of Common Stock by Holding LLC
(whether upon liquidation of Holding LLC or otherwise), establish and
shall thereafter maintain an American Depositary Receipt program (the "ADR
Program") providing for deposits from time to time of Common Stock against
is-
<PAGE>
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suance by the depositary (the "Depositary") of American Depositary
Receipts ("ADRs") and shall obtain all approvals, authorizations and
consents from, and shall make all filings, declarations or presentations
with, any governmental or administrative body (including but not limited
to the CVM and the Central Bank of Brazil) which shall at any time be
necessary or desirable for the establishment of the ADR Program.
(s) The Issuers shall not, for a period of 180 days from the date of
the Offering Memorandum, without the prior written consent of Merrill
Lynch, directly or indirectly, offer, sell, grant any option to purchase
or otherwise dispose of any debt securities of the Company (other than the
Exchange Notes and the Private Exchange Notes, if any) or any Subsidiary.
SECTION 6. Payment of Expenses. (a) Whether or not any sale of the
Securities is consummated, the Issuers agree jointly and severally to pay and
bear all costs and expenses incident to the performance of all of their
obligations under this Agreement, including (i) the preparation and printing of
the Preliminary Offering Memorandum, the Offering Memorandum and any amendments
or supplements thereto and the cost of furnishing copies thereof to the Initial
Purchasers, (ii) the preparation, issuance, printing and distribution of the
Units, the Notes, the Exchange Notes, the Private Exchange Notes, if any, and
the Holding Shares and any survey of state securities or "blue sky" laws or
legal investment memoranda, (iii) the delivery to the Initial Purchasers of the
Securities, (iv) the fees and disbursements of the Issuers' counsel and
accountants, (v) the qualification of the Securities under the applicable state
securities or "blue sky" laws in accordance with the provisions of Section 5(m)
hereof and any filing for review of the offering with the NASD, if required,
including filing fees and reasonable fees and disbursements of counsel to the
Initial Purchasers in connection therewith and in connection with the
preparation of any survey of state securities or "blue sky" laws or legal
investment memoranda, (vi) any fees charged by rating agencies for rating the
Securities, (vii) the fees and
<PAGE>
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expenses of the Trustee, the Paying Agent, the Unit Agent and the Holding Share
Transfer Agent, including the fees and disbursements of their counsel, (viii)
all expenses (including travel expenses) of the Issuers and the Initial
Purchasers in connection with any meetings with prospective investors in the
Securities and (ix) all expenses and listing fees in connection with the
application for designation of the Securities as PORTAL securities and to permit
the Units, the Notes, the Exchange Notes, the Private Exchange Notes and the
Holding Shares, as applicable, to be eligible for clearance through The
Depository Trust Company, the Euroclear System and Cedel Bank, societe anonyme.
Notwithstanding the foregoing, if the sale of the Securities is consummated as
provided for herein, the Initial Purchasers shall reimburse the Issuers for
US$312,500 of the expenses set forth in the preceding clauses (i) through (ix).
(b) If the sale of the Securities provided for herein is not
consummated because any condition to the obligations of the Initial Purchasers
set forth in Section 7 hereof is not satisfied, because this Agreement is
terminated pursuant to Section 11 hereof or because of any failure, refusal or
inability on the part of any of the Issuers to perform all obligations and
satisfy all conditions on their part to be performed or satisfied hereunder
other than by reason of a default by an Initial Purchaser in payment for the
Securities at the Closing Time, the Issuers agree jointly and severally to
reimburse the Initial Purchasers promptly upon demand for all reasonable
out-of-pocket expenses (including reasonable fees and disbursements of their
counsel) that shall have been incurred by it in connection with the proposed
purchase and sale of the Securities.
SECTION 7. Conditions of the Initial Purchasers' Obligations. The
obligations of the Initial Purchasers to purchase and pay for the Securities are
subject to the continued accuracy, as of the Closing Time, of the
representations and warranties of the Issuers herein contained, to the accuracy
of the statements of the Issuers and officers of the Issuers made in any
certificate pursuant to the provisions hereof, to the
<PAGE>
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performance by each of the Issuers of its obligations hereunder, and to the
following further conditions:
(a) At the Closing Time, the Initial Purchasers shall have received
the opinion of Willkie Farr & Gallagher, United States counsel to the
Issuers, dated as of the Closing Time, in form and substance reasonably
satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers, to the effect that:
(1) no consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body
in the United States of America or the State of New York is required
for the execution and delivery by the Company and the LLC, as
applicable, of the Purchase Agreement, the Equity Registration
Rights Agreement, the Notes Registration Rights Agreement, the
Agency Agreement, the Escrow Agreement, the Unit Agreement, the
Company-LLC Subscription Agreement or the Indenture or for the
issuance, sale and delivery of the Notes pursuant to the Purchase
Agreement, the issuance and delivery of the Exchange Notes or the
Private Exchange Notes, if any, in exchange for the Notes in the
manner contemplated by the Notes Registration Rights Agreement, or
the consummation by the Company and the LLC, as applicable, of any
of the transactions contemplated in such instruments and agreements,
or the issuance, sale and delivery of the Holding Shares by the LLC
pursuant to the Purchase Agreement (except for authorizations
required under the securities or Blue Sky laws of certain
jurisdictions, as to which we express no opinion) nor will such
issuance, sale and delivery of the Securities to the Initial
Purchasers or the execution, delivery and performance of such
instruments and agreements by the Company and the LLC, as
applicable, conflict with, or result in a violation of any of the
terms or provisions of, any existing applicable United States
Federal or New York State judgment, order or decree which is known
to such counsel or any
<PAGE>
-38-
law, rule or regulation, in any such case, of any government,
governmental instrumentality or court located in the United States
having jurisdiction over the Company or any of its properties or
assets, except that (a) the transactions contemplated by the Notes
Registration Rights Agreement are subject, to the extent set forth
therein, to the registration and other requirements of the Act and
the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act") and (b) the transactions contemplated by the Equity
Registration Rights Agreement are subject, to the extent set forth
therein, to the registration requirements of the Act;
(2) to our knowledge, there is not pending or threatened any
action, suit, proceeding, inquiry or investigation to which the
Company or the LLC is a party, or to which the property of the
Company or the LLC is subject, before or brought by any court or
governmental agency or body in the Federal courts of the United
States or in any State court in the State of New York, which might
reasonably be expected to have or result in a Material Adverse
Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the
consummation or performance by the Company or the LLC of its
obligations under any of the Operative Documents;
(3) the execution, delivery and performance of the Operative
Documents, the issuance by the Company of the Notes, the issuance by
the LLC of the Holding Shares and the consummation of the
transactions contemplated in the Operative Documents and compliance
by the Company and the LLC with their respective obligations under
the Operative Documents will not, whether with or without the giving
of notice or lapse of time or both, (a) conflict with or constitute
a breach of, or a default or otherwise cause or permit any holder of
indebtedness of the Company to have a
<PAGE>
-39-
right to require the repurchase, redemption or repayment of any of
such indebtedness of the Company or the LLC under or (b) result in
the creation or imposition of any lien (other than liens
contemplated by the Escrow Agreement), charge or encumbrance upon
any property or assets of the Company or the LLC pursuant to any
material contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or any other agreement or instrument,
known to us, to which the Company or the LLC is a party or by which
either of them may be bound, or to which any of the property or
assets of the Company or the LLC is subject, or (c) result in any
violation of the provisions of the LLC Agreement, or any applicable
New York or Federal law, statute, rule, regulation, judgment, order,
writ or decree, known to us, of any government, government
instrumentality or court having jurisdiction over the Company or the
LLC or any of their respective properties, assets or operations
except in the case of (a), (b), or (c) above, such as would not,
either singly or in the aggregate, have a Material Adverse Effect;
(4) the Notes are in the form contemplated by the Indenture
and assuming that (a) the Company has been duly organized and is
validly existing and in good standing under the laws of the
Federative Republic of Brazil, (b) the Company has all requisite
corporate power and authority to issue, sell and deliver the Notes
and the issuance, sale and delivery of the Notes has been duly
authorized by all requisite corporate action by the Company, (c) the
Company has all requisite corporate power and authority to issue and
deliver the Exchange Notes and the Private Exchange Notes in
exchange for the Notes in the manner contemplated by the Notes
Registration Rights Agreement and such issuance and delivery has
been duly authorized by all requisite corporate action of the
Company, (d) the Company has all requisite corporate power and
authority to execute and deliver the Purchase Agree-
<PAGE>
-40-
ment, the Unit Agreement, the Indenture, the Escrow Agreement, the
Agency Agreement, the Notes Registration Rights Agreement, the
Equity Registration Rights Agreement and the Company-LLC
Subscription Agreement and to perform its obligations thereunder and
such execution, delivery and performance has been duly authorized by
all requisite corporate action by the Company, (e) the Unit
Agreement, the Indenture, the Escrow Agreement, the Agency
Agreement, the Notes Registration Rights Agreement, the Equity
Registration Rights Agreement and the Company-LLC Subscription
Agreement have been duly executed and delivered by the Company, (f)
the LLC has all requisite limited liability power and authority to
execute and deliver the Unit Agreement, the Company-LLC Subscription
Agreement and the Equity Registration Rights Agreement and to
perform its obligations thereunder and such execution, delivery and
performance has been duly authorized by all requisite limited
liability company action by the LLC, (g) the Unit Agreement, the
Company-LLC Subscription Agreement and the Equity Registration
Rights Agreement have been duly executed and delivered by the LLC,
(I) when the Notes are authenticated by the Trustee in accordance
with the provisions of the Indenture (assuming the due
authorization, execution and delivery of the Indenture by the
Trustee) and delivered and paid for in accordance with the terms of
this Agreement, registered holders of the Notes will be entitled to
the benefits of the Indenture and the Indenture will constitute the
valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, (II) when the Exchange Notes
and the Private Exchange Notes, if any, are authenticated and
delivered in exchange for the Notes in the manner contemplated by
the Notes Registration Rights Agreement, registered holders of the
Exchange Notes and Private Exchange Notes will be entitled to the
benefits of the Indenture and will constitute the valid and binding
obligations of the Company enforceable
<PAGE>
-41-
against the Company in accordance with their terms, and (III) each
of the Unit Agreement, the Indenture, the Escrow Agreement, the
Agency Agreement, the Notes Registration Rights Agreement, the
Equity Registration Rights Agreement and the Company-LLC
Subscription Agreement constitutes a valid and binding agreement of
the Company, enforceable against the Company in accordance with its
terms, and (IV) each of the Unit Agreement, the Company-LLC
Subscription Agreement and the Equity Registration Rights Agreement
constitutes a valid and binding obligation of the LLC, enforceable
against the LLC in accordance with its terms, except, in each case,
(x) as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or
similar laws affecting the rights and remedies of creditors
generally and (y) such counsel need express no opinion concerning
the enforceability of, or the enforceability under law under certain
circumstances of, the indemnification provisions of Section 4 of the
Notes Registration Rights Agreement or Section 5 of the Equity
Registration Rights Agreement with respect to a liability where such
indemnification is contrary to public policy;
(5) assuming compliance by the Escrow Agent with the terms of
the Escrow Agreement, the Escrow Agreement creates a valid perfected
security interest in favor of the Trustee in all right, title and
interest of the Company in and to the Escrow Account and the
Collateral;
(6) the statements in the Offering Memorandum under the
headings "Summary -- The Offering," "Description of the Units,"
"Description of the Notes," "Exchange Offer; Notes Registration
Rights" and "Equity Registration and Other Rights," insofar as such
statements purport to summarize certain provisions of the Units, the
Notes, the Exchange Notes, the Private Exchange Notes, the
Indenture, the Notes Registration
<PAGE>
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Rights Agreement and the Equity Registration Rights Agreement,
provide a fair summary of such provisions of such agreements and
instruments;
(7) assuming the Securities are issued and sold under the
circumstances contemplated by this Agreement and the representations
and warranties of the Issuers and the Initial Purchasers set forth
herein are true and correct, it is not necessary in connection with
the offer, sale and delivery of the Securities to the Initial
Purchasers and to each Subsequent Purchaser in the manner
contemplated by the Purchase Agreement and the Offering Memorandum
to register the Securities under the 1933 Act or to qualify the
Indenture under the Trust Indenture Act;
(8) assuming the Company invests the net proceeds of the
Offering as described under "Use of Proceeds" in the Final Offering
Memorandum, neither the Company nor the LLC is an "investment
company" or an entity "controlled" by an "investment company," as
such terms are defined in the Investment Company Act of 1940 (the
"Investment Company Act") nor is the Company or the LLC otherwise
subject to regulation or registration under the Investment Company
Act. In forming the foregoing opinion, we are not relying on the
availability of any exemption under Section 3(c)(1) or 3(c)(7) of
the Investment Company Act;
(9) the statements in the Offering Memorandum under the
caption "Tax Considerations -- United States" fairly summarize the
material United States Federal tax consequences of acquiring, owning
and disposing of the Units, the Notes, the Exchange Notes and the
Holding Shares;
(10) the LLC will be treated for federal income tax purposes
as a partnership and, based on the manner in which it intends to
limit its business activities and monitor its "qualifying income"
for purposes of Section 7704(c) of the Internal Revenue Code of
<PAGE>
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1986, as amended (the "Code"), it will not be classified as a
publicly traded partnership that is treated as a corporation under
section 7704(a) of the Code.
In addition such counsel shall state that such counsel has
participated in conferences with representatives of the Initial
Purchasers, officers and other representatives of the Issuers and
representatives of the independent certified accountants of the Issuers,
at which conferences the contents of the Offering Memorandum and related
matters were discussed, and although such counsel has not verified and
does not pass upon or assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Offering
Memorandum (except and only to the extent set forth in subclauses (7) and
(10) above), on the basis of the foregoing (relying as to materiality to
the extent such counsel deems appropriate upon opinions of officers and
other representatives of the Issuers), on the basis of the foregoing
nothing has come to its attention to cause it to believe that the Offering
Memorandum at the date thereof or as of the Closing Time, contained or
contains an untrue statement of a material fact or omitted or omits to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading (it
being understood that such counsel has not been requested to and does not
make any comment with respect to (i) the financial statements, and the
notes thereto and related schedules, (ii) other financial or statistical
data found in or derivable from the financial, accounting or internal
records of the Issuers or (iii) any forward-looking or projected financial
or statistical data relating to the Issuers, in each case, included in the
Offering Memorandum).
In rendering such opinion, such counsel (A) need not express any
opinion with regard to the application of laws of any jurisdiction other
than the Federal laws of the United States and the laws of the State of
New York and (B) may rely as to matters of fact (but not as to legal
<PAGE>
-44-
conclusions), to the extent they deem proper, on certificates of
responsible officers of the Issuers and public officials. Such opinion
shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991).
References to the Offering Memorandum in this Section (a) include
any supplement thereto prior to the Closing Time.
(b) At the Closing Time, the Initial Purchasers shall have received
the opinion of Xavier, Bernardes, Braganca, Brazilian counsel to the
Issuers, dated as of the Closing Time, in form and substance satisfactory
to the Initial Purchasers and counsel for the Initial Purchaser, to the
effect that:
(1) the Company has been duly organized and is a validly
existing sociedade anonima in good standing under the laws of the
Federative Republic of Brazil, with full corporate power and
authority to own, lease and operate its assets and properties and
conduct its business currently conducted and as described in the
Offering Memorandum;
(2) the authorized, issued and outstanding capital stock of
the Company is as set forth in the Offering Memorandum under the
subheading "Actual" under the caption "Capitalization" (except that
8,700 additional shares of the Company's redeemable preferred stock
were subsequently issued); the Company does not have any
subsidiaries;
(3) (a) the Company has the requisite corporate power and
authority to issue, sell and deliver the Notes pursuant to the
Purchase Agreement and the issuance, sale and delivery of the Notes
pursuant to the Purchase Agreement have been duly authorized by
<PAGE>
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all requisite corporate action by the Company; (b) the Company has
all requisite corporate power and authority to issue and deliver the
Exchange Notes and the Private Exchange Notes in exchange for the
Notes in the manner contemplated by the Notes Registration Rights
Agreement and such issuance and delivery has been duly authorized by
all requisite corporate action by the Company; (c) the Company has
the requisite corporate power and authority to issue, sell and
deliver the Common Stock pursuant to the Company-LLC Subscription
Agreement and the issuance, sale and delivery of the Common Stock
pursuant to the Company-LLC Subscription Agreement has been duly
authorized by all requisite corporate action by the Company; (d) the
Company has all requisite corporate power and authority to execute
and deliver the Purchase Agreement, the Indenture, the Escrow
Agreement, the Unit Agreement, the Company-LLC Subscription
Agreement, the Agency Agreement, the Notes Registration Rights
Agreement and the Equity Registration Rights Agreement and to
perform its obligations thereunder and such execution, delivery, and
performance has been duly authorized by all requisite corporate
action by the Company; (e) the Indenture, the Purchase Agreement,
the Escrow Agreement, the Unit Agreement, the Company-LLC
Subscription Agreement, the Agency Agreement, the Notes Registration
Rights Agreement and the Equity Registration Rights Agreement have
been duly executed and delivered by the Company and are in proper
legal form under the laws of the Federative Republic of Brazil for
the enforcement thereof against the Company and, assuming due
authorization, execution and delivery of the aforesaid agreements by
the other parties thereto, each constitute a valid and legally
binding obligation of the Company, enforceable in accordance with
their respective terms, subject as to enforcement, to applicable
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights generally
and to general equity principles;
<PAGE>
-46-
and, assuming the signatures of the parties to the aforesaid
agreements other than the signatures of the Company and any other
Brazilian signatories have been duly notarized by a competent notary
public, it is not necessary to ensure the legality, validity,
enforceability or admissibility in evidence of any of the aforesaid
agreements in the Federative Republic of Brazil or any political
subdivision thereof that any of them be filed or recorded or
enrolled with any court or authority in the Federative Republic of
Brazil or any political subdivision thereof or that any stamp,
registration or similar tax be paid in the Republic of Brazil or any
political subdivision thereof, other than the consularization of
such agreements by a Brazilian Consulate and registration of any
such agreement together with a sworn Portuguese translation thereof,
with the competent Registry of Deeds and Documents and payment of
filing fees therefor;
(4) the Common Stock delivered to the LLC pursuant to the
Company-LLC Subscription Agreement has been duly authorized and, at
the Closing Time, will be validly issued, fully paid and
non-assessable and will have attached to it the rights and benefits
described in the Offering Memorandum, including under the caption
"Description of Company Capital Stock"; at the Closing Time, none of
such Common Stock will have been issued in violation of any
preemptive or other similar rights under any contract or the
Company's Organizational Documents or applicable Brazilian law; no
holder of any of the Common Stock will be subject to personal
liability by reason of being such a holder; at the Closing Time, the
LLC will be the record owner of (A) 125,000 shares of Common Stock
delivered to the LLC pursuant to the Company -LLC Subscription
Agreement, representing approximately 7.0% of the common share
capital of the Company on a fully diluted basis (including for
purposes of such calculation the exercise in full of all outstanding
<PAGE>
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subscription bonds) and (B) 814,955 shares of Common Stock delivered
to the LLC by the Founding Class A Member (as defined in the LLC
Agreement), representing 45.6% of the common share capital of the
Company on a fully diluted basis (including for purposes of this
calculation the exercise in full of all outstanding subscription
bonds);
(5) all of the outstanding capital stock of the Company has
been duly authorized and validly issued, is fully paid and
nonassessable and was not issued in violation of any preemptive or
other similar rights under any contract or the Company's
Organizational Documents or applicable Brazilian Law; pursuant to
the Company's Organizational Documents, ownership of all of the
shares of capital stock of the Company is evidenced solely by book
entry records of Banco Itau S.A., as Registrar, and no certificates
with respect to such shares of capital stock exist;
(6) except as set forth in the Offering Memorandum and
assuming compliance by the Company and Holding LLC of their
respective obligations under Section 5(r) of the Purchase Agreement,
(A) there are no limitations under Brazilian law on the rights of
non-Brazilian holders of Common Stock which would not be applicable
to Brazilian holders with respect to their Common Stock, (B) all
dividends and other distributions declared and payable on the Common
Stock may under current Brazilian laws and regulations be paid
directly to the account of a holder of Common Stock in Brazilian
Reais that may be converted into foreign currency that may be freely
transferred out of Brazil, (C) no such dividends and other
distributions, once made to holders of Common Stock who are
non-domiciliaries of Brazil, will be subject to Brazilian laws and
regulations and (D) all such dividends and other distributions are
otherwise free and clear of any other tax, duty, withholding or
deduc-
<PAGE>
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tion in Brazil without the necessity of obtaining any governmental
authorization in Brazil;
(7) the Common Stock conforms in all material respects to the
description thereof in the Offering Memorandum under the caption
"Description of Company Capital Stock";
(8) no consent, approval, authorization, license,
qualification or order of or filing or registration with, any court
or governmental or regulatory agency or body of the Federative
Republic of Brazil or any political subdivision thereof, including,
without limitation, the Comissao de Valores Mobiliarios, is required
for the execution and delivery by the Company (and the LLC, as
applicable) of the Purchase Agreement, the Equity Registration
Rights Agreement, the Notes Registration Rights Agreement, the
Agency Agreement, the Escrow Agreement, the Unit Agreement, the
Company-LLC Subscription Agreement or the Indenture or for the
issuance, sale and delivery of the Notes pursuant to the Purchase
Agreement, the issuance and delivery of the Exchange Notes or the
Private Exchange Notes, if any, in exchange for the Notes in the
manner contemplated by the Notes Registration Rights Agreement, or
the consummation by the Company (and the LLC, as applicable) of any
of the transactions contemplated in such instruments and agreements,
including, but not limited to, the obligation of the Company to
effect payments of principal of, and premium, interest and
Additional Amounts (as defined in the Indenture) on the Notes, the
Exchange Notes or the Private Exchange Notes, if any, in United
States dollars free of any liability on the part of any holder
thereof, except for (A) the registration of the issue of the Notes,
the Exchange Notes and the Private Exchange Notes, if any, with the
Brazilian Central Bank to allow the remittance of U.S. dollars from
Brazil for payment on each scheduled due date of principal, interest
and Additional Amounts on
<PAGE>
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the Notes, the Exchange Notes and the Private Exchange Notes and
those costs, fees and commissions set forth in the Purchase
Agreement, the Indenture and the Registration Rights Agreement
covered by the Prior Authorization, which will be evidenced by the
Registration Certificate; and (B) the approval of the Brazilian
Central Bank for the Company to make any payment in U.S. dollars not
set forth in the Registration Certificate or to make any payment
provided for therein earlier than its originally scheduled date for
payment (including amounts payable pursuant to acceleration of the
maturity of the Notes, the Exchange Notes or the Private Exchange
Notes, a Tax Redemption (as defined in the Indenture), any optional
redemption by the Company, a redemption upon a Significant Equity
Offering (as defined in the Indenture), a Change of Control (as
defined in the Indenture) or an Asset Sale (as defined in the
Indenture);
(9) the Prior Authorization of the Notes, Exchange Notes and
Private Exchange Notes has been obtained from the Brazilian Central
Bank and is in full force and effect; to the knowledge of such
counsel after due inquiry, there is no reason that the Registration
Certificate should not be expected to be issued by the Central Bank
in due course;
(10) the issuance, sale and delivery of the Notes, the
Exchange Notes and the Private Exchange Notes, if any, the
execution, delivery and performance by the Company of this
Agreement, the Agency Agreement, the Escrow Agreement, the Unit
Agreement, the Company-LLC Subscription Agreement, the Notes
Registration Rights Agreement, the Equity Registration Rights
Agreement and the Indenture, the consummation by the Issuers of the
transactions contemplated hereby, thereby and in the Offering
Memorandum and the compliance by the Issuers with the terms of the
foregoing do not, and, at the Closing Time, will not, conflict with
or constitute or result in a
<PAGE>
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breach or violation by the Issuers of (A) any of the terms or
provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) by
either of the Issuers or give rise to any right to accelerate the
maturity or require the prepayment of any indebtedness under, or
result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of either of the Issuers
under, any obligation, agreement, covenant or condition contained in
any contract, indenture, mortgage, deed of trust, loan agreement,
lease, license, note, franchise agreement, authorization, permit,
certificate or other agreement or instrument to which either of the
Issuers is a party or by which either of the Issuers may be bound or
to which any of their respective assets or properties may be subject
or (B) any law, rule or regulation of the Federative Republic of
Brazil or any political subdivision thereof or any order, decree or
judgment applicable to either of the Issuers, in any such case, of
any court or governmental or regulatory agency or body or
arbitrator;
(11) the Company is not (A) in violation of its Estatutos, (B)
in violation of any law, statute, judgment, decree, order, rule or
regulation of any domestic or foreign court with jurisdiction over
the Company or any of its assets or properties, or other
governmental or regulatory authority, agency or other body, or (C)
to the knowledge of such counsel, in default (or, with notice or
lapse of time or both, would be in default) in the performance or
observance of any obligation, agreement, covenant or condition
contained in any contract, indenture, mortgage, deed of trust, loan
agreement, note, lease, license, franchise agreement, authorization,
permit, certificate or other agreement or instrument to which it is
a party or by which it may be bound, or to which any of its
respective assets or properties is subject other than such defaults
or violations which, individually
<PAGE>
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or in the aggregate, could not reasonably be expected to have or
result in a Material Adverse Effect;
(12) the Company has obtained all consents, approvals, orders,
certificates, licenses, permits, franchises and other authorizations
of and from, and has made all declarations and filings with, all
governmental and regulatory authorities, all self-regulatory
organizations and all courts and other tribunals necessary, in each
case, in the Federative Republic of Brazil or any political
subdivision thereof, to own, lease, license and use its properties
and assets and to conduct its businesses as now conducted and in the
manner described in the Offering Memorandum, except to the extent
that the failure to so obtain or file, individually or in the
aggregate, could not reasonably be expected to have a Material
Adverse Effect;
(13) the Company and each of the Licenseholders comply in all
material respects with the terms and conditions of all decisions,
policies, authorizations and licenses announced, rendered, granted
or regulated, as the case may be, by the Brazilian Ministry of
Communications (the "Ministry"), and the other governmental
authorities having authority over services provided by the Company
with respect to the construction and operation of the businesses of
the Company, including, without limitation, Brazilian Law No. 9,295
and Brazilian Presidential Decrees No. 2,056 and 2,196, Ordinances
No. 257, No. 579 and No. 1,306 of the Ministry and Ordinance No. 232
of the Ministry of Infrastructure and the regulations, orders and
instructions enacted or issued under the authority of such acts.
There exists no reason or cause that could justify the variation,
suspension, cancellation or termination of any such authorizations
or licenses held, controlled or used by the Company with respect to
the construction or operation of its businesses, which variation,
suspension, can-
<PAGE>
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cellation or termination could be reasonably expected to have a
Material Adverse Effect;
(14) the Operating Agreements between the Company and each of
the Licenseholders and the Agreements of Promise of Assignment and
Transfer of Permission between the Company and each of the
Licenseholders do not violate any provision of applicable law or
require the consent or approval of, or any filing with or
notification to, the Ministry or any other competent governmental
authority in the Federative Republic of Brazil, to be effective to
provide the benefits intended to be provided thereunder to the
Company and are legally valid and provide the Company with all
rights purported to be provided thereunder;
(15) no legal, regulatory or governmental proceedings are
pending to which the Company or any of the Licenseholders is a party
or to which the assets of the Company are subject which,
individually or in the aggregate, could reasonably be expected to
have or result in a Material Adverse Effect or which, individually
or in the aggregate, would have a material adverse effect on the
power or ability of the Company to perform its obligations under the
Operative Documents or to consummate the transactions contemplated
thereby or by the Offering Memorandum and, to the knowledge of such
counsel, no such material proceedings have been threatened against
the Company or any of the Licenseholders or with respect to any of
the assets or properties of the Company or any of the
Licenseholders;
(16) the Shareholder Commitments have been duly authorized,
executed and delivered by all requisite corporate or other action on
the part of the shareholders party thereto and the Company and
constitute the valid and binding obligation of each of them,
enforceable against them in accordance with their terms. In giving
such opinion, counsel may rely, to
<PAGE>
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the extent appropriate, on opinions of counsel to the shareholders;
(17) no holder of any securities of the Company is entitled to
(x) have such securities (other than the Notes, the Exchange Notes
and the Private Exchange Notes, if any) registered under any
registration statement contemplated by the Notes Registration Rights
Agreement or (y) have such securities (other than any Registrable
Securities (as defined in the Equity Registration Rights Agreement))
registered under any registration statement contemplated by the
Equity Registration Rights Agreement, except to the extent expressly
set forth in the Offering Memorandum;
(18) all descriptions in the Offering Memorandum of contracts
and other documents to which the Company is a party are accurate in
all material respects, including, but not limited to, the
Shareholders Agreement, the Operating Agreements, the Transfer
Agreements and the Technical Services Agreement (as each such term
is defined in the Offering Memorandum); to the knowledge of such
counsel, there are no material franchises, contracts, indentures,
mortgages, loan agreements, notes, agreements or other documents
that are not described in the Offering Memorandum;
(19) the statements in the Prospectus under the headings
"Enforceability of Civil Liabilities," "Risk Factors -- Factors
Relating to Brazil -- Controls and Restrictions on US Dollar
Remittances," " -- Factors Relating to Brazil -- Enforceability of
Judgments," "-- Risk Factors Relating to the Company and the
Offering --Regulation and Ownership of Licenses;" "Exchange Rate
Data" (last three paragraphs); "Business -- Government Regulation,"
"-- Legal Proceedings;" "Management -- Employment Agreements," "--
Shares of Common Stock Reserved for Management;" "Certain
Transactions;" "Principal Shareholders"; "Description of the Notes
-- Enforceability of Judg-
<PAGE>
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ments," and "-- Certain Bankruptcy Law Considerations" insofar as
such statements constitute a summary of Brazilian statutes, rules,
regulations or of legal matters, provide a fair summary of such
statutes, rules, regulations or legal matters and constitutes all of
the information with respect thereto required to be so disclosed
(upon consultation with United States counsel to the Issuers);
(20) the Company and its obligations under the Operative
Documents are subject to civil and commercial law and to suit in
Brazil and neither the Company nor any of its properties, assets or
revenues has any right of immunity under Brazilian law from any
legal action, suit or proceeding, from the giving of any relief in
any such legal action, suit or proceeding, from setoff or
counterclaim, from the jurisdiction of any Brazilian court, from
service of process, attachment upon or prior to judgment, or
attachment in aid of execution of judgment, or from execution of a
judgment, or other legal process or proceeding for the giving of any
relief or for the enforcement of a judgment, in any such court, with
respect to its obligations, liabilities or any other matter under or
arising out of or in connection with the Operative Documents, and,
to the extent that the Company or any of the Company's properties,
assets or revenues may have or may hereafter become entitled to any
such right of immunity in any such court in which proceedings may at
any time be commenced, the Company has waived or has agreed to waive
such right to the extent permitted by law and has consented to such
relief and enforcement as provided in Section 18 of the Purchase
Agreement and the like provision included in each of the other
Operative Documents;
(21) the Brazilian courts will recognize and give effect to
(a) the choice of the law of the State of New York ("New York law")
as the law governing the Indenture, the Notes, the Exchange Notes,
the Private
<PAGE>
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Exchange Notes, if any, this Agreement, the Escrow Agreement, the
Unit Agreement, the Company-LLC Subscription Agreement, the Equity
Registration Rights Agreement and the Notes Registration Rights
Agreement and (b) the appointment by the Company of CT Corporation
System, 1633 Broadway, New York, New York 10019, as its agent to
receive service of process in the United States of America under the
Indenture, the Notes, the Exchange Notes, the Private Exchange
Notes, if any, this Agreement, the Escrow Agreement, the Unit
Agreement, the Company-LLC Subscription Agreement, the Equity
Registration Rights Agreement and the Notes Registration Rights
Agreement and to the provisions in the Indenture, the Notes, the
Exchange Notes, the Private Exchange Notes, if any, this Agreement,
the Escrow Agreement, the Unit Agreement, the Company-LLC
Subscription Agreement, the Equity Registration Rights Agreement and
the Notes Registration Rights Agreement whereby the Company submits
to the non-exclusive jurisdiction of any Federal or state court
located in the Borough of Manhattan in The City of New York (a "New
York Court"); and the Company has the power to submit and has taken
all necessary corporate action to submit to the non-exclusive
jurisdiction of a New York Court;
(22) the Brazilian courts will recognize a final and
conclusive judgment against the Company for a definite amount by a
New York Court in an action arising out of or in connection with any
of the Operative Documents without reconsideration of the merits
upon ratification of such judgment by the Brazilian Supreme Court;
and ratification of such a judgment will occur if such a judgment
(a) fulfills all formalities required for its enforceability under
the laws of the jurisdiction under which it was granted, (b) is
issued following personal service of process on the Company or on a
properly appointed agent for service of process, (c) is issued by a
competent court after proper service of process, (d) is not
<PAGE>
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subject to appeal, (e) is authenticated by a Brazilian consular
office in the country where the foreign judgment is issued and is
accompanied by a sworn translation into Portuguese and (f) is not
contrary to Brazilian law, national sovereignty or public policy or
"good morals" (as set forth in Brazilian law) and does not contain
any provision which is or would for any reason not be upheld by the
courts of Brazil;
(23) no provision of any of the Operative Documents is
contrary to Brazilian law, national sovereignty or public policy or
"good morals" (as set forth in Brazilian law) and none of the
Operative Documents contains any provision which is or would for any
reason not be upheld by the courts of Brazil;
(24) a holder of Notes, Exchange Notes or Private Exchange
Notes, the Trustee under the Indenture, the Escrow Agent under the
Escrow Agreement, the Unit Agent under the Unit Agreement, the
Initial Purchasers under the Purchase Agreement, the Notes
Registration Rights Agreement and the Equity Registration Rights
Agreement and Holding LLC under the Company-LLC Subscription
Agreement are each entitled to sue as plaintiff in a Brazilian court
for the enforcement of their respective rights under such
instruments and agreements against the Company and such access to
Brazilian courts will not be subject to any conditions which are not
applicable to residents of Brazil or a company incorporated in
Brazil, other than the requirement to post a bond of guarantee with
respect to court costs and legal fees if any such party does not own
real property in Brazil;
(25) payments of interest, principal and premium in respect of
the Notes, Exchange Notes or Private Exchange Notes are not
currently subject under the laws of Brazil or any political
subdivision thereof to any withholding or similar charges or
deductions;
<PAGE>
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(26) the statements in the Offering Memorandum under the
caption "Tax Considerations -- Brazil" completely and accurately
summarize the material Brazilian tax consequences of, and the
Brazilian Federal Reserve Department practice relating to,
acquiring, owning and disposing of any of the Notes, the Exchange
Notes, the Private Exchange Notes, the Holding Shares or the Common
Stock;
(27) none of (a) the Operative Documents, (b) the issuance,
sale and delivery of the Securities to the Initial Purchasers upon
payment therefor as contemplated in this Agreement, (c) the issuance
of the Exchange Notes and any Private Exchange Notes, (d) the
issuance of the Common Stock to the LLC pursuant to the Company-LLC
Subscription Agreement or (e) the distribution of the Common Stock
of the Company to holders of the Holding Shares upon a Liquidation
Event (as defined in the LLC Agreement), in each case as
contemplated in this Agreement, the Notes Registration Rights
Agreement, the Equity Registration Rights Agreement and the LLC
Agreement, are subject to any registration tax, stamp duty or
similar tax, duty, impost or levy imposed by the Federative Republic
of Brazil or any political subdivision thereof;
In addition such counsel shall state that such counsel has
participated in conferences with representatives of the Initial
Purchasers, officers and other representatives of the Issuers,
representatives of the independent certified accountants of the Issuers
and United States counsel to the Issuers, at which conferences the
contents of the Offering Memorandum and related matters were discussed,
and although such counsel has not verified and does not pass upon or
assume any responsibility for the accuracy, completeness or fairness of
the statements contained in the Offering Memorandum (except and only to
the extent set forth in subsections (7), (19) and (26) above), on the
basis of the foregoing (relying as to materiality
<PAGE>
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to the extent such counsel deems appropriate upon opinions of officers and
other representatives of the Issuers), no facts have come to the attention
of such counsel which lead such counsel to believe that the Offering
Memorandum at the date thereof or as of the Closing Time, contained or
contains an untrue statement of a material fact or omitted or omits to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading; (it
being understood that such counsel has not been requested to and does not
make any comment with respect to (i) the financial statements, and the
notes thereto and related schedules, (ii) other financial or statistical
data found in or derivable from the financial, accounting or internal
records of the Issuers and (iii) any forward-looking or projected
financial or statistical data relating to the Issuers, in each case,
included in the Offering Memorandum).
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of the Federal laws of the United States or the
laws of the State of New York, upon the opinion of Willkie Farr &
Gallagher, United States counsel to the Issuers (which opinion shall be
addressed to the Initial Purchasers and shall be dated and furnished to
the Initial Purchasers at the Closing Time and shall be satisfactory in
form and substance to counsel for the Initial Purchasers) and (B) as to
matters of fact (but not as to legal conclusions), to the extent they deem
proper, on certificates of responsible officers of the Issuers and public
officials. Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written
policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business Law
(1991).
References to the Offering Memorandum in this subsection (b) include
any supplement thereto prior to the Closing Time.
<PAGE>
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(c) At the Closing Time, the Initial Purchasers shall have received
the opinion of Morris, Nichols, Asht & Tunnell, special Delaware counsel
to the LLC, dated as of the Closing Time, in form and substance
satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers to the effect
(1) The LLC is duly organized and validly existing as a
limited liability company in good standing under the laws of the
State of Delaware. The LLC has the requisite limited liability
company power and authority to (x) enter into and perform its
obligations under the Purchase Agreement, the Unit Agreement, the
Company-LLC Subscription Agreement and the Equity Registration
Rights Agreement and to issue and deliver the Holding Shares
pursuant to the Purchase Agreement and (y) own its properties and
conduct its business as described in the Offering Memorandum.
(2) All necessary action on the part of the members of the LLC
has been taken to form the LLC under Delaware law and to provide for
its governance as set forth in the LLC Agreement and the LLC
Agreement is valid and in full force and effect in the form attached
to the Purchase Agreement as Exhibit D.
(3) As of the Closing Time, there are 814,955 Class A Holding
Shares and 125,000 Class B Holding Shares authorized, issued and
outstanding, all of which have been duly authorized, validly issued
and are fully paid and non-assessable. No personal liability
attaches to the holders of the Class A Shares or the Class B Shares
by virtue of their ownership thereof. The Class A Shares and the
Class B Shares have not been issued in violation of any preemptive
or similar right arising under the LLC Agreement or Delaware law.
The Holding Shares have the designations, powers, preferences,
rights, qualification, limitations and restrictions set forth in the
LLC Agreement.
<PAGE>
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(4) The Holding Shares to be purchased by the Initial
Purchasers from the LLC have been duly authorized for issuance and
sale to the Initial Purchasers pursuant to the Purchase Agreement,
and when issued and delivered by the LLC pursuant to the Purchase
Agreement, will be validly issued, fully paid and non-assessable and
no holder of the Holding Shares is or will be subject to personal
liability by reason of being such a Holder.
(5) All action on the part of LLC and its members necessary
for the authorization, execution, delivery and performance of the
Purchase Agreement, the Unit Agreement, the Company-LLC Subscription
Agreement and the Equity Registration Rights Agreement and each of
such agreements has been executed and delivered and is a valid and
legally binding obligation of the LLC (assuming due authorization,
execution and delivery by each of the other parties thereto).
(6) The statements in the Offering Memorandum under the
heading "Description of the Class B Holding Shares," insofar as such
statements purport to summarize certain provisions of the Class B
Holding Shares, the Class A Holding Shares and the LLC Agreement,
provide a fair summary of such provisions of such instruments and
agreement.
(7) All consents, approvals, orders or authorizations of, or
registrations or qualifications, designations, declarations or
filings with any authority in the State of Delaware on the part of
the LLC or its members required in connection with the consummation
of the transactions contemplated by the Operative Documents have
been made or obtained by the LLC or its members and are in full
force and effect.
(8) Under Delaware law as currently in effect, holders of
Holding Shares are not and will not be required to pay any tax,
levy, impost or fee to, or register or file any document with, any
governmental
<PAGE>
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or administrative body in the State of Delaware, with respect to
their ownership of member interests in the LLC.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of the Federal laws of the United States or the
laws of the State of New York, upon the opinion of Willkie Farr &
Gallagher, United States counsel to the Issuers, and as to matters
involving the application of the laws of the Federative Republic of
Brazil, upon the opinion of Xavier, Bernardes, Braganca, Brazilian counsel
to the Issuers (which opinions shall be addressed to the Initial
Purchasers and shall be dated and furnished to the Initial Purchasers at
the Closing Time and shall be satisfactory in form and substance to
counsel for the Initial Purchasers) and (B) as to matters of fact (but not
as to legal conclusions), to the extent they deem proper, on certificates
of responsible officers of the Issuers and public officials. Such opinion
shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document
relating to legal opinions, including, without limitation, the Legal
Opinion Accord of the ABA Section of Business Law (1991).
References to the Offering Memorandum in this subsection (c) include
any supplement thereto prior to the Closing Time.
(d) The Initial Purchasers shall have received the favorable
opinion, dated as of the Closing Time, of Cahill Gordon & Reindel, counsel
for the Initial Purchasers, with respect to certain matters set forth in
subsection (a) of this Section 7.
In rendering such opinions, such counsel (A) need not express any
opinion with regard to the application of laws of any jurisdiction other
than the Federal laws of the United States and the laws of the State of
New York and (B) may rely, as to matters of fact, to the extent they deem
proper on representations or certificates of respon-
<PAGE>
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sible officers of the Issuers and certificates of public officials.
In giving its opinion required by this subsection (d) of this
Section 7, such counsel shall additionally state that such counsel has
participated in conferences with officers and other representatives of the
Issuers, representatives of the independent accountants for the Issuers,
United States and Brazilian counsel to the Issuers, representatives of the
Initial Purchasers and Brazilian counsel to the Initial Purchasers at
which conferences the contents of the Offering Memorandum and related
matters were discussed, and although such counsel has not verified and
does not pass upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Offering Memorandum, on the basis of the foregoing (relying as to
materiality to the extent such counsel deems appropriate upon opinions of
officers and other representatives of the Issuers), no facts have come to
the attention of such counsel which lead such counsel to believe that the
Offering Memorandum, at the date thereof or as of the Closing Time,
contained or contains an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading (it
being understood that such counsel has not been requested to and does not
make any comment with respect to (i) the financial statements, and the
notes thereto and related schedules, (ii) other financial or statistical
data found in or derivable from the financial, accounting or internal
records of the Issuers and (iii) any forward-looking or projected
financial or statistical data relating to the Issuers, in each case,
included in the Offering Memorandum).
(e) The Initial Purchasers shall have received the favorable
opinion, dated as of the Closing Time, of Pinheiro Neto --Advogados,
counsel for the Initial Purchasers, with respect to each of the matters
set forth in subsection (b) of this Section 7.
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In rendering such opinions, such counsel (A) need not express any
opinion with regard to the application of laws of any jurisdiction other
than the laws of the Federative Republic of Brazil and of the political
subdivisions thereof and (B) may rely, as to matters of fact, to the
extent they deem proper on representations or certificates of responsible
officers of the Issuers and certificates of public officials.
In giving its opinion required by this subsection (e) of this
Section 7, such counsel shall additionally state that such counsel has
participated in conferences with officers and other representatives of the
Issuers, representatives of the independent accountants for the Issuers,
United States and Brazilian counsel to the Issuers, representatives of the
Initial Purchasers and United States counsel to the Initial Purchasers at
which conferences the contents of the Offering Memorandum and related
matters were discussed, and although such counsel has not verified and
does not pass upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Offering Memorandum (except and only to the extent set forth in clause
(7), (19), and (26) of subsection (b) of this Section 7), on the basis of
the foregoing (relying as to materiality to a large extent upon the
representations and opinions of officers and other representatives of the
Issuers), no facts have come to the attention of such counsel which lead
such counsel to believe that the Offering Memorandum, at the date thereof,
contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading (it being
understood that such counsel has not been requested to and does not make
any comment with respect to (i) the financial statements, and the notes
thereto and related schedules, (ii) other financial or statistical data
found in or derivable from the financial, accounting or internal records
of the Issuers and (iii) any forward-looking or projected
<PAGE>
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financial or statistical data relating to the Issuers, in each case,
included in the Offering Memorandum).
(f) The following conditions contained in clauses (i) and (ii) of
this subsection (f) shall have been satisfied at and as of the Closing
Time and (x) the Company shall have furnished to the Initial Purchasers a
certificate, signed by the President and the principal financial or
accounting officer of the Company and (y) the LLC shall have furnished to
the Initial Purchasers a certificate, signed by two Members of the
Management Committee (at least one of whom shall also be a Manager of the
LLC); each such certificate shall be dated as of the Closing Time and
shall be to the effect that the signers of such certificate have examined
the Offering Memorandum, any amendment or supplement to the Offering
Memorandum, and this Agreement and that:
(i) the representations and warranties of the Issuers in this
Agreement are true and correct in all material respects on and as of
the Closing Time with the same effect as if made at the Closing Time
and the Issuers have complied with all the agreements and satisfied
all the conditions under this Agreement on their part to be
performed or satisfied at or prior to the Closing Time; and
(ii) since the date of the most recent financial statements
included in the Offering Memorandum (exclusive of any amendment or
supplement thereto), there has been no Material Adverse Change,
whether or not arising in the ordinary course of business. As used
in this subparagraph, the term "Offering Memorandum" means the
Offering Memorandum in the form first used to confirm sales of the
Securities.
(g) At the time that this Agreement is signed and at the Closing
Time, Ernst & Young Auditores Independentes S.C. shall have furnished to
the Initial Purchasers a letter or letters, dated respectively as of the
date of this Agreement and as of the Closing Time, in form and sub-
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stance satisfactory to the Initial Purchasers, confirming that they are
independent certified public accountants within the meaning of the Act and
the applicable published rules and regulations thereunder and containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to initial purchasers and underwriters with respect to
financial statements and certain financial information contained in the
Offering Memorandum.
(h) Subsequent to the date hereof or, if earlier, the dates as of
which information is given in the Offering Memorandum (exclusive of any
amendment or supplement thereto), there shall not have been any change, or
any development involving a prospective change, in or affecting the
business or properties of the Issuers the effect of which is, in the
reasonable judgment of Merrill Lynch, so material and adverse as to make
it impractical or inadvisable to proceed with the purchase and the
delivery of the Securities as contemplated by the Offering Memorandum
(exclusive of any amendment or supplement thereto).
(i) All government authorizations required in connection with the
issue and sale of the Securities as contemplated under this Agreement and
the performance of the Issuers' respective obligations hereunder and under
Indenture, the Agency Agreement, the Company-LLC Subscription Agreement,
the Units, the Notes, the Exchange Notes, the Private Exchange Notes, the
Holding Shares and the Common Stock delivered to the LLC pursuant to the
Subscription Agreement shall be in full force and effect and the Issuers
shall deliver copies of such authorizations (including but not limited to
the Prior Authorization of the Brazilian Central Bank) to the Initial
Purchasers and there shall have been no indication from the Brazilian
Central Bank that the Registration Certificate will not be forthcoming.
(j) At the Closing Time, counsel for the Initial Purchasers shall
have been furnished with such information, certificates and documents
(including an executed
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copy of the Prior Authorization of the Brazilian Central Bank) as they may
reasonably require for the purpose of enabling them to pass upon the
issuance and sale of the Securities as contemplated herein and related
proceedings, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the
conditions, herein contained; and all opinions and certificates mentioned
above or elsewhere in this Agreement shall be reasonably satisfactory in
form and substance to the Initial Purchasers and counsel for the Initial
Purchasers.
(k) The Issuers and the Trustee shall have entered into the
Indenture.
(l) The Company shall have taken any and all actions reasonably
required to establish the Escrow Account with the Escrow Agent and to
prepare to file appropriate financing statements in each of the offices
where such filing is necessary or, in the opinion of the Initial
Purchasers, desirable to perfect the lien in favor of the Trustee created
by the Escrow Agreement.
(m) The Issuers and the Initial Purchasers shall have entered into
the Notes Registration Rights Agreement.
(n) The Issuers, the Shareholders, the Holding Share Transfer Agent
and the Initial Purchasers shall have executed the Equity Registration
Rights Agreement.
(o) The Common Stock to be delivered to the LLC by the Company
pursuant to the Company-LLC Subscription Agreement shall have been
delivered to the LLC and all other obligations required to be performed
pursuant to such agreement shall have been fully performed.
(p) The Issuers, the Unit Agent and the Initial Purchasers shall
have entered into the Unit Agreement.
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(q) The Issuers shall have executed the Agency Agreement and CT
Corporation System shall have accepted its appointment thereunder.
(r) The Shareholder Commitments shall have been executed and
delivered and shall be in full force and effect.
If any condition specified in this Section 7 shall not have been
fulfilled in all material respects when and as required to be fulfilled, this
Agreement may be terminated by the Initial Purchasers by notice to the Issuers,
and such termination shall be without liability of any party to any other party
except as provided in Section 6. Notwithstanding any such termination, the
provisions of Sections 1, 8, 18 and 19 shall remain in effect. Notice of such
cancellation shall be given to the Issuers in writing or by telephone, facsimile
transmission or telegraph confirmed in writing. The Issuers shall furnish to the
Initial Purchasers such conformed copies of such opinions, certificates, letters
and documents in such quantities as the Initial Purchasers and counsel for the
Initial Purchasers shall reasonably request.
SECTION 8. Indemnification.
(a) Indemnification of Initial Purchasers. Each of the Issuers
agrees, jointly and severally, to indemnify and hold harmless each Initial
Purchaser and each person, if any, who controls any Initial Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Offering
Memorandum or the Final Offering Memorandum (or any amendment or
supplement thereto), or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
<PAGE>
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(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission; provided that (subject to Section
8(d) below) any such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the reasonable fees and disbursements of counsel chosen by Merrill Lynch),
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency
or body, commenced or threatened, or any claim whatsoever based upon any
such untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (i) or
(ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Initial Purchaser through Merrill Lynch expressly for use in the Offering
Memorandum (or any amendment thereto).
(b) Indemnification of Issuers, Directors and Officers. Each Initial
Purchaser severally agrees to indemnify and hold harmless the Issuers, its
directors and each person, if
<PAGE>
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any, who controls any of the Issuers within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act against any and all loss, liability, claim,
damage and expense described in the indemnity contained in subsection (a) of
this Section 8, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions made in the Offering
Memorandum in reliance upon and in conformity with written information furnished
to the Issuers by such Initial Purchaser through Merrill Lynch expressly for use
in the Offering Memorandum.
(c) Actions against Parties; Notification. Each indemnified party
shall give notice as promptly as reasonably practicable to each indemnifying
party of any action commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify an indemnifying party shall not
relieve such indemnifying party from any liability hereunder to the extent it is
not materially prejudiced as a result thereof and in any event shall not relieve
it from any liability which it may have otherwise than on account of this
indemnity agreement. In the case of parties indemnified pursuant to Section 8(a)
above, counsel to the indemnified parties shall be selected by Merrill Lynch,
and, in the case of parties indemnified pursuant to Section 8(b) above, counsel
to the indemnified parties shall be selected by the Issuers. Notwithstanding the
foregoing sentence, in case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent it
may wish, jointly with any other indemnifying party similarly notified, unless
such indemnified party shall have one or more legal defenses available to it
which are not available to the indemnifying party, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party. After
notice from the indemnifying party to such indemnified party of its election as
aforesaid to assume the defense thereof and approval by such indemnified party
of counsel appointed to defend such action, the indemnifying party will not be
liable to such indemnified party under this Section 8 for any legal or other
expenses other than reasonable costs of investigation, subsequently incurred by
such indemnified party in connection with the defense thereof. An indemnifying
party may participate at its own expense in the
<PAGE>
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defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising
<PAGE>
-71-
out of the same general allegations or circumstances. No indemnifying party
shall, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 8 or Section
9 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement Without Consent if Failure To Reimburse. If at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement of the
nature contemplated by Section 8(a)(ii) effected without its written consent if
(i) such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
SECTION 9. Contribution. If the indemnification provided for in
Section 8 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims, damages
and expenses incurred by such indemnified party, as incurred, (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Issuers on the
<PAGE>
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one hand and the Initial Purchasers on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Issuers on the one hand and of the
Initial Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Issuers on the one hand and
the Initial Purchasers on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the Initial
Purchasers, bear to the aggregate initial offering price of the Securities.
The relative fault of the Issuers on the one hand and the Initial
Purchasers on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Issuers or by the Initial Purchasers and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
The Issuers and the Initial Purchasers agree that it would not be
just and equitable if contribution pursuant to this Section 9 were determined by
pro rata allocation (even if the Initial Purchasers were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 9. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 9 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending
<PAGE>
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against any litigation, or any investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 9, no Initial
Purchaser shall be required to contribute any amount in excess of the amount by
which the total price at which the Securities underwritten by it and distributed
to the public were offered to the public exceeds the amount of any damages which
such Initial Purchaser has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 9, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the Act or Section 20 of
the Exchange Act shall have the same rights to contribution as such Initial
Purchaser, and each director of any of the Issuers, each officer, director or
member of any of the Issuers and each person, if any, who controls any of the
Issuers within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act shall have the same rights to contribution as the Company. The
Initial Purchasers' respective obligations to contribute pursuant to this
Section 9 are several in proportion to the number of Securities set forth
opposite their respective names in Schedule A hereto and not joint.
SECTION 10. Representations, Warranties and Agreements To Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Issuers submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any Initial Purchaser or controlling
person, or by or on behalf of the Issuers, and
<PAGE>
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shall survive delivery of the Securities to the Initial Purchasers.
SECTION 11. Termination of Agreement.
(a) Termination: General. The Initial Purchasers may terminate this
Agreement, by notice to any of the Issuers, at any time at or prior to the
Closing Time (i) if there has been, since the time of execution of this
Agreement or since the respective dates as of which information is given in the
Offering Memorandum, any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects of the
Issuers considered as one enterprise, whether or not arising in the ordinary
course of business, or (ii) if there has occurred any material adverse change in
the financial markets in the United States, Brazil, Latin America generally or
in the international financial markets, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the reasonable judgment of the Initial Purchasers, impracticable to market
the Securities or to enforce contracts for the sale of the Securities, or (iii)
if trading generally on the American Stock Exchange, the New York Stock
Exchange, the Sao Paulo Stock Exchange or the Rio de Janeiro Stock Exchange, in
the NASDAQ National Market System or in the PORTAL market has been suspended or
limited, or minimum or maximum prices for trading have been fixed, or maximum
ranges for prices have been required, by any of said exchanges or by such system
or by order of the Comissao de Valores Mobiliarios, the Commission, the National
Association of Securities Dealers, Inc. or any governmental authority, or (iv)
if a banking moratorium has been declared by either United States Federal or New
York authorities or by the Brazilian Central Bank or any other competent
governmental authority in the Federative Republic of Brazil or any political
subdivision thereof.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without li-
<PAGE>
-75-
ability of any party to any other party except as provided in Section 6 hereof,
and provided further that Sections 1, 8, 9, 18 and 19 shall survive such
termination and remain in full force and effect.
SECTION 12. Default By One of the Initial Purchasers. If one or more
of the Initial Purchasers shall fail at the Closing Time to purchase the
Securities which it or they are obligated to purchase under this Agreement (the
"Defaulted Securities"), Merrill Lynch shall have the right, but not the
obligation, within 24 hours thereafter, to make arrangements for one or more of
the nondefaulting Initial Purchasers, or any other Initial Purchasers, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, Merrill
Lynch shall not have completed such arrangements within such 24-hour period,
then this Agreement shall terminate without liability on the part of any
nondefaulting Initial Purchaser.
No action pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement, either the non-defaulting Initial Purchaser or
the Issuers shall have the right to postpone the Closing Time for a period not
exceeding seven days in order to effect any required changes in the Offering
Memorandum or in any other documents or arrangement.
SECTION 13. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed (and
in the case of Section 18, certified, return receipt requested) or (other than
in the case of Section 18) transmitted by any standard form of
telecommunication. Notices to the Initial Purchasers shall be directed to the
Initial Purchasers c/o Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Merrill Lynch World Headquarters, North Tower, World
Financial Center, New York, New York 10281-1305, attention of Christopher A.
Johnson, Managing
<PAGE>
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Director; and notices to the Company shall be directed to the Company's offices
at Rua Alexandre Dumas, 1.711-1 andar, 04717-910-Birmann 12-Chacara Santo
Antonio, Sao Paolo, Attention: Thomas C. Trynin, President; and notices to the
LLC shall be directed to the LLC's offices c/o Warburg, Pincus Ventures L.P.,
466 Lexington Avenue, New York, New York 10017, Attention: Douglas M. Karp.
SECTION 14. Information Supplied by the Initial Purchasers. The
statement set forth in the last paragraph on the inside front cover page in the
Offering Memorandum (to the extent such statement relates to the Initial
Purchasers) and the information specifically relating to the Initial Purchasers
under the caption "Plan of Distribution" in the Offering Memorandum constitute
the only information furnished by the Initial Purchasers to the Company for the
purposes of Sections 1, 8 and 9 hereof.
SECTION 15. Parties. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchasers and the Issuers and their respective
successors and legal representatives. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Initial Purchasers and the Issuers and their
respective successors and legal representatives and the controlling persons and
officers, directors, employees and agents referred to in Sections 8, 9 and 19
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under, by virtue of or in respect of this Agreement or any provision
herein contained. This Agreement and all conditions and provisions hereof are
intended to be for the sole and exclusive benefit of the Initial Purchasers and
the Issuers and their respective successors and legal representatives, and said
controlling persons and officers, directors, employees and agents and their
heirs and legal representatives, and for the benefit of no other person, firm or
corporation. No purchaser of Securities from any Initial Purchaser shall be
deemed to be a successor by reason merely of such purchase.
SECTION 16. Governing Law and Time. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
<PAGE>
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OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO
CONFLICTS OF LAWS. Specified times of day refer to New York City time.
SECTION 17. Counterparts. This Agreement may be executed by manual
or facsimile signature in one or more counterparts and, when each party has
executed a counterpart, all such counterparts taken together shall constitute
one and the same agreement.
SECTION 18. Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. By the execution and delivery of this Agreement, the Company (i)
acknowledges that it has, by separate written instrument, designated and
appointed CT Corporation System, 1633 Broadway, New York, NY 10019 ("CT
Corporation System") (and any successor entity), as its authorized agent upon
which process may be served in any suit or proceeding arising out of or relating
to this Agreement that may be instituted in any federal or state court in The
City of New York, Borough of Manhattan, State of New York or brought under
federal or state securities laws, and acknowledge that CT Corporation System has
accepted such designation, (ii) submits to the jurisdiction of any such court in
any such suit or proceeding and (iii) agrees that service of process upon CT
Corporation System and written notice of said service to the Company in
accordance with Section 13 shall be deemed in every respect effective service of
process upon the Company, in any such suit or proceeding. The Company further
agrees to take any and all action, including the execution and filing of any and
all such documents and instruments, as may be necessary to continue such
designation and appointment of CT Corporation System in full force and effect so
long as any of the Units, the Notes, the Exchange Notes or the Private Exchange
Notes shall be outstanding; provided that the Company may and to the extent CT
Corporation System ceases to be able to be served on the basis contemplated
herein shall, by written notice to the Initial Purchasers, designate such
additional or alternative agent for service of process under this Section 18
that (i) maintains an office located in the Borough of Manhattan, City of New
York, State of New York and (ii) is either (x) counsel for the Com-
<PAGE>
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pany or (y) a corporate service company which acts as agent for service of
process for other persons in the ordinary course of its business. Such written
notice shall identify the name of such agent for service of process and the
address of the office of such agent for service of process in the Borough of
Manhattan, City of New York, State of New York.
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court of (i) any jurisdiction in which the
Company owns or leases property or assets, (ii) the United States or the State
of New York or (iii) the Federative Republic of Brazil or any political
subdivision thereof or from any legal process (whether through service of
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property and assets or this
Agreement or any of the Units, the Notes, Exchange Notes or Private Exchange
Notes or actions to enforce judgments in respect of any thereof, the Company
hereby irrevocably waives such immunity in respect of its obligations under the
above-referenced documents, to the extent permitted by law.
SECTION 19. Judgment Currency. Each of the Issuers hereby jointly
and severally agrees to indemnify each Purchaser and each Person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act and each of their respective officers, directors,
employees and agents against any loss incurred by such party as a result of any
judgment or order being given or made for any U.S. dollar amount due under this
Agreement and such judgment or order being expressed and paid in a currency (the
"Judgment Currency") other than United States dollars and as a result of any
variation as between (i) the rate of exchange at which the United States dollar
amount is converted into the Judgment Currency for the purpose of such judgment
or order and (ii) the spot rate of exchange in The City of New York at which
such party on the date of payment of such judgment or order is able to purchase
United States dollars with the amount of the Judgment Currency actually received
by such party. The foregoing indemnity shall continue in full force and effect
notwith-
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standing any such judgment or order as aforesaid. The term "spot rate of
exchange" shall include any premiums and costs of exchange payable in connection
with the purchase of, or conversion into, United States dollars.
SECTION 20. Prior Agreements Superseded. This Agreement supersedes
all prior agreements, undertakings and arrangements, oral or written, among the
parties hereto with respect to the subject matter hereof.
<PAGE>
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If the foregoing is in accordance with your understanding of our
agreement, please sign and return to each of the Issuers a counterpart hereof,
whereupon this instrument, along with all counterparts, will become a binding
agreement between the Initial Purchasers and the Issuers in accordance with its
terms.
Very truly yours,
PAGING NETWORK DO BRASIL S.A.
By: /s/ Thomas C. Trynin
------------------------------
Name: Thomas C. Trynin
Title: President
PAGING BRAZIL HOLDING CO., LLC
By: /s/ David E. Libowitz
-----------------------------
Name: David E. Libowitz
Title: Manager
<PAGE>
Confirmed and accepted as of
the date first above
written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
By: Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/ Chantal D. Simon
---------------------------
Name: Chantal D. Simon
Title: Authorized Signatory
<PAGE>
SCHEDULE A
Number of
Units
---------
Name of Initial Purchaser
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................ 75,000
Goldman, Sachs & Co............................................. 25,000
Bear, Stearns & Co. Inc......................................... 25,000
Total ........................................... 125,000
-------
<PAGE>
SCHEDULE B
Equity Capitalization of Paging Brazil Holding Co., LLC
Number Outstanding
Prior to After
Offering Offering(1)
-------- --------
Class A Member Interests None 814,955
Class B Member Interests None 125,000
- ----------
1 Immediately following the Offering, all of the outstanding Class A Member
Interests are held beneficially and of record by Warburg, Pincus Ventures,
L.P. and all of the Class B Member Interests are held beneficially and of
record by the holders of Units issued and delivered pursuant to this
Agreement.
<PAGE>
EXHIBIT A
[Notes Registration Rights Agreement]
<PAGE>
EXHIBIT B
[Equity Registration Rights Agreement]
<PAGE>
EXHIBIT C
[LLC Agreement]
<PAGE>
================================================================================
NOTES REGISTRATION RIGHTS AGREEMENT
Dated June 6, 1997
by and among
PAGING NETWORK DO BRASIL S.A.
and
MERRILL LYNCH & CO.,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
GOLDMAN, SACHS & CO.
and
BEAR, STEARNS & CO. INC.,
as Initial Purchasers
============================================================================
<PAGE>
NOTES REGISTRATION RIGHTS AGREEMENT
THIS NOTES REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into June 6, 1997 by and among PAGING NETWORK DO BRASIL S.A., a
corporation organized under the laws of the Federative Republic of Brazil (the
"Company"), MERRILL LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED ("Merrill Lynch"), GOLDMAN, SACHS & CO. ("Goldman") and BEAR,
STEARNS & CO., INC. ("Bear Stearns" and, together with Merrill Lynch and
Goldman, the "Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated May
30, 1997 by and among the Company, PAGING BRAZIL HOLDING CO., LLC ("Holding
LLC") and the Purchasers (the "Purchase Agreement"), which provides for the sale
by the Company and Holding LLC to the Purchasers of 125,000 Units consisting of
an aggregate of U.S.$125,000,000 principal amount of the Company's 13 1/2%
Senior Notes due 2005 (the "Notes") and 125,000 Class B Holding Shares of
Holding LLC. The Notes are to be issued under an indenture (the "Indenture")
dated as of June 1, 1997 between the Company and The Chase Manhattan Bank, as
Trustee. In order to induce the Purchasers to enter into the Purchase Agreement,
the Company has agreed to provide to the Purchasers and their direct and
indirect transferees the registration rights set forth in this Agreement with
respect to the Notes. The execution of this Agreement is a condition to the
closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows (terms not otherwise defined herein have the meaning assigned to them in
that certain Offering Memorandum dated May 30, 1997):
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"Additional Interest" shall have the meaning set forth in Section
2(e) hereof.
<PAGE>
-2-
"Advice" shall have the meaning set forth in the last paragraph of
Section 3 hereof.
"Applicable Period" shall have the meaning set forth in Section 3(t)
hereof.
"Closing Time" shall mean the Closing Time as defined in the
Purchase Agreement.
"Company" shall have the meaning set forth in the preamble to this
Agreement and also includes the Company's successors.
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Company; provided that such depositary must
have an office in the Borough of Manhattan, the City of New York.
"Effectiveness Period" shall have the meaning set forth in Section
2(b) hereof.
"Event Date" shall have the meaning set forth in Section 2(e)
hereof.
"Exchange Notes" shall mean the 13 1/2% Senior Notes due 2005,
Series B issued by the Company under the Indenture containing terms
identical to the Notes (except that (i) interest thereon shall accrue from
the last date on which interest was paid on the Notes or, if no such
interest has been paid, from June 6, 1997 and (ii) the transfer
restrictions thereon shall be eliminated) to be offered to Holders of
Notes in exchange for Notes pursuant to the Exchange Offer.
"Exchange Offer" shall mean the exchange offer by the Company of
Exchange Notes for Notes pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
1933 Act effected pursuant to Section 2(a) hereof.
<PAGE>
-3-
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form F-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Exchange Period" shall have the meaning set forth in Section 2(a)
hereof.
"Guarantees" shall have the meaning provided in the Indenture.
"Guarantors" shall have the meaning provided in the Indenture.
"Holder" shall mean the Purchasers, for so long as they own any
Registrable Notes, and each of their successors, assignees and direct and
indirect transferees who become registered owners of Registrable Notes
under the Indenture.
"the Holders of a majority of the Notes" shall mean the Holders of a
majority of the aggregate principal amount of outstanding (as determined
under the Indenture) Registrable Notes.
"Indenture" shall mean the Indenture specified in the preamble
hereto, as the same may be amended from time to time in accordance with
the terms thereof.
"Inspectors" shall have the meaning set forth in Section 3(n)
hereof.
"Issuers" shall mean the Company and each Guarantor.
"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
<PAGE>
-4-
"Notes" shall have the meaning set forth in the preamble to this
Agreement.
"Notes Registration Statement" shall mean any registration statement
of the Issuers which covers any of the Exchange Securities or Registrable
Notes pursuant to the provisions of this Agreement, and all amendments and
supplements to any such Notes Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Notes Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Notes Shelf Registration Statement" shall mean a "shelf"
registration statement of the Issuers pursuant to the provisions of
Section 2(b) of this Agreement which covers all of the Registrable Notes
or all of the Private Exchange Notes, as the case may be, on an
appropriate form under Rule 415 under the 1933 Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Participating Broker-Dealer" shall have the meaning set forth in
Section 3(t) hereof.
"Person" shall mean an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"Private Exchange" shall have the meaning set forth in Section 2(a)
hereof.
"Private Exchange Notes" shall have the meaning set forth in Section
2(a) hereof.
<PAGE>
-5-
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus
as amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Notes covered by a Notes Shelf Registration
Statement, and by all other amendments and supplements to a prospectus,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble to this Agreement.
"Purchasers" shall have the meaning set forth in the preamble to
this Agreement.
"Records" shall have the meaning set forth in Section 3(n) hereof.
"Registrable Notes" shall mean the Notes and, if issued, the Private
Exchange Notes; provided that Notes or Private Exchange Notes, as the case
may be, shall cease to be Registrable Notes when (i) a Notes Registration
Statement with respect to such Notes or Private Exchange Notes or the
resale thereof, as the case may be, shall have been declared effective
under the 1933 Act and such Notes or Private Exchange Notes, as the case
may be, shall have been disposed of pursuant to such Notes Registration
Statement, (ii) such Notes or Private Exchange Notes, as the case may be,
shall have been sold to the public pursuant to Rule 144(k) (or any similar
provision then in force, but not Rule 144A) under the 1933 Act, (iii) such
Notes or Private Exchange Notes, as the case may be, shall have ceased to
be outstanding or (iv) with respect to the Notes, such Notes have been
exchanged for Exchange Notes upon consummation of the Exchange Offer.
"Registration Default" has the meaning set forth in Section 2(e)
hereof.
<PAGE>
-6-
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Issuers with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. (the "NASD") registration and filing fees, (ii)
all fees and expenses incurred in connection with compliance with state
securities or blue sky laws (including reasonable fees and disbursements
of counsel for any underwriters or Holders in connection with blue sky
qualification of any of the Exchange Notes or Registrable Notes) and
compliance with the rules of the NASD, (iii) all expenses of any Person in
preparing or assisting in preparing, word processing, printing and
distributing any Notes Registration Statement, any Prospectus and any
amendments or supplements thereto, and in preparing or assisting in
preparing, printing and distributing any underwriting agreements,
securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) all rating agency
fees, (v) the fees and disbursements of counsel for the Issuers and of the
independent certified public accountants of the Issuers, including the
expenses of any "cold comfort" letters required by or incident to such
performance and compliance, (vi) the fees and expenses of the Trustee, and
any exchange agent or custodian, (vii) all fees and expenses incurred in
connection with the listing, if any, of any of the Registrable Notes on
any securities exchange or exchanges, and (viii) any fees and
disbursements of any underwriter customarily required to be paid by
issuers or sellers of notes and the reasonable fees and expenses of any
special experts retained by the Issuers in connection with any
Registration Statement, but excluding fees of counsel to the underwriters
or the Holders and underwriting discounts and commissions and transfer
taxes, if any, relating to the sale or disposition of Registrable Notes by
a Holder.
"SEC" shall mean the Securities and Exchange Commission.
<PAGE>
-7-
"Special Private Exchange" shall have the meaning set forth in
Section 2(a).
"TIA" shall have the meaning set forth in Section 3(l).
"Trustee" shall mean the trustee with respect to the Notes under the
Indenture.
2. Registration Under the 1933 Act.
(a) Exchange Offer. To the extent not prohibited by any applicable
law or applicable interpretation of the staff of the SEC, the Issuers shall, for
the benefit of the Holders, at the Issuers' cost, use their reasonable best
efforts to cause to be filed with the SEC within 60 days after the Closing Time
an Exchange Offer Registration Statement on an appropriate form under the 1933
Act covering the offer by the Issuers to the Holders to exchange all of the
Registrable Notes (other than Private Exchange Notes) for a like principal
amount of Exchange Notes, to have such Exchange Offer Registration Statement
declared effective under the 1933 Act by the SEC, to have such Registration
Statement remain effective until the closing of the Exchange Offer and to cause
the Exchange Offer to be consummated not later than 150 days after the Closing
Time. The Exchange Notes will be issued under the Indenture. Upon the
effectiveness of the Exchange Offer Registration Statement, the Issuers shall
promptly commence the Exchange Offer, it being the objective of such Exchange
Offer to enable each Holder eligible and electing to exchange Registrable Notes
for Exchange Notes (assuming that such Holder is not an affiliate of any of the
Issuers within the meaning of Rule 405 under the 1933 Act and is not a
broker-dealer tendering Registrable Notes acquired directly from any of the
Issuers for its own account, acquires the Exchange Notes in the ordinary course
of such Holder's business and has no arrangements or understandings with any
Person to participate in the Exchange Offer for the purpose of distributing the
Exchange Notes and that each such Holder makes a representation to the Issuers
to such effect) to transfer such Exchange Notes from and after their receipt
without any limitations or restrictions under the 1933 Act and without ma-
<PAGE>
-8-
terial restrictions under the securities laws of a substantial proportion of the
several states of the United States under state securities or blue sky laws.
In connection with the Exchange Offer, the Issuers shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Exchange Offer open for acceptance for a period of not
less than 30 days after the date notice thereof is mailed to the Holders
(or longer if required by applicable law) (such period referred to herein
as the "Exchange Period");
(iii) utilize the services of the Depositary for the Exchange Offer;
(iv) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day of the
Exchange Period, by sending to the institution specified in the notice, a
telegram, telex, facsimile transmission or letter setting forth the name
of such Holder, the principal amount of Notes delivered for exchange, and
a statement that such Holder is withdrawing his election to have such
Notes exchanged;
(v) notify each Holder, by notice which may be included in any of
the documents listed in paragraph 2(a)(i) of this Section 2, that any Note
not tendered will remain outstanding and continue to accrue interest, but
will not retain any rights under this Agreement (except in the case of the
Purchasers and Participating Broker-Dealers and in connection with any
Special Private Exchange as provided herein); and
(vi) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
<PAGE>
-9-
If, prior to consummation of the Exchange Offer, the Purchasers hold
any Notes acquired by them and having the status of an unsold allotment in the
initial distribution, the Issuers upon the request of the Purchasers shall,
simultaneously with the delivery of the Exchange Notes in the Exchange Offer,
issue and deliver to the Purchasers, in exchange (the "Private Exchange" (which
term shall also be deemed to refer to any Special Private Exchange (as defined
below) unless the context otherwise requires)) for the Notes held by the
Purchasers, a like principal amount of debt securities (the "Private Exchange
Notes" (which term shall also be deemed to refer to the Special Private Exchange
Notes (as defined below) unless the context otherwise requires)) of the Company,
guaranteed by each of the Guarantors on a senior unsecured basis, that are
identical (except that all of the Private Exchange Notes other than the Special
Private Exchange Notes shall bear appropriate transfer restrictions) to the
Exchange Notes and which are issued pursuant to the Indenture (which will
provide that the Exchange Notes will not be subject to the transfer restrictions
set forth in the Indenture and that the Exchange Notes, the Private Exchange
Notes (including the Special Private Exchange Notes) and the Notes will vote and
consent together on all matters as one class and that neither the Exchange
Notes, the Private Exchange Notes, the Special Private Exchange Notes nor the
Notes will have the right to vote or consent as a separate class on any matter).
The Private Exchange Notes (including the Special Private Exchange Notes) shall
be of the same series as and shall bear the same CUSIP number as the Exchange
Notes.
Following the Exchange Offer, any Holder of Registrable Notes who
holds such Registrable Notes in the form of Offshore Physical Securities or
Offshore Global Securities (each as defined in the Indenture) and who did not
participate in the Exchange Offer may present such Registrable Notes to the
Company for exchange (a "Special Private Exchange") and the Company shall issue
in exchange for such Registrable Notes a like principal amount of debt
securities ("Special Private Exchange Notes") of the Company issued pursuant to
the Indenture and guaranteed by each of the Guarantors on a senior unsecured
basis which are identical to the Exchange Notes and which are of
<PAGE>
-10-
the same series and bear the same CUSIP number as the Exchange Notes.
As soon as practicable after the close of the Exchange Offer, the
Private Exchange or the Special Private Exchange, as the case may be, the
Issuers shall:
(i) accept for exchange all Notes or portions thereof tendered and
not validly withdrawn pursuant to the Exchange Offer, Private Exchange or
Special Private Exchange, as the case may be;
(ii) accept for exchange all Notes duly tendered pursuant to the
Exchange Offer, the Private Exchange or the Special Private Exchange; and
(iii) deliver, or cause to be delivered, to the Trustee for
cancellation all Notes or portions thereof so accepted for exchange by the
Issuers, and issue, and cause the Trustee under the Indenture to promptly
authenticate and deliver to each Holder, a new Exchange Note, Private
Exchange Note or Special Private Exchange Note, as the case may be, equal
in principal amount to the principal amount of the Notes surrendered by
such Holder.
To the extent not prohibited by any law or applicable interpretation of the
staff of the SEC, the Issuers shall use their reasonable best efforts to
complete the Exchange Offer as provided above, and shall comply with the
applicable requirements of the 1933 Act, the 1934 Act and other applicable laws
in connection with the Exchange Offer. The Exchange Offer shall not be subject
to any conditions, other than that the Exchange Offer does not violate
applicable law or any applicable interpretation of the staff of the SEC. Each
Holder of Registrable Notes who wishes to exchange such Registrable Notes for
Exchange Notes in the Exchange Offer will be required to make certain customary
representations in connection therewith, including representations that such
Holder is not an affiliate of any of the Issuers within the meaning of Rule 405
under the 1933 Act, that any Exchange Notes to be received by it will be
acquired in the ordinary course of business and that at the
<PAGE>
-11-
time of the commencement of the Exchange Offer it has no arrangement with any
Person to participate in the distribution (within the meaning of the 1933 Act)
of the Exchange Notes. The Issuers shall inform the Purchasers, after
consultation with the Trustee and the Purchasers, of the names and addresses of
the Holders to whom the Exchange Offer is made, and the Purchasers shall have
the right to contact such Holders and otherwise facilitate the tender of
Registrable Notes in the Exchange Offer.
In connection with any Special Private Exchange, the Company may
require the Holder of Registrable Notes to provide appropriate representations
or undertakings to the extent required to comply with the 1933 Act.
Upon consummation of the Exchange Offer in accordance with this
Section 2(a), the provisions of this Agreement shall continue to apply, mutatis
mutandis, solely with respect to Registrable Notes that are Private Exchange
Notes and Exchange Notes held by Participating Broker-Dealers, and the Issuers
shall have no further obligation to register Registrable Notes (other than
Private Exchange Notes) pursuant to Section 2(b) of this Agreement.
(b) Notes Shelf Registration. In the event that (i) the Issuers or
the the Holders of a majority of the Notes reasonably determine, after
conferring with counsel, that the Exchange Offer Registration provided in
Section 2(a) above is not available or may not be consummated as soon as
practicable after the last day of the Exchange Period because it would violate
applicable securities laws or because the applicable interpretations of the
staff of the SEC would not permit the Issuers to effect the Exchange Offer, or
(ii) the Exchange Offer is not for any other reason consummated within 150 days
of the Closing Time, or (iii) any Holder notifies the Company prior to
commencement of the Exchange Offer that (a) due to a change in law or policy it
is not entitled to participate in the Exchange Offer, (b) due to a change in law
or policy it may not resell the Exchange Notes acquired by it in the Exchange
Offer to the public without delivering a prospectus and the prospectus contained
in the Exchange Offer Registration Statement is not ap-
<PAGE>
-12-
propriate or available for such resales by such Holder or (c) it is a
broker-dealer and owns Notes acquired directly from the Company or an affiliate
of the Company or any Guarantor, or (iv) the Holders of a majority of the Notes
may not resell the Exchange Notes acquired by them in the Exchange Offer to the
public without restriction under the 1933 Act and without restriction under
applicable blue sky or state securities laws, the Issuers shall, at their cost,
use their best efforts to cause to be filed prior to the later of (a) 90 days
after the Closing Time or (b) 30 days after such filing obligation arises, a
Notes Shelf Registration Statement providing for the sale by the Holders of all
of the Registrable Notes, and shall use their best efforts to have such Notes
Shelf Registration Statement declared effective by the SEC on or prior to 60
days after such Notes Shelf Registration Statement is required to be filed;
provided that if the Company has not consummated the Exchange Offer within 150
days of the Closing Time, then the Issuers will file the Notes Shelf
Registration Statement with the SEC on or prior to the 151st day after the
Closing Time. No Holder of Registrable Notes may include any of its Registrable
Notes in any Notes Shelf Registration pursuant to this Agreement unless and
until such Holder furnishes to the Issuers in writing, within 15 days after
receipt of a request therefor, such information as the Issuers may, after
conferring with counsel with regard to information relating to Holders that
would be required by the SEC to be included in such Notes Shelf Registration
Statement or Prospectus included therein, reasonably request for inclusion in
any Notes Shelf Registration Statement or Prospectus included therein. Each
Holder as to which any Notes Shelf Registration is being effected agrees to
furnish promptly to the Issuers all information to be disclosed in the
applicable Notes Shelf Registration Statement or Prospectus included therein in
order to make the information previously furnished to the Issuers by such Holder
not materially misleading.
The Issuers agree to use their reasonable best efforts to keep the
Notes Shelf Registration Statement continuously effective, supplemented and
amended for a period of two years (or such shorter period as required by Rule
144(k) under
<PAGE>
-13-
the 1933 Act) from the effective date of the Notes Shelf Registration Statement
(subject to extension pursuant to the last paragraph of Section 3) (the
"Effectiveness Period"); provided that if such Notes Shelf Registration
Statement has been filed solely at the request of a Holder pursuant to clause
(iv) above, the Issuers shall only be required to use their reasonable best
efforts to keep such Notes Shelf Registration Statement continuously effective
for a period of one year from the date of issuance of the Notes (subject to
extension pursuant to the last paragraph of Section 3 hereof) or for such
shorter period which will terminate when all of the Registrable Notes covered by
the Notes Shelf Registration Statement have been sold pursuant to the Notes
Shelf Registration Statement or cease to be outstanding and provided further
that the Company may suspend the effectiveness of the Shelf Registration
Statement for a period (a "Black Out Period") not to exceed an aggregate of 90
days if (i) an event occurs and is continuing as a result of which the Shelf
Registration Statement would, in the Company's good faith judgment, contain an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the circumstances under
which they were made, not misleading and (ii) (a) the Company determines in its
good faith judgment that the disclosure of such event at such time would have a
material adverse effect on the business, operations or prospects of the Company
or (b) the disclosure otherwise relates to a pending material business
transaction which has not been publicly disclosed. The Issuers shall not permit
any notes other than Registrable Notes to be included in the Notes Shelf
Registration. The Issuers further agree, if necessary, to supplement or amend
the Notes Shelf Registration Statement, if required by the rules, regulations or
instructions applicable to the registration form used by the Issuers for such
Notes Shelf Registration Statement or by the 1933 Act or by any other rules and
regulations thereunder for shelf registrations, and the Issuers agree to furnish
to the Holders of Registrable Notes copies of any such supplement or amendment
promptly after its being used or filed with the SEC.
<PAGE>
-14-
(c) Expenses. The Issuers shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) or 2(b) and will
reimburse the Purchasers for the reasonable fees and disbursements of Cahill
Gordon & Reindel incurred in connection with the Registered Exchange Offer and
any one counsel designated in writing by the the Holders of a majority of the
Notes to act as counsel for the Holders of the Registrable Notes in connection
with a Notes Shelf Registration Statement. Each Holder shall pay all expenses of
its counsel other than as set forth in the preceding sentence, underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Notes pursuant to the Notes Shelf
Registration Statement.
(d) Effective Registration Statement. An Exchange Offer Registration
Statement pursuant to Section 2(a) hereof or a Notes Shelf Registration
Statement pursuant to Section 2(b) hereof will not be deemed to have become
effective unless it has been declared effective by the SEC; provided that if,
after it has been declared effective, the offering of Registrable Notes pursuant
to a Notes Shelf Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, such Notes Registration Statement will be deemed not to have
been effective during the period of such interference, until the offering of
Registrable Notes pursuant to such Notes Registration Statement may legally
resume. The Issuers will be deemed not to have used their reasonable efforts to
cause the Exchange Offer Registration Statement or the Notes Shelf Registration
Statement, as the case may be, to become, or to remain, effective during the
requisite period if they voluntarily take any action that would result in any
such Notes Registration Statement not being declared effective or in the Holders
of Registrable Notes covered thereby not being able to exchange or offer and
sell such Registrable Notes during that period unless such action is required by
applicable law.
(e) Additional Interest. In the event that either (i) the Issuers
fail to file the Exchange Offer Registration Statement or the Notes Shelf
Registration Statement, as the
<PAGE>
-15-
case may be, on or before the date specified for any such filing hereunder, (ii)
the Issuers fail to consummate the Exchange Offer pursuant to an effective
Exchange Offer Registration Statement on or prior to the 150th day following the
Closing Time or (iii) if the law or applicable interpretations of the SEC
thereof prohibit a Holder from participating in the Exchange Offer or if such
Holder does not receive freely tradeable Exchange Notes pursuant to the Exchange
Offer or if for any reason the Exchange Offer is not consummated within 150 days
of the Closing Time, and if by 150 days after the Closing Time a Notes Shelf
Registration Statement is not declared effective (each such event referred to in
clauses (i) through (iii) above, a "Registration Default"), the interest rate
borne by all Registrable Notes shall be increased ("Additional Interest") by
one-half of one percent per annum during the first 90-day period immediately
following the occurrence of such Registration Default. In addition, such rate of
Additional Interest shall be increased by an additional one-half of one percent
per annum for each 90-day period that any Additional Interest continues to
accrue pursuant to this Section 2(e); provided that the aggregate increase in
such interest rate pursuant to this Section 2(e) will in no event exceed two
percent per annum. Following the cure of all Registration Defaults, the accrual
of Additional Interest shall cease and the interest rate borne by all
Registrable Notes shall revert to the original rate.
In the event that the Notes Shelf Registration Statement has been
declared effective and subsequently ceases to be effective prior to the end of
the Effectiveness Period, or if such Notes Shelf Registration Statement was
filed solely at the request of the Purchasers pursuant to Section 2(b)(iv)
hereof, one year after the date of issuance of the Notes (in each instance,
subject to extension pursuant to the last paragraph of Section 3 hereof), for a
period in excess of 90 days, whether or not consecutive, during the term hereof,
then the interest rate borne by the Notes or the Private Exchange Notes, as the
case may be, shall be increased by an additional one-half of one percent per
annum on the 91st day such Notes Shelf Registration Statement ceases to be
effective. Such interest rate shall be increased by an additional one-half of
one percent per
<PAGE>
-16-
annum for each additional 90 days that such Notes Shelf Registration Statement
is not effective, subject to an aggregate maximum increase in the interest rate
per annum of two percent. Upon the effectiveness of a Notes Shelf Registration
Statement, the interest rate borne by the Notes or the Private Exchange Notes,
as the case may be, shall be reduced to the original interest rate unless and
until increased as described in this paragraph.
The Issuers shall notify the Trustee within three business days
after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). Additional
Interest shall be paid by depositing with the Trustee, in trust, for the benefit
of the Holders of Notes or of Private Exchange Notes, as the case may be, on or
before the applicable semiannual interest payment date, immediately available
funds in sums sufficient to pay the Additional Interest then due. The Additional
Interest due shall be payable on each interest payment date to the record Holder
of Notes entitled to receive the interest payment to be paid on such date as set
forth in the Indenture. Each obligation to pay Additional Interest shall be
deemed to accrue from and including the day following the applicable Event Date.
The Issuers agree to use their best efforts to seek and obtain all
registrations, approvals and consents of any governmental agency or body,
including but not limited to the Central Bank of Brazil, to permit the lawful
payment by the Issuers of the Additional Interest provided for herein.
(f) Specific Enforcement. Without limiting the remedies available to
the Purchasers and the Holders, the Issuers acknowledge that any failure by the
Issuers to comply with their obligations under Section 2(a) and Section 2(b)
hereof may result in material irreparable injury to the Purchasers or the
Holders for which there is no adequate remedy at law, that it would not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Purchasers or any Holder may obtain such relief as may
be required to specifically enforce the Issuers' obligations under Section 2(a)
and Section 2(b) hereof.
<PAGE>
-17-
3. Registration Procedures. In connection with the obligations of
the Issuers with respect to the Registration Statements pursuant to Sections
2(a) and 2(b) hereof, the Issuers shall:
(a) prepare and file with the SEC a Registration Statement or
Registration Statements as prescribed by Sections 2(a) and 2(b) hereof
within the relevant time period specified in Section 2 hereof on an
appropriate form under the 1933 Act, which form (i) shall be selected by
the Issuers, (ii) shall, in the case of a Notes Shelf Registration, be
available for the sale of the Registrable Notes by the selling Holders
thereof and (iii) shall comply as to form in all material respects with
the requirements of the applicable form and include all financial
statements required by the SEC to be filed therewith; and use its
reasonable best efforts to cause such Notes Registration Statement to
become effective and remain effective in accordance with Section 2 hereof;
provided that if (1) such filing is -------- pursuant to Section 2(b), or
(2) a Prospectus contained in a Notes Exchange Offer Registration
Statement filed pursuant to Section 2(a) is required to be delivered under
the 1933 Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes, before filing any Notes Registration Statement or Prospectus or any
amendments or supplements thereto, the Issuers shall furnish to and afford
the Holders of the Registrable Notes and each such Participating
Broker-Dealer, as the case may be, covered by such Notes Registration
Statement, their counsel and the managing underwriters, if any, a
reasonable opportunity to review copies of all such documents (including
copies of any documents to be incorporated by reference therein and all
exhibits thereto) proposed to be filed (at least 10 business days prior to
such filing). The Issuers shall not file any Registration Statement or
Prospectus or any amendments or supplements thereto in respect of which
the Holders must be afforded an opportunity to review prior to the filing
of such document if the the Holders of a majority of the Notes or such
Participating Bro-
<PAGE>
-18-
ker-Dealer, as the case may be, their counsel or the managing
underwriters, if any, shall reasonably object;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Notes Registration Statement as may be necessary to
keep such Notes Registration Statement effective for the Effectiveness
Period or the Applicable Period, as the case may be (except for Black Out
Periods); and cause each Prospectus to be supplemented by any required
prospectus supplement and as so supplemented to be filed pursuant to Rule
424 (or any similar provision then in force) under the 1933 Act, and
comply with the provisions of the 1933 Act, the 1934 Act and the rules and
regulations promulgated thereunder applicable to it with respect to the
disposition of all securities covered by each Notes Registration Statement
during the Effectiveness Period or the Applicable Period, as the case may
be, in accordance with the intended method or methods of distribution by
the selling Holders thereof described in this Agreement (including sales
by any Participating Broker-Dealer);
(c) in the case of a Notes Shelf Registration, (i) notify each
Holder of Registrable Notes, at least three business days prior to filing,
that a Notes Shelf Registration Statement with respect to the Registrable
Notes is being filed and advising such Holder that the distribution of
Registrable Notes will be made in accordance with the method selected by
the the Holders of a majority of the Notes; (ii) furnish to each Holder of
Registrable Notes and to each underwriter of an underwritten offering of
Registrable Notes, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder or underwriter
may reasonably request, in order to facilitate the public sale or other
disposition of the Registrable Notes; and (iii) subject to the last
paragraph of Section 3, hereby consent to the use of the Prospectus or any
amendment or supplement thereto by each of the selling Holders of
Registrable Notes in
<PAGE>
-19-
connection with the offering and sale of the Registrable Notes covered by
the Prospectus or any amendment or supplement thereto;
(d) in the case of a Notes Shelf Registration, use their respective
reasonable best efforts to register or qualify the Registrable Notes under
all applicable state securities or "blue sky" laws of such jurisdictions
by the time the applicable Registration Statement is declared effective by
the SEC as any Holder of Registrable Notes covered by a Notes Registration
Statement and each underwriter of an underwritten offering of Registrable
Notes shall reasonably request in advance of such date of effectiveness,
and do any and all other acts and things which may be reasonably necessary
or advisable to enable such Holder and underwriter to consummate the
disposition in each such jurisdiction of such Registrable Notes owned by
such Holder; provided that none of the Issuers shall be required to (i)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but for
this Section 3(d), (ii) file any general consent to service of process or
(iii) subject itself to taxation in any such jurisdiction if it is not so
subject;
(e) if (1) a Notes Shelf Registration is filed pursuant to Section
2(b) or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2(a) is required to be delivered under
the 1933 Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the applicable period as provided in Section 3(t) hereof,
notify each Holder of Registrable Notes, or such Participating
Broker-Dealers, as the case may be, their counsel and the managing
underwriters, if any, promptly and confirm such notice in writing (i) when
a Notes Registration Statement has become effective and when any
post-effective amendments and supplements thereto become effective, (ii)
of any request by the SEC or any state securities authority for amendments
and supplements to a Notes Registration Statement or Prospectus or for
ad-
<PAGE>
-20-
ditional information after the Notes Registration Statement has become
effective, (iii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a Notes
Registration Statement or the initiation of any proceedings for that
purpose, (iv) in the case of a Notes Shelf Registration, if, between the
effective date of a Notes Registration Statement and the closing of any
sale of Registrable Notes covered thereby, the representations and
warranties of the Issuers contained in any underwriting agreement,
securities sales agreement or other similar agreement, if any, relating to
such offering cease to be true and correct in all material respects, (v)
if the Issuers receive any notification with respect to the suspension of
the qualification of the Registrable Notes or the Exchange Notes to be
sold by any Participating Broker-Dealer for offer or sale in any
jurisdiction or the initiation of any proceeding for such purpose, (vi) of
the happening of any event or the failure of any event to occur or the
discovery of any facts or otherwise, during the period a Notes Shelf
Registration Statement is effective which makes any statement made in such
Notes Registration Statement or the related Prospectus untrue in any
material respect or which causes such Notes Registration Statement or
Prospectus to omit to state a material fact necessary to make the
statements therein (in the case of any Prospectus, in the light of the
circumstances under which they were made) not misleading and (vii) the
Issuers' reasonable determination that a post-effective amendment to the
Notes Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Notes Registration Statement as
soon as practicable;
(g) in the case of a Notes Shelf Registration, furnish to each
Holder of Registrable Notes, without charge, at least one conformed copy
of each Notes Registration Statement and any post-effective amendment
thereto (with-
<PAGE>
-21-
out documents incorporated therein by reference or exhibits thereto,
unless requested);
(h) in the case of a Notes Shelf Registration, cooperate with the
selling Holders of Registrable Notes to facilitate the timely preparation
and delivery of certificates representing Registrable Notes to be sold and
not bearing any restrictive legends; and cause such Registrable Notes to
be in such denominations (consistent with the provisions of the Indenture)
and registered in such names as the selling Holders or the underwriters,
if any, may reasonably request at least two business days prior to the
closing of any sale of Registrable Notes;
(i) in the case of a Notes Shelf Registration or an Exchange Offer
Registration, upon the occurrence of any circumstance contemplated by
Section 3(e)(ii), 3(e)(iii), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, except
during Black Out Periods use their respective reasonable best efforts to
prepare a supplement or post-effective amendment to a Notes Registration
Statement or the related Prospectus or any document incorporated therein
by reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes, such Prospectus will
not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading. The Issuers
agree to notify each Holder to suspend use of the Prospectus as promptly
as practicable after the occurrence of such an event, and each Holder
hereby agrees to suspend use of the Prospectus until the Issuers have
amended or supplemented the Prospectus to correct such misstatement or
omission;
(j) in the case of a Notes Shelf Registration, on or prior to the
filing of any document which is to be incorporated by reference into a
Notes Registration Statement or a Prospectus after the initial filing of a
Notes Registration Statement, provide a reasonable number of copies
<PAGE>
-22-
of such document to the Purchasers on behalf of such Holders;
(k) obtain a CUSIP number for all Exchange Notes or Registrable
Notes, as the case may be, not later than the effective date of a Notes
Registration Statement, and provide the Trustee with printed certificates
for the Exchange Notes or the Registrable Notes, as the case may be, in a
form eligible for deposit with the Depositary;
(l) cause the Indenture to be qualified under the Trust Indenture
Act of 1939 (the "TIA") in connection with the registration of the
Exchange Notes or Registrable Notes, as the case may be, cooperate with
the Trustee and the Holders to effect such changes to the Indenture as may
be required for the Indenture to be so qualified in accordance with the
terms of the TIA and execute, and use their respective best efforts to
cause the Trustee to execute, all documents as may be required to effect
such changes, and all other forms and documents required to be filed with
the SEC to enable the Indenture to be so qualified in a timely manner;
(m) in the case of a Notes Shelf Registration, enter into such
agreements (including underwriting agreements) as are customary in
underwritten offerings and take all such other appropriate actions as are
reasonably requested in order to expedite or facilitate the registration
or the disposition of such Registrable Notes, and in such connection,
whether or not an underwriting agreement is entered into and whether or
not the registration is an underwritten registration: (i) make such
representations and warranties to Holders of such Registrable Notes and
the underwriters (if any), with respect to the business of the Issuers and
any of their subsidiaries and the Notes Registration Statement, Prospectus
and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
requested; (ii) in the case of underwritten offerings obtain opinions of
counsel to the Issuers
<PAGE>
-23-
and updates thereof in form and substance reasonably satisfactory to the
managing underwriters and the Holders of a majority in principal amount of
the Registrable Notes being sold, addressed to each selling Holder and the
underwriters covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be
reasonably requested by such Holders and underwriters; (iii) obtain "cold
comfort" letters and updates thereof in form and substance reasonably
satisfactory to the managing underwriters from the independent certified
public accountants of the Issuers (and, if necessary, any other
independent certified public accountants of any subsidiary of any of the
Issuers or of any business acquired by any of the Issuers for which
financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to the selling Holders
of Registrable Notes and to each of the underwriters, such letters to be
in customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings and such
other matters as reasonably requested by such selling Holders and
underwriters; and (iv) if an underwriting agreement is entered into, the
same shall contain indemnification provisions and procedures no less
favorable than those set forth in Section 4 hereof (or such other
provisions and procedures acceptable to Holders of a majority in aggregate
principal amount of Registrable Notes covered by such Registration
Statement and the managing underwriters or agents) with respect to all
parties to be indemnified pursuant to said Section. The above shall be
done at each closing under such underwriting agreement, or as and to the
extent required thereunder;
(n) if (1) a Notes Shelf Registration is filed pursuant to Section
2(b) or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2(a) is required to be delivered under
the 1933 Act by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the applicable period, make available for inspection by any
selling Holder of such Regis-
<PAGE>
-24-
trable Securities being sold, or each such Participating Broker-Dealer, as
the case may be, any underwriter participating in any such disposition of
Registrable Notes, if any, and any attorney, accountant or other agent
retained by any such selling Holder or each such Participating
Broker-Dealer, as the case may be, or underwriter (collectively, the
"Inspectors"), at an office in The Borough of Manhattan, the City of New
York and in Sao Paulo, Brazil, during reasonable business hours, all
financial and other records, pertinent corporate documents and properties
of the Issuers and any of their subsidiaries (collectively, the "Records")
as shall be reasonably necessary to enable them to exercise any applicable
due diligence responsibilities, and cause the officers, directors and
employees of the Issuers and any of their subsidiaries to supply all
information in each case reasonably requested by any such Inspector in
connection with such Notes Registration Statement. Records which the
Issuers determine, in good faith, to be confidential and any Records which
they notify the Inspectors are confidential shall not be disclosed by the
Inspectors unless (i) the disclosure of such Records is necessary to avoid
or correct a misstatement or omission in such Notes Registration
Statement, (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction or (iii)
the information in such Records has been made generally available to the
public. Each selling Holder of such Registrable Notes and each such
Participating Broker-Dealer will be required to agree that information
obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of any of the Issuers unless and until such
is made generally available to the public. Each selling Holder of such
Registrable Notes and each such Participating Broker-Dealer will be
required to further agree that it will, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction, give notice
to the Issuers and allow the Issuers at their expense to undertake
<PAGE>
-25-
appropriate action to prevent disclosure of the Records deemed
confidential;
(o) comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the 1933 Act and Rule 158
thereunder (or any similar rule promulgated under the 1933 Act) no later
than 45 days after the end of any 12-month period (or 90 days after the
end of any 12-month period if such period is a fiscal year) (i) commencing
at the end of any fiscal quarter in which Registrable Notes are sold to
underwriters in a firm commitment or best efforts underwritten offering
and (ii) if not sold to underwriters in such an offering, commencing on
the first day of the first fiscal quarter of the Company and each Issuer
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods;
(p) upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion of counsel to the Issuers addressed to the Trustee for
the benefit of all Holders of Registrable Notes participating in the
Exchange Offer or the Private Exchange, as the case may be, and which
includes an opinion that (i) the Issuers have duly authorized, executed
and delivered the Exchange Notes and Private Exchange Notes and the
Indenture (and, to the extent applicable, the Guarantees), and (ii) each
of the Exchange Notes or the Private Exchange Notes, as the case may be,
and the Indenture (and, to the extent applicable, the Guarantees)
constitute a legal, valid and binding obligation of the Issuers,
enforceable against the Issuers in accordance with its respective terms
(in each case, with customary exceptions and qualifications);
(q) if an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Issuers (or to
such other Person as directed by the Issuers) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Issuers shall
mark, or cause to be marked, on such Registra-
<PAGE>
-26-
ble Notes delivered by such Holders that such Registrable Notes are being
cancelled in exchange for the Exchange Notes or the Private Exchange
Notes, as the case may be; in no event shall such Registrable Notes be
marked as paid or otherwise satisfied;
(r) cooperate with each seller of Registrable Notes covered by any
Notes Registration Statement and each underwriter, if any, participating
in the disposition of such Registrable Notes and their respective counsel
in connection with any filings required to be made with the NASD;
(s) use their respective best efforts to take all other steps
necessary to effect the registration of the Registrable Notes covered by a
Notes Registration Statement contemplated hereby;
(t) (A) in the case of the Exchange Offer Registration Statement (i)
include in the Exchange Offer Registration Statement a section entitled
"Plan of Distribution," which section shall be reasonably acceptable to
the Purchasers or another representative of the Participating
Broker-Dealers, and which shall contain a summary statement of the
positions taken or policies made by the staff of the SEC with respect to
the potential "underwriter" status of any broker-dealer (a "Participating
Broker-Dealer") that holds Registrable Notes acquired for its own account
as a result of market-making activities or other trading activities and
that will be the beneficial owner (as defined in Rule 13d-3 under the 1934
Act) of Exchange Notes to be received by such broker-dealer in the
Exchange Offer, whether such positions or policies have been publicly
disseminated by the staff of the SEC or such positions or policies, in the
reasonable judgment of the Purchasers or such other representative,
represent the prevailing views of the staff of the SEC, including a
statement that any such broker-dealer who receives Exchange Notes for
Registrable Notes pursuant to the Exchange Offer may be deemed a statutory
underwriter and must deliver a prospectus meeting the requirements of the
<PAGE>
-27-
1933 Act in connection with any resale of such Exchange Notes, (ii)
furnish to each Participating Broker-Dealer who has delivered to the
Issuers the notice referred to in Section 3(e), without charge, as many
copies of each Prospectus included in the Exchange Offer Registration
Statement, including any preliminary prospectus, and any amendment or
supplement thereto, as such Participating Broker-Dealer may reasonably
request, (iii) hereby consent to the use of the Prospectus forming part of
the Exchange Offer Registration Statement or any amendment or supplement
thereto, by any Person subject to the prospectus delivery requirements of
the 1933 Act, including all Participating Broker-Dealers, in connection
with the sale or transfer of the Exchange Notes covered by the Prospectus
or any amendment or supplement thereto, (iv) use their respective
reasonable best efforts to keep the Exchange Offer Registration Statement
effective and to amend and supplement the Prospectus contained therein, in
order to permit such Prospectus to be lawfully delivered by all Persons
subject to the prospectus delivery requirements of the 1933 Act for such
period of time as such Persons must comply with such requirements in order
to resell the Exchange Notes; provided that such period shall not be
required to exceed 180 days -------- (or such longer period if extended
pursuant to the last sentence of Section 3 hereof) (the "Applicable
Period"), and (v) include in the transmittal letter or similar
documentation to be executed by an exchange offeree in order to
participate in the Exchange Offer (x) the following provision:
"If the exchange offeree is a broker-dealer holding Registrable Notes
acquired for its own account as a result of market-making activities or
other trading activities, it will deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of Exchange
Notes received in respect of such Registrable Notes pursuant to the
Exchange Offer."
and (y) a statement to the effect that by a broker-dealer making the
acknowledgment described in clause (x) and by
<PAGE>
-28-
delivering a Prospectus in connection with the exchange of Registrable
Notes, the broker-dealer will not be deemed to admit that it is an
underwriter within the meaning of the 1933 Act; and
(B) in the case of any Exchange Offer Registration Statement, the
Issuers agree to deliver to the Purchasers on behalf of the Purchasers and
the Participating Broker-Dealers upon consummation of the Exchange Offer
(i) an opinion of counsel substantially in the form attached hereto as
Exhibit A, (ii) an officers certificate containing certifications
substantially similar to those set forth in Section 7(f) of the Purchase
Agreement and such additional certifications as are customarily delivered
in a public offering of debt securities and (iii) as well as upon the
effectiveness of the Exchange Offer Registration Statement, a comfort
letter, in each case, in customary form if permitted by Statement on
Auditing Standards No. 72 of the American Institute of Certified Public
Accountants.
The Issuers may require each seller of Registrable Notes as to which
any registration is being effected to furnish to the Issuers such information
and representations regarding such seller and the proposed distribution of such
Registrable Notes, as the Issuers may from time to time reasonably request in
writing. The Issuers may exclude from such registration the Registrable Notes of
any seller who unreasonably fails to furnish such information within a
reasonable time after receiving such request.
In the case of (1) a Notes Shelf Registration Statement or (2)
Participating Broker-Dealers who have notified the Issuer that they will be
utilizing the Prospectus contained in the Exchange Offer Registration Statement
as provided in Section 3(t) hereof, that are seeking to sell Exchange Notes and
are required to deliver Prospectuses, each Holder agrees that, upon receipt of
any notice from the Issuers of the happening of any event of the kind described
in Section 3(e)(ii), 3(e)(iii), 3(e)(v), 3(e)(vi) or 3(e)(vii) hereof, such
Holder will forthwith discontinue disposition of Registrable Notes pursuant to a
<PAGE>
-29-
Notes Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof or until
it is advised in writing (the "Advice") by the Issuers that the use of the
applicable Prospectus may be resumed, and, if so directed by the Issuers, such
Holder will deliver to the Issuers (at the Issuers' expense) all copies in such
Holder's possession, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registrable Notes or Exchange Notes,
as the case may be, current at the time of receipt of such notice. If the
Issuers shall give any such notice to suspend the disposition of Registrable
Notes or Exchange Notes, as the case may be, pursuant to a Notes Registration
Statement, the Issuer shall use their respective best efforts to file a
supplement or an amendment to the Notes Registration Statement and, in the case
of an amendment, have such amendment declared effective as soon as practicable
and shall extend the period during which such Notes Registration Statement shall
be maintained effective pursuant to this Agreement by the number of days in the
period from and including the date of the giving of such notice to and including
the date when the Issuer shall have made available to the Holders (x) copies of
the supplemented or amended Prospectus necessary to resume such dispositions or
(y) the Advice.
4. Indemnification and Contribution. (a) Each of the Issuers,
jointly and severally, agrees to indemnify and hold harmless each Purchaser,
each Holder, each Participating Broker-Dealer, each underwriter who participates
in an offering of Registrable Notes, their respective affiliates, each Person,
if any, who controls any of such parties within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act and each of their respective directors,
officers, employees and agents, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) covering Registrable
Notes or Exchange Notes, including all documents incorpo-
<PAGE>
-30-
rated therein by reference, or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement
or alleged untrue statement of a material fact contained in any Prospectus
(or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any court or governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission;
provided that (subject to Section 4(c) below) any such settlement is
effected with the prior written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including reasonable fees and disbursements of counsel chosen by such
Purchaser, such Holder, such Participating Broker-Dealer or any
underwriter (except to the extent otherwise expressly provided in Section
4(c) hereof)), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any court or governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) of this Section 4(a);
provided that this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or omission
or alleged untrue statement or omission (i) made in reliance upon and in
conformity with written information furnished to the Issuers by such Purchaser,
<PAGE>
-31-
such Holder, such Participating Broker-Dealer or any underwriter in writing
expressly for use in the Registration Statement (or any amendment thereto) or
any Prospectus (or any amendment or supplement thereto) or (ii) contained in any
preliminary prospectus if the Purchasers, such Holder, such Participating
Broker-Dealer or such underwriter failed to send or deliver a copy of the
Prospectus (in the form it was first provided to such parties for confirmation
of sales) to the Person asserting such losses, claims, damages or liabilities on
or prior to the delivery of written confirmation of any sale of securities
covered thereby to such Person in any case where such delivery is required by
the 1933 Act and a court of competent jurisdiction in a judgment not subject to
appeal or final review shall have determined that such Prospectus would have
corrected such untrue statement or omission. Any amounts advanced by an
indemnifying party to an indemnified party pursuant to this Section 4 as a
result of such losses shall be returned to such indemnifying party if it shall
be finally determined by such a court in a judgment not subject to appeal or
final review that such indemnified party was not entitled to indemnification by
such indemnifying party.
(b) Each Holder agrees, severally and not jointly, to indemnify and
hold harmless the Issuers, the Purchasers, each underwriter who participates in
an offering of Registrable Notes and the other selling Holders and each of their
respective directors, officers (including each officer of each of the Issuers
who signed the Registration Statement), employees and agents and each Person, if
any, who controls each of the Issuers, the Purchasers, any underwriter or any
other selling Holder within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act, against any and all loss, liability, claim, damage and
expense whatsoever described in the indemnity contained in Section 4(a) hereof,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Issuers by such selling Holder expressly for use in the Registration Statement
(or any
<PAGE>
-32-
amendment thereto), or any such Prospectus (or any amendment or supplement
thereto); provided, however, that in the case of a Notes Shelf Registration
Statement, no such Holder shall be liable for any claims hereunder in excess of
the amount of net proceeds received by such Holder from the sale of Registrable
Notes pursuant to such Notes Shelf Registration Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action commenced
against it in respect of which indemnity may be sought hereunder, but failure to
so notify an indemnifying party shall not relieve such indemnifying party from
any liability hereunder to the extent it is not materially prejudiced as a
result thereof and in any event shall not relieve it from any liability which it
may have otherwise than on account of this indemnity agreement. In the case of
parties indemnified pursuant to Section 4(a) above, counsel to the indemnified
parties shall be selected by Merrill Lynch, and, in the case of parties
indemnified pursuant to Section 4(b) above, counsel to the indemnified parties
shall be selected by the Issuers. Notwithstanding the foregoing sentence, in
case any such action is brought against any indemnified party, and it notifies
the indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein and, to the extent it may wish, jointly with
any other indemnifying party similarly notified, unless such indemnified party
shall have one or more legal defenses available to it which are not available to
the indemnifying party to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party. After notice from the indemnifying party
to such indemnified party of its election as aforesaid to assume the defense
thereof and approval by such indemnified party of counsel appointed to defend
such action, the indemnifying party will not be liable to such indemnified party
under this Section 4 for any legal or other expenses other than reasonable costs
of investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. An indemnifying party may participate at its own
expense in the defense of any such action; provided, however, that counsel to
the indemnifying party shall not (except with the consent of the indemnified
<PAGE>
-33-
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 4 (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 4(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 4 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Issuers, the Purchasers
<PAGE>
-34-
and the Holders shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Issuers, the Purchasers and the Holders, as incurred; provided
that no Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any Person
that was not guilty of such fraudulent misrepresentation. As between the
Issuers, the Purchasers and the Holders, such parties shall contribute to such
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement in such proportion as shall be
appropriate to reflect the relative fault of the Issuers, on the one hand, and
the Purchasers and the Holders, on the other hand, with respect to the
statements or omissions which resulted in such loss, liability, claim, damage or
expense, or action in respect thereof, as well as any other relevant equitable
considerations. The relative fault of the Issuers, on the one hand, and of the
Purchasers and the Holders, on the other hand, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Issuers, on the one hand, or by or on
behalf of the Purchasers or the Holders, on the other, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Issuers, the Purchasers and the Holders of the
Registrable Notes agree that it would not be just and equitable if contribution
pursuant to this Section 4 were to be determined by pro rata allocation or by
any other method of allocation that does not take into account the relevant
equitable considerations. For purposes of this Section 4, each affiliate of the
Purchasers or Holder, and each director, officer, employee, agent and Person, if
any, who controls a Purchasers or Holder or such affiliate within the meaning of
Section 15 of the 1933 Act shall have the same rights to contribution as such
Purchaser or Holder, and each director of each of the Issuers, each officer of
each of the Issuers who signed the Registration Statement, and each Person, if
any, who controls each of the Issuers within the meaning of Section 15
<PAGE>
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of the 1933 Act shall have the same rights to contribution as each of the
Issuers.
5. Participation in Underwritten Registrations. No Holder may
participate in any underwritten registration hereunder unless such Holder (a)
agrees to sell such Holder's Registrable Notes on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents reasonably required under the terms of such underwriting
arrangements.
6. Selection of Underwriters. The Holders of Registrable Securities
covered by the Notes Shelf Registration Statement who desire to do so may sell
the securities covered by such Notes Shelf Registration in an underwritten
offering. In any such underwritten offering, the underwriter or underwriters and
manager or managers that will administer the offering will be selected by the
Holders of a majority in aggregate principal amount of the Registrable Notes
included in such offering; provided that such underwriters and managers must be
satisfactory to the Issuers.
7. Miscellaneous.
(a) Rule 144 and Rule 144A. For so long as the Issuers are subject
to the reporting requirements of Section 13 or 15 of the 1934 Act and any
Registrable Notes remain outstanding, the Issuers covenant that they will file
the reports required to be filed by it under the 1933 Act and Section 13(a) or
15(d) of the 1934 Act and the rules and regulations adopted by the SEC
thereunder, that if they cease to be so required to file such reports, they will
upon the request of any Holder of Registrable Notes (a) make publicly available
such information as is necessary to permit sales pursuant to Rule 144 under the
1933 Act, (b) deliver such information to a prospective purchaser as is
necessary to permit sales pursuant to Rule 144A under the 1933 Act and they will
take such further action as any Holder of Registrable Notes may reasonably
request, and (c)
<PAGE>
-36-
take such further action that is reasonable in the circumstances, in each case,
to the extent required from time to time to enable such Holder to sell its
Registrable Notes without registration under the 1933 Act within the limitation
of the exemptions provided by (i) Rule 144 under the 1933 Act, as such rule may
be amended from time to time, (ii) Rule 144A under the 1933 Act, as such rule
may be amended from time to time, or (iii) any similar rules or regulations
hereafter adopted by the SEC. Upon the request of any Holder of Registrable
Notes, the Issuers will deliver to such Holder a written statement as to whether
it has complied with such requirements.
(b) No Inconsistent Agreements. The Issuers have not entered into
nor will the Issuers on or after the date of this Agreement enter into any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with the provisions
hereof. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of any of
the Issuers' other issued and outstanding securities under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Issuers have obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Notes affected by such amendment, modification, supplement, waiver
or departure; provided no amendment, modification or supplement or waiver or
consent to the departure with respect to the provisions of Section 4 hereof
shall be effective as against any Holder of Registrable Notes unless consented
to in writing by such Holder of Registrable Notes; provided, further, that this
Section 7(c) shall not prevent the Company, without the consent of any Holder,
from executing any supplement or amendment to this Agreement the sole purpose of
which is to add any Guarantor as a party and as an Issuer under the terms of
this Agreement.
<PAGE>
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(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Issuers by means of a notice given in accordance with the provisions of this
Section 7(d), which address initially is, with respect to the Purchasers, the
address set forth in the Purchase Agreement; and (ii) if to the Issuers,
initially at the Issuers' address set forth in the Purchase Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 7(d).
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall
be concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of the
Purchasers, including, without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Notes in
violation of the terms of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Registrable Notes, in any manner, whether
by operation of law or otherwise, such Registrable Notes shall be held subject
to all of the terms of this Agreement, and by taking and holding such
Registrable Notes, such Person shall be conclusively deemed to have agreed to be
bound by and to perform all of the terms and provisions of this Agreement and
such Person shall be entitled to receive the benefits hereof.
<PAGE>
-38-
(f) Third Party Beneficiary. The Purchasers shall be a third party
beneficiary of the agreements made hereunder between the Issuers, on the one
hand, and the Holders, on the other hand, and shall have the right to enforce
such agreements directly to the extent they deem such enforcement necessary or
advisable to protect their rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW. SPECIFIED DATES AND TIMES OF DAY REFER TO NEW
YORK CITY TIME.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(k) Notes Held by the Issuers or any of their Affiliates. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Notes is required hereunder, Registrable Notes held by the Issuers or any of
their affiliates (as such term is defined in Rule 405 under the 1933 Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
<PAGE>
-39-
(l) Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. By the execution and delivery of this Agreement, each of the Issuers
(i) acknowledges that it has, by separate written instrument, designated and
appointed CT Corporation System, 1633 Broadway, New York, NY 10019 ("CT
Corporation System") (and any successor entity), as its authorized agent upon
which process may be served in any suit or proceeding arising out of or relating
to this Agreement that may be instituted in any federal or state court in The
City of New York, Borough of Manhattan, State of New York or brought under
federal or state securities laws, and acknowledges that CT Corporation System
has accepted such designation, (ii) submits to the jurisdiction of any such
court in any such suit or proceeding and (iii) agrees that service of process
upon CT Corporation System and written notice of said service to such Issuers in
accordance with Section 7(d) shall be deemed in every respect effective service
of process upon such Issuers, in any such suit or proceeding. Each of the
Issuers further agrees to take any and all action, including the execution and
filing of any and all such documents and instruments, as may be necessary to
continue such designation and appointment of CT Corporation System in full force
and effect so long as any of the Notes, Exchange Notes or Private Exchange Notes
shall be outstanding; provided that the Issuers may and to the extent CT
Corporation System ceases to be able to be served on the basis contemplated
herein, shall, by written notice to the Underwriters, designate such additional
or alternative agent for service of process under this Section 7(1) that (i)
maintains an office located in the Borough of Manhattan, City of New York, State
of New York and (ii) is either (x) counsel for the Issuers or (y) a corporate
service company which acts as agent for service of process for other persons in
the ordinary course of its business. Such written notice shall identify the name
of such agent for service of process and the address of the office of such agent
for service of process in the Borough of Manhattan, City of New York, State of
New York.
To the extent that any of the Issuers has or hereafter may acquire
any immunity from jurisdiction of any court of (i) any jurisdiction in which
such Issuer owns or leases prop-
<PAGE>
-40-
erty or assets, (ii) the United States or the State of New York or (iii) the
Federative Republic of Brazil or any political subdivision thereof or from any
legal process (whether through service of notice, attachment prior to judgment,
attachment in aid of execution, execution or otherwise) with respect to itself
or its property and assets or this Agreement or any of the Notes, Exchange Notes
or Private Exchange Notes or actions to enforce judgments in respect of any
thereof, it hereby irrevocably waives such immunity in respect of its
obligations under the above-referenced documents, to the extent permitted by
law.
(m) Judgment Currency. The Issuers shall, jointly and severally, indemnify each
Purchaser, each Participating Broker-Dealer, each underwriter who participates
in an offering of Registrable Notes, their respective affiliates, each Person,
if any, who controls any of such parties within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act and each of their respective officers,
directors, employees and agents and each Holder against any loss incurred by
such party as a result of any judgment or order being given or made for any
amount due under this Agreement and such judgment or order being expressed and
paid in a currency (the "Judgment Currency") other than United States dollars
and as a result of any variation as between (i) the rate of exchange at which
the United States dollar amount is converted into the Judgment Currency for the
purpose of such judgment or order and (ii) the spot rate of exchange in The City
of New York at which such party on the date of payment of such judgment or order
is able to purchase United States dollars with the amount of the Judgment
Currency actually received by such party. The foregoing indemnity shall continue
in full force and effect notwithstanding any such judgment or order as
aforesaid. The term "spot rate of exchange" shall include any premiums and costs
of exchange payable in connection with the purchase of, or conversion into,
United States dollars.
(n) Covenant of Company to Cause Guarantors' Compliance. The Company
shall cause and direct each Guarantor of the Notes to comply with each of the
obligations of the Issuers under the terms of this Agreement.
<PAGE>
-41-
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
PAGING NETWORK DO BRASIL S.A.
By: /s/ Thomas C. Trynin
-------------------------
Name: Thomas C. Trynin
Title: President
Confirmed and accepted as of the
date first above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
GOLDMAN, SACHS & CO.
BEAR, STEARNS & CO. INC.
By: Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/ Lisa Craig
-----------------------
Name: Lisa Craig
Title: Vice President
<PAGE>
Exhibit A
Form of Opinion of Counsel
1. Each of the Exchange Offer Registration Statement and the
Prospectus (other than the financial statements, notes or schedules thereto and
other financial and statistical data and supplemental schedules included or
referred to therein or omitted therefrom and the Form T-1, as to which such
counsel need express no opinion), complies as to form in all material respects
with the applicable requirements of the 1933 Act and the applicable rules and
regulations promulgated under the 1933 Act.
2. In the course of such counsel's review and discussion of the
contents of the Exchange Offer Registration Statement and the Prospectus with
certain officers and other representatives of the Issuers and representatives of
the independent certified public accountants of the Issuers, but without
independent check or verification or responsibility for the accuracy,
completeness or fairness of the statements contained therein, on the basis of
the foregoing (relying as to materiality to a large extent upon representations
and opinions of officers and other representatives of the Issuers), no facts
have come to such counsel's attention which cause such counsel to believe that
the Exchange Offer Registration Statement (other than the financial statements,
notes and schedules thereto and other financial and statistical information
contained or referred to therein and the Form T-1, as to which such counsel need
express no belief), at the time the Exchange Offer Registration Statement became
effective and as of the date of this opinion, contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements contained
therein not misleading, or that the Prospectus (other than the financial
statements, notes and schedules thereto and other financial and statistical
information contained or referred to therein, as to which such counsel need
express no be-
<PAGE>
lief) contained or contains any untrue statement of a material fact or omitted
or omits to state a material fact necessary to make the statements contained
therein, in the light of the circumstances under which they were made, not
misleading.
<PAGE>
- --------------------------------------------------------------------------------
EQUITY REGISTRATION RIGHTS AGREEMENT
Dated as of June 6, 1997
PAGING NETWORK DO BRASIL among
S.A.
and
PAGING BRAZIL HOLDING CO., LLC,
as Issuers
WARBURG, PINCUS VENTURES, L.P.,
PAGING NETWORK INTERNATIONAL N.V.,
IVP PAGING (CAYMAN) L.P.,
MULTIPONTO TELECOMUNICACOES LTDA.
and
TVA SISTEMA DE TELEVISAO S.A.
as Shareholders to the limited extent set forth herein
AND
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
BEAR, STEARNS & CO. INC.,
and
GOLDMAN, SACHS & CO.,
as Initial Purchasers,
AND
CHASE MELLON SHAREHOLDER SERVICES,
as Transfer Agent to the limited extent
set forth herein
- --------------------------------------------------------------------------------
<PAGE>
THIS EQUITY REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of June 6, 1997, among Paging Network do Brasil S.A., a
Brazilian corporation (the "Company"), Paging Brazil Holding Co., LLC, a
Delaware limited liability company (the "LLC"; together with the Company, the
"Issuers"), Warburg, Pincus Ventures, L.P., a Delaware limited partnership
("WPV"), Paging Network International N.V., a Netherlands corporation ("PNNV"),
IVP Paging (Cayman) L.P., a Cayman Islands exempted limited partnership ("IVP"),
TVA Sistema de Televisao S.A., a Brazilian corporation ("TVA"), Multiponto
Telecomunicacoes Ltda., a Brazilian limited liability company ("MT"; together
with WPV, PNNV, IVP and TVA, the "Shareholders"), and Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch & Co."), Bear, Stearns & Co. Inc.
and Goldman, Sachs & Co. (collectively, the "Initial Purchasers") and, as to
Sections 3.2 to 3.5 only, Chase Mellon Shareholder Services (the "Transfer
Agent"). The Shareholders shall be deemed not to be a party to Sections 2.1,
2.2, 3.5, 3.6, 3.7, 4, 5 and 6 hereof.
This Agreement is made pursuant to the Purchase Agreement, dated as
of May 30, 1997, among the Company, the LLC and the Initial Purchasers (the
"Purchase Agreement"), relating to the sale by the Company and the LLC to the
Initial Purchasers of an aggregate of 125,000 Units, each Unit consisting of
US$1,000 principal amount of 13 1/2% Senior Notes due 2005 (the "Notes") of the
Company and one Non-Voting Class B Member Interest (each an "LLC Share") of the
LLC. Pursuant to an agreement between the Company and the LLC dated May 29, 1997
(the "Company-LLC Subscription Agreement"), 125,000 shares of common stock
(acoes ordinarias), with no par value, of the Company will be issued and
delivered by the Company to the LLC for the capital accounts of the holders of
LLC Shares issued as a part of the Units. In order to induce the Initial
Purchasers to enter into the Purchase Agreement, the Issuers have agreed to
provide to the Holders (as defined herein) the registration rights for the
Registrable Securities (as defined herein) set forth in this Agreement and the
Shareholders, for themselves and their Affiliates, and have agreed to provide
the Holders, among other things, the tag-along rights for the Shares (as defined
herein) and Registrable Securities set forth herein. The execution and delivery
of this Agreement by each of the parties hereto is a condition to the
obligations of the Initial Purchasers to purchase the Units under the Purchase
Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
<PAGE>
-2-
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"Advice" shall have the meaning ascribed to that term in the last
paragraph of Section 4.
"Affiliate" means, when used with reference to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct
or indirect common control with, the referent Person or such other Person,
as the case may be. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling,"
"controlled by," and "under common control with"), when used with respect
to any specified Person, means the power to direct or cause the direction
of management or policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" shall have the meaning ascribed to that term in the
preamble hereto.
"Black Out Period" shall have the meaning ascribed to that term in
Section 2.1(a).
"Business Day" shall mean a day that is not a Legal Holiday.
"Capital Stock" shall mean, with respect to any Person, any and all
shares or other equivalents (however designated) of capital stock,
partnership interests, member interests or any other participation, right
or other interest in the nature of an equity interest in such Person or
any option, warrant or other security convertible into or exercisable or
exchangeable for any of the foregoing.
"Change of Control" shall have the meaning ascribed to that term in
the Indenture dated as of June 1, 1997 between the Company and The Chase
Manhattan Bank, as Trustee, as in effect on the date hereof.
"Common Stock" shall mean the common stock (acoes ordinarias), with
no par value, of the Company, and any common stock equivalents,
participations or interests comparable to any of the foregoing and any
options, warrants, subscription bonds or security convertible into or
exercisable or exchangeable for any of the foregoing.
<PAGE>
-3-
"Company" shall have the meaning ascribed to that term in the
preamble hereto and shall also include the Company's successors.
"Company-LLC Subscription Agreement" shall have the meaning ascribed
to that term in the preamble hereto.
"Company Registrable Securities" means Registrable Securities issued
by the Company or any of its successors.
"Current Market Value" per share of Common Stock of the Company or
any other security at any date means (i) if the security is not registered
under the Exchange Act, the Fair Market Value of the security or (ii)(a)
if the security is registered under the Exchange Act, the average of the
daily market prices of the securities for the 20 consecutive trading days
immediately preceding such date, or (b) if the securities have been
registered under the Exchange Act for less than 20 consecutive trading
days before such date, then the average of the closing sales prices for
all of the trading days before such date for which closing sales prices
are available, in the case of each of (ii)(a) and (ii)(b), as certified to
the Holders by the President, any Vice President or the Chief Financial
Officer of the Company. The market price for each such trading day shall
be: (A) in the case of a security listed or admitted to trading on any
United States national securities exchange or quotation system, the
closing sales price, regular way on such day, or if no sale takes place on
such day, the average of the closing bid and asked prices on such day, (B)
in the case of a security not then listed or admitted to trading on any
national securities exchange or quotation system, the last reported sale
price on such day, or if no sale takes place on such day, the average of
the closing bid and asked prices on such day, as reported by a reputable
quotation source designated by the Company, (C) in the case of a security
not then listed or admitted to trading on any national securities exchange
or quotation system and as to which no such reported sale price or bid and
asked prices are available, the average of the reported high bid and low
asked prices on such day, as reported by a reputable quotation service, or
a newspaper of general circulation in the Borough of Manhattan, City and
State of New York, customarily published on each Business Day, designated
by the Company, or, if there shall be no bid and asked prices on such day,
the average of the high bid and low asked prices, as so reported, on the
most recent day (not more
<PAGE>
-4-
than 30 days prior to the date in question) for which prices have been so
reported and (D) if there are no bid and asked prices reported during the
30 days prior to the date in question, the Current Market Value shall be
determined as if the securities were not registered under the Exchange
Act.
"Definitive Certificate" refers to Shares that are not represented
by the Global Certificate and, instead, are issued in definitive
registered form.
"Demand Registration" shall have the meaning ascribed to that term
in Section 2.1(a).
"Depositary" means The Depository Trust Company, its nominees and
successors.
"Effectiveness Period" shall have the meaning ascribed to that term
in Section 2.1(a).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Excluded Transfer" shall mean (i) a Transfer by a Shareholder or
any of its Affiliates to a Shareholder or an Affiliate of a Shareholder,
so long as such transferee agrees to be bound by the transferor's
obligations under this Agreement to the same extent as the transferor,
(ii) a Transfer pursuant to a registered public offering, in which holders
of Registrable Securities have available to them (without cut-back) the
rights provided under Section 2.2, (iii) a Transfer by one or more
Shareholders (other than Transfers pursuant to (i) or (ii)) of 10% or less
of the shares of Common Stock held by the Shareholders in the aggregate as
of the date hereof or (iv) a Transfer resulting in net proceeds to the
Selling Shareholder(s), of US$15,000,000 or less.
"Fair Market Value" shall mean the value of any securities as
determined (without any discount for lack of liquidity, the amount of such
securities proposed to be sold or the fact that such securities held by
any Holder of such security may represent a minority interest in a private
company) by an Independent Financial Expert selected by the Company for
the determination of such value.
"Fully Diluted Shares" shall mean the outstanding shares of Common
Stock of the Company, after giving effect
<PAGE>
-5-
to the exercise of all outstanding options, subscription bonds, warrants
or other rights or securities to acquire Common Stock.
"Global Certificate" refers to the initial form of Share
certificates which, unless otherwise instructed, will be issued in global
form and held by the Depositary.
"Holder" shall mean the Initial Purchasers, for so long as the
Initial Purchasers own any Registrable Securities, and their successors,
assigns and direct and indirect transferees who become registered owners
of Registrable Securities.
"Included Securities" shall have the meaning ascribed to that term
in the Section 3.3.
"Independent Financial Expert" means a United States investment
banking firm of international standing in the United States and Brazil (i)
which does not, and whose directors, officers and employees or Affiliates
do not, have a direct or indirect material financial interest for its
proprietary account in the Company or any of its Affiliates and (ii)
which, in the judgment of the Board of Directors of the Company, is
otherwise independent with respect to the Company and its Affiliates and
qualified to perform the task for which it is to be engaged.
"Initial Public Equity Offering" means a primary public offering
(whether or not underwritten, but excluding any offering pursuant to Form
S-8 under the Securities Act or any other publicly registered offering
pursuant to the Securities Act pertaining to an issuance of shares of
Common Stock of the Company or securities exercisable therefor under any
benefit plan, employee compensation plan, or employee or director stock
purchase plan) of Common Stock of the Company pursuant to an effective
registration statement under the Securities Act.
"Initial Purchasers" shall have the meaning ascribed to that term in
the preamble hereto.
"Issuers" shall have the meaning ascribed to that term in the
preamble hereto.
"Legal Holiday" shall mean a Saturday, a Sunday or a day on which
banking institutions in New York, New York or
<PAGE>
-6-
Sao Paulo, Brazil are required by law, regulation or executive order to
remain closed.
"Liquidation Event" shall have the meaning set forth in the LLC
Agreement.
"LLC Agreement" shall mean the Limited Liability Company Agreement
of the LLC.
"LLC Shares" shall have the meaning ascribed to that term in the
preamble hereto.
"Lock Up Period" shall have the meaning ascribed to that term in
Section 2.1(a).
"Notes" shall have the meaning ascribed to that term in the preamble
hereto.
"Participating Holder" shall have the meaning ascribed to that term
in Section 3.3(a).
"Person" shall mean an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"Piggy-Back Registration" shall have the meaning ascribed to that
term in Section 2.2.
"Proposed Purchaser" shall have the meaning ascribed to that term in
Section 3.3(a).
"Proposed Transfer Date" shall have the meaning ascribed to that
term in Section 3.3(a).
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
pursuant to the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration
Statement, and all other amendments and supplements to any such
prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference, if
any, in such prospectus.
<PAGE>
-7-
"Purchase Agreement" shall have the meaning ascribed to that term in
the preamble hereto.
"Purchase Election Date" shall have the meaning ascribed to that
term in Section 2.1(g).
"Purchase Offer" shall have the meaning ascribed to that term in
Section 2.1(g).
"Purchase Offer Payment Date" shall have the meaning ascribed to
that term in Section 2.1(g).
"Purchase Offer Securities" shall have the meaning ascribed to that
term in Section 2.1(g).
"Registrable Securities" shall mean any of (a) the Shares and (b)
any other securities issued or issuable with respect to or in exchange for
the Shares by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise. As to any particular Registrable Securities,
such securities shall cease to be Registrable Securities when (a) a
Registration Statement with respect to the offering of such securities by
the Holder thereof shall have been declared effective under the Securities
Act and such securities shall have been disposed of by such Holder
pursuant to such Registration Statement, (b) such securities have been
sold to the public pursuant to Rule 144(k) (or any similar provision then
in force, but not Rule 144A) promulgated under the Securities Act or are
eligible for sale in all respects to the public without volume or manner
of sale restrictions under Rule 144(k) (or any similar provision then in
force, but not Rule 144A) promulgated under the Securities Act, (c) such
securities shall have been otherwise transferred and new certificates for
such securities not bearing a legend restricting further transfer shall
have been delivered by the Company or the LLC, as the case may be, or its
transfer agent and subsequent disposition of such securities shall not
require registration or qualification under the Securities Act or any
similar state law then in force or (d) such securities shall have ceased
to be outstanding.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with this Agreement, including,
without limitation, all SEC and stock exchange or National Association of
Securities Deal-
<PAGE>
-8-
ers, Inc. registration and filing fees and expenses, fees and expenses of
compliance with securities or blue sky laws (including, without
limitation, in the event of an underwritten offering, reasonable fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications of the Registrable Securities), rating agency fees,
printing expenses, messenger, telephone and delivery expenses, fees and
disbursements of counsel for the Company and all independent certified
public accountants, and, in the event of an underwritten offering, the
fees and disbursements of underwriters customarily paid by issuers or
sellers of securities (but not including any underwriting discounts or
commissions or transfer taxes, if any, attributable to the sale of
Registrable Securities by Holders of such Registrable Securities).
"Registration Statement" shall mean any registration statement of
the Company which covers any of the Registrable Securities pursuant to the
provisions of this Agreement and all amendments and supplements to any
such Registration Statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein.
"Requisite Shares" shall mean a number of Registrable Securities
equivalent to not less than 35% of the Registrable Securities originally
issued to the LLC pursuant to the Company-LLC Subscription Agreement.
"Rule 144" shall mean Rule 144 under the Securities Act, as such
Rule may be amended from time to time, or any similar rule (other than
Rule 144A) or regulation hereafter adopted by the SEC providing for offers
and sales of securities made in compliance therewith resulting in offers
and sales by subsequent holders that are not affiliates of an issuer of
such securities being free of the registration and prospectus delivery
requirements of the Securities Act.
"Rule 144A" shall mean Rule 144A under the Securities Act, as such
Rule may be amended from time to time.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
<PAGE>
-9-
"Shares" shall mean (a) the LLC Shares sold to the Initial
Purchasers as part of the Units pursuant to the Purchase Agreement,
whether held by any Initial Purchaser or any subsequent assignee or
transferee, (b) the Common Stock issued to the LLC in connection with the
transactions contemplated by the Purchase Agreement, whether held by the
LLC or any subsequent assignee or transferee and (c) any other securities
issued or issuable with respect to or in exchange for the foregoing by way
of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise.
"Tag-Along Notice" shall have the meaning ascribed to that term in
Section 3.3(a).
"Tag-Along Right" shall have the meaning ascribed to that term in
Section 3.3(a).
"Transfer" shall mean, with respect to Common Stock or LLC Shares,
any sale, assignment, gift, transfer, exchange, pledge or other
disposition.
"Transfer Agent" shall have the meaning ascribed to that term in the
preamble hereto and shall include any other transfer agent or registrar
for any of the Shares. The Issuers will be required to cause each such
transfer agent to become a party hereto for purposes of Sections 3.5 to
3.7.
"Transfer Notice" shall have the meaning ascribed to that term in
Section 3.3(a).
"Triggering Date" shall mean the day on which a bona fide
underwritten public offering of Common Stock is consummated, as a result
of which at least 20% of the outstanding shares of Common Stock of the
Company are listed on a national securities exchange or the Nasdaq
National Market System.
"Triggering Event" shall mean the occurrence of any of the
following: (a) the 90th day (or such earlier date as determined by the
Company in its sole discretion) following an Initial Public Equity
Offering or (b) the later to occur of (1) a Liquidation Event or (2) the
fifth anniversary of the date hereof.
<PAGE>
-10-
"Withdrawal Election" shall have the meaning ascribed to that term
in Section 2.3(c).
2. Registration Rights.
2.1. Demand Registration. (a) Request for Registration. At any time
on or after a Triggering Event, Holders owning, individually or in the
aggregate, at least the Requisite Shares may make two written requests for
registration under the Securities Act of their Company Registrable Securities (a
"Demand Registration"). Any such request will specify the number of Company
Registrable Securities proposed to be sold and will also specify the intended
method of disposition thereof. Subject to the other provisions of this Section
2.1, the Company shall give written notice of such registration request within
10 days after the receipt thereof to all other Holders. Within 30 days after
receipt of such notice by any Holder, such Holder may request in writing that
its Company Registrable Securities be included in such registration and the
Company shall include in the Demand Registration the Company Registrable
Securities of any such selling Holder requested to be so included. Each such
request by such other selling Holders shall specify the number of Company
Registrable Securities proposed to be sold and the intended method of
disposition thereof. Upon a demand, the Company will (i) prepare, file with the
SEC and use its reasonable best efforts to cause to become effective within 120
days of such demand a Registration Statement in respect of all the Company
Registrable Securities which Holders request for inclusion therein; provided
that if such demand occurs during a Black Out Period or a period (not to exceed
180 days) during which the Company is prohibited or restricted from issuing or
selling Common Stock pursuant to any underwriting or purchase agreement relating
to an underwritten public offering of Common Stock or securities convertible
into or exchangeable for Common Stock under Rule 144A or registered under the
Security Act or any agreement with a securityholder of the Company exercising
registration rights pursuant to an agreement in existence on the date hereof (a
"Lock Up Period"), the Company shall not be required to notify the Holders of
such demand or file such Registration Statement prior to the end of the Black
Out Period or Lock Up Period, as the case may be, in which event, the Company
will use its best efforts to cause such Registration Statement to become
effective no later than 45 days after the end of the Black Out Period or Lock Up
Period, as the case may be, and (ii) keep such Registration Statement
continuously effective for the shorter of (a) 180 days (the "Effectiveness
Period") and (b) such period of time as all of the Company Registrable
Securities included in such
<PAGE>
-11-
Registration Statement have been sold thereunder; provided, however, that the
Company may postpone the filing period, suspend the effectiveness of any
registration, suspend the use of any Prospectus and shall not be required to
amend or supplement the Registration Statement, any related Prospectus or any
document incorporated therein by reference (other than an effective registration
statement being used for an underwritten offering) in the event that, and for a
period, in the case of any particular Demand Registration, not to exceed an
aggregate of 45 days ("Black Out Period") if (i) an event or circumstance occurs
and is continuing as a result of which the Registration Statement, any related
Prospectus or any document incorporated therein by reference as then amended or
supplemented would, in the Company's good faith judgment, contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein (in the case of any Prospectus, in the light of
the circumstances under which they were made), not misleading, and (ii)(A) the
Company determines in its good faith judgment that the disclosure of such event
at such time would have a material adverse effect on the business, operations or
prospects of the Company or (B) the disclosure otherwise relates to a material
business transaction which has not yet been publicly disclosed; provided,
further, that the Effectiveness Period shall be extended by the number of days
in any Black Out Period. Subject to Section 2.1(b), the Company shall only be
required to register Registrable Securities pursuant to this Section 2.1 once.
In the event of the occurrence of any Black Out Period during an
Effectiveness Period or Lock Up Period, the Company will promptly notify the
Holders of Company Registrable Securities thereof in writing.
(b) Effective Registration. A registration will not be deemed to
have been effected as a Demand Registration, and thereby satisfy the obligation
hereunder, unless it has been declared effective by the SEC and the Company has
complied in all material respects with its obligations under this Agreement with
respect thereto; provided that if, after it has become effective, the offering
of Company Registrable Securities pursuant to such registration is or becomes
the subject of any stop order, injunction or other order or requirement of the
SEC or any other governmental or administrative agency, or if any court prevents
or otherwise limits the sale of Company Registrable Securities pursuant to the
registration (for any reason other than the act or omissions of the Holders) for
the period of time contemplated hereby, such registration will be deemed not to
have been effected. If (i) a registration requested
<PAGE>
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pursuant to this Section 2.1 is deemed not to have been effected or (ii) the
registration requested pursuant to this Section 2.1 does not remain effective
for the Effectiveness Period, then the Company shall continue to be obligated to
effect an additional registration pursuant to this Section 2.1. The Holders of
Company Registrable Securities shall be permitted to withdraw all or any part of
the Company Registrable Securities from a Demand Registration at any time prior
to the effective date of such Demand Registration. If at any time a Registration
Statement is filed with the SEC pursuant to a Demand Registration, and
subsequently a sufficient number of the Company Registrable Securities are
withdrawn from the Demand Registration so that such Registration Statement does
not cover that number of Company Registrable Securities at least equal to 25% of
the Shares originally issued to the LLC, the Holders who have not withdrawn
their Company Registrable Securities shall have the opportunity to include an
additional number of Company Registrable Securities in the Demand Registration
so that such Registration Statement covers that number of Company Registrable
Securities at least equal to 25% of the Shares originally issued to the LLC. If
an additional number of Company Registrable Securities is not so included, the
Company may withdraw the Registration Statement. Such withdrawn Registration
Statement will not count as a Demand Registration and the Company shall continue
to be obligated to effect a registration pursuant to this Section 2.1; provided
the Holders that requested withdrawal shall be obligated to reimburse the
Company for all customary and reasonable out-of-pocket expenses incurred by it
in performing its obligations hereunder with respect to such withdrawn
Registration Statement.
(c) Priority in Demand Registrations Pursuant to Section 2.1. If a
Demand Registration pursuant to this Section 2.1 involves an underwritten
offering and the lead managing underwriter advises the Company in writing that,
in its view, the number of Company Registrable Securities requested by the
Holders to be included in such registration, together with any other securities
permitted to be included in such registration pursuant to Section 8(c) hereof
exceeds the number which, can be sold without adversely affecting the offering:
first, the securities other than the Company Registrable Securities of the
Holders included in such registration shall be reduced in their entirety before
any reduction of Company Registrable Securities; and second, to the extent the
reduction set forth in the immediately preceding clause is insufficient to
reduce the number of securities requested for inclusion in such registration to
a number, which, in the view of such lead managing underwriter, can be sold
without adversely affecting the offer-
<PAGE>
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ing, the number of such Company Registrable Securities to be included in such
registration shall be allocated pro rata among all requesting Holders on the
basis of the relative number of Company Registrable Securities then held by each
such Holder (provided that any Company Registrable Securities thereby allocated
to any such Holder that exceed such Holder's request shall be reallocated among
the remaining requesting Holders in like manner). In the event that the number
of Company Registrable Securities requested to be included in such registration
is less than the number which, in the view of the lead managing underwriter, can
be sold without adversely affecting the offering, the Company may include in
such registration the securities the Company or any other Person proposes to
sell up to the number of securities that, in the view of the lead managing
underwriter, can be sold without adversely affecting the offering.
(d) Selection of Underwriter. If the Holders so elect, the offering
of such Company Registrable Securities pursuant to a Demand Registration shall
be in the form of an underwritten offering. The Company shall select one or more
nationally recognized firms of investment bankers (to whom a majority of Holders
making such Demand Registration shall not have reasonably objected) to act as
the managing underwriter or underwriters (and if more than one Managing
Underwriter is selected, the Company shall also name the lead managing
underwriter) in connection with such offering and shall select any additional
investment bankers and managers to be used in connection with the offering.
(e) Expenses. The Company will pay all Registration Expenses in
connection with the registration requested pursuant to Section 2.1(a). Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Company Registrable
Securities pursuant to a registration statement requested pursuant to this
Section 2.1.
(f) Ability of LLC Shareholders to Effect Rights. In the event that
the Initial Public Equity Offering occurs but a Liquidation Event has not
occurred, Holders of Registrable Securities of the LLC will be entitled to the
rights and privileges pertaining to Company Registrable Securities in accordance
with each such Holder's Percentage Interest (as defined in the Purchase
Agreement) with respect to the Company Registrable Securities held by the LLC
notwithstanding that a Liquidation Event has not occurred and Holders may cause
the LLC to
<PAGE>
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deliver Company Registrable Securities for inclusion in a Demand Registration
pursuant to this Section 2.1.
2.2. Piggy-Back Registration. If at any time either of the Issuers
proposes to file a Registration Statement under the Securities Act with respect
to an offering by such Issuer for its own account or for the account of any of
its respective securityholders of any class of Common Stock (other than (i) a
registration statement on Form S-8, S-4 or F-4 (or any substitute form that may
be adopted by the SEC), (ii) a registration statement filed in connection with
an offer or offering of securities solely to such Issuer's existing
securityholders or (iii) a Demand Registration), then such Issuer shall give
written notice of such proposed filing to the Holders of Registrable Securities
as soon as practicable (but in no event less than 20 Business Days before the
anticipated filing date), and such notice shall offer such Holders the
opportunity to register such number of Registrable Securities as each such
Holder may request (which request shall specify the Registrable Securities
intended to be disposed of by such Holder (a "Piggy-Back Registration"). Such
Issuer shall use its reasonable best efforts to cause the managing underwriter
or underwriters of such proposed underwritten offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration to be included
on the same terms and conditions as any similar securities of such Issuer or any
other securityholder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof, provided, however, in no event shall such Issuer
be required to reduce the number of securities proposed to be sold by such
Issuer or alter the terms of the securities proposed to be sold by such Issuer
in order to induce the managing underwriter or underwriters to permit
Registrable Securities to be included. Any Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 2.2 by giving written notice to
such Issuer of its request to withdraw prior to the effectiveness of the
Registration Statement. An Issuer may withdraw a Piggy-Back Registration at any
time prior to the time it becomes effective; provided that such Issuer shall
give prompt notice thereof to participating Holders. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this Section 2.2, and each Holder shall pay all
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Registrable Securities pursuant to a
registration statement effected pursuant to this Section 2.2.
<PAGE>
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No registration effected under this Section 2.2, and no failure to
effect a registration under this Section 2.2, shall relieve an Issuer of its
obligation to effect a registration upon the request of Holders pursuant to
Section 2.1, and no failure to effect a registration under this Section 2.2 and
to complete the sale of Registrable Securities in connection therewith shall
relieve an Issuer of any other obligation under this Agreement.
2.3. Reduction of Offering. (a) If the lead managing underwriter of
any underwritten offering described in Section 2.2 has informed, in writing, the
Holders of the Registrable Securities requesting inclusion in such offering that
it is its view that the total number of securities which an Issuer, the Holders
and any other Persons desiring to participate in such registration intend to
include in such offering is such as to materially and adversely affect the
success of such offering, including the price at which such securities can be
sold, then the number of Registrable Securities to be offered for the account of
such Holders and the number of such securities to be offered for the account of
all such other Persons (other than the Company) participating in such
registration shall be reduced or limited pro rata in proportion to the
respective number of securities requested to be registered to the extent
necessary to reduce the total number of securities requested to be included in
such offering to the number of securities, if any, recommended by such lead
managing underwriter; provided that if such offering is effected for the account
of any securityholder of the Company other than the Holders (either directly or
through the LLC), pursuant to the demand registration rights of any such
securityholder, then the number of securities to be offered for the account of
the Company (if any) and the Holders (but not such securityholders who have
exercised their demand registration rights) shall be reduced or limited pro rata
in proportion to the respective number of securities requested to be registered
to the extent necessary to reduce the total number of securities requested to be
included in such offering to the number of securities, if any, recommended by
such lead managing underwriter.
(b) If the lead managing underwriter of any underwritten offering
described in Section 2.2 notifies the Holders requesting inclusion of
Registrable Securities in such offering, that the kind of securities that such
Holders, the Company and any other Persons desiring to participate in such
registration intend to include in such offering is such as to materially and
adversely affect the success of such offering, (x) the Registrable Securities to
be included in such offering shall be
<PAGE>
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reduced as described in clause (i) above or (y) if a reduction in the
Registrable Securities pursuant to clause (i) above would, in the judgment of
the lead managing underwriter, be insufficient to substantially eliminate the
adverse effect that inclusion of the Registrable Securities requested to be
included would have on such offering, such Registrable Securities will be
excluded from such offering.
(c) If, as a result of the proration provisions of this Section 2.3,
any Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Holder has requested to be included, such
Holder may elect to withdraw his request to include Registrable Securities in
such registration (a "Withdrawal Election"); provided that a Withdrawal Election
shall be made prior to the effectiveness of the Registration Statement and shall
be irrevocable and, after making a Withdrawal Election, a Holder shall no longer
have any right to include Registrable Securities in the registration as to which
such Withdrawal Election was made.
(d) Holders of Registrable Securities of the LLC will be entitled to
the rights and privileges pertaining to Company Registrable Securities in
accordance with each such Holder's Percentage Interest with respect to the
Company Registrable Securities held by the LLC notwithstanding that a
Liquidation Event has not occurred and Holders may cause the LLC to deliver
Company Registrable Securities for inclusion in a Piggy-Back Registration
pursuant to this Section 2.3.
3. Transfers.
3.1. Generally. All Shares and Registrable Securities at any time
and from time to time outstanding shall be held subject to the conditions and
restrictions set forth in this Section 3. All shares of Capital Stock of the
Issuers now or hereafter beneficially owned by the Shareholders and each of
their Affiliates shall be held subject to the conditions and restrictions set
forth in this Section 3. Each Holder of Shares and Registrable Securities and
each of the Shareholders by executing this Agreement or by accepting a
certificate representing Capital Stock or other indicia of ownership therefor
from an Issuer agree with each Issuer to such conditions and restrictions.
3.2. Restrictions on Transfer. (a) The LLC shall keep, at the office
or agency maintained by the LLC for such purpose in the City of New York,
Borough of Manhattan, a register or registers in which, subject to such
reasonable regula-
<PAGE>
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tions as it may prescribe, the LLC shall provide for the registration of, and
registration of transfer of, Shares of the LLC as provided in this Article. The
Company shall at all times maintain appropriate and customary arrangements
providing for the registration of, and registration of transfer of, Shares as
provided in this Article. Each person designated by an Issuer from time to time
as a person authorized to register the transfer and exchange of the Shares of
such Issuer is hereinafter called, individually and collectively, the "Transfer
Agent" and shall be required to agree to Sections 3.2 through 3.5 hereof;
provided, however, that Banco Itau shall not be required to agree to Section 3.5
to the extent such Section shall be inapplicable to Shares of the Company. The
LLC has initially appointed Chase Mellon Shareholder Services as Transfer Agent
with respect to Shares of the LLC. The Company has initially appointed Banco
Itau S.A. as Transfer Agent with respect to Shares of the Company. The Company
shall, promptly following the execution of this Agreement, duly register this
Agreement and shall notify Banco Itau thereof. Upon written notice by any Issuer
to any acting Transfer Agent, such Issuer may appoint a successor Transfer Agent
for such purposes.
(b) Any Transfer made in violation of this Agreement by a
Shareholder or any of its Affiliates shall be deemed null and void and shall not
be recorded as a transfer upon the transfer books of the applicable Issuer. Each
certificate representing shares of Common Stock held by a Shareholder and each
of its Affiliates shall contain conspicuous notation on such certificate
indicating that the transfer of such shares is subject to the terms and
restrictions of this Agreement, and each of the Shareholders hereby consents to
the placement of such legend on the certificate or certificates representing the
shares of Common Stock beneficially owned by such party.
3.3. Tag-Along Rights. (a) In the event of any proposed direct or
indirect Transfer of beneficial ownership of Shares (whether now or hereafter
issued) by a Shareholder (the "Proposed Seller") or any of its Affiliates in any
transaction or series of related transactions (including any proposed direct or
indirect transfer of Common Stock by the LLC for the capital account of any
Shareholder or any Affiliate having an interest in the LLC) to any Person (other
than an Excluded Transfer or a Transfer of beneficial ownership of Common Stock
by the LLC to the Member of the LLC whose capital account is at such time
credited with such Common Stock upon the occurrence of a Liquidation Event)
(such other Person being hereinafter referred to as the "Proposed Purchaser") at
any time prior to the Triggering Date, the holders of Shares and Registrable Se-
<PAGE>
-18-
curities shall have the irrevocable right, but not the obligation (the
"Tag-Along Right"), to require the Proposed Purchaser to purchase from each of
them up to such number of Shares and Registrable Securities (the "Included
Securities") determined in accordance with Section 3.3(c). The Proposed Seller
shall give written notice (a "Transfer Notice") at least 30 days prior to the
date of the proposed Transfer (the "Proposed Transfer Date") to the holders of
Shares and Registrable Securities stating (i) the name and address of the
Proposed Purchaser, (ii) the proposed amount of consideration, terms and
conditions of payment offered by such Proposed Purchaser (if the proposed
consideration is not cash, the Transfer Notice shall describe the terms of the
proposed consideration) and the time and place of the closing for the proposed
Transfer, (iii) the number of shares of Common Stock and other securities
proposed to be directly or indirectly Transferred by the Proposed Seller and/or
its Affiliates and (iv) either that the Proposed Purchaser has been informed of
the Tag-Along Right and has agreed to purchase Shares and Registrable Securities
in accordance with the terms hereof or that the Proposed Seller or any of its
Affiliates will make such purchase. The Tag-Along Right shall be exercised by
any or all of the holders of Shares and Registrable Securities by giving written
notice to the Issuers of the Shares or Registrable Securities proposed to be
sold ("Tag-Along Notice"), within 15 days of receipt of the Transfer Notice,
indicating its election to exercise the Tag-Along Right (the "Participating
Holders"). The Tag-Along Notice shall state the amount of Shares and Registrable
Securities that such holder proposes to include in such Transfer to the Proposed
Purchaser. Failure by any holder to give such notice within the 15-day period
shall be deemed an election by such holder not to sell its Shares and
Registrable Securities pursuant to that Transfer. The closing with respect to
any sale to a Proposed Purchaser pursuant to this Section shall be held at the
time and place specified in the Transfer Notice but in any event within 60 days
of the Proposed Transfer Date; provided that if through the exercise of
reasonable efforts the Proposed Seller or any of its Affiliates is unable to
cause such transaction to close within 60 days, such period may be extended for
such reasonable period of time as may be necessary to close such transaction.
Consummation of the sale of Common Stock or other securities by the Proposed
Seller and/or its Affiliates to a Proposed Purchaser shall be conditioned upon
consummation of the sale by each Participating Holder to such Proposed Purchaser
(or the Proposed Seller) of the Included Securities, if any.
<PAGE>
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(b) In the event that the Proposed Purchaser does not purchase
Included Securities from the holders on the same terms and conditions as
purchased from the Proposed Seller and its Affiliates, then the Proposed Seller
or such Affiliate shall purchase, or cause another Person to purchase, such
Included Securities if the Transfer occurs.
(c) Each holder of Shares and Registrable Securities shall have the
right to require the Proposed Purchaser to purchase from such holder up to a
percentage of the number of Shares and Registrable Securities owned by such
holder equaling the percentage derived by dividing the total number of shares of
Common Stock that the Proposed Seller and its Affiliates propose to directly or
indirectly Transfer by the total number of shares of Common Stock at the time
beneficially owned by the Proposed Seller and its Affiliates; provided that in
the event of any proposed Transfer, either at a time or as a result of which
there would result a Change of Control, each holder of Shares and Registrable
Securities shall have the right to require the Proposed Purchaser to purchase
all of the Shares and Registrable Securities owned by such holder.
(d) Any Shares and/or Registrable Securities purchased from the
Participating Holders pursuant to this Section 3.3 shall be paid for in the same
type of consideration and at the same price per share of Common Stock and upon
the same terms and conditions of such proposed Transfer of Common Stock by the
Proposed Seller and/or any of its Affiliates. If the Registrable Securities to
be purchased include securities or property other than Common Stock, the price
to be paid for such securities or property shall be the same price per share or
other denomination paid by the Proposed Purchaser for like securities purchased
from the Proposed Seller and/or its Affiliates or, if like securities are not
purchased from the Proposed Seller and/or its Affiliates by the Proposed
Purchaser, the Fair Market Value of such securities. The Proposed Seller shall
arrange for payment directly by the Proposed Purchaser to each Participating
Holder, upon delivery of the certificate or certificates representing the Shares
and/or Registrable Securities duly endorsed for transfer, together with such
other documents as the Proposed Purchaser may reasonably request.
(e) If at the end of 60 days following the Proposed Transfer Date,
or as otherwise extended pursuant to the provisions of Section 3.3(a), the sale
of Common Stock by the Proposed Seller and/or its Affiliates and the sale of the
Included Securities have not been completed in accordance with the terms of the
Proposed Purchaser's offer, all certificates represent-
<PAGE>
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ing the Included Securities shall be returned to the Participating Holders, and
all the restrictions on Transfer contained in this Agreement with respect to
Common Stock beneficially owned by the Proposed Seller and its Affiliates shall
remain in effect.
3.4. Obligation to Sell. If at any time prior to the Triggering Date
the Shareholders and/or any of their Affiliates determine to sell all of the
Common Stock of the Company then beneficially owned by the Shareholders and
their Affiliates to a Person other than an Affiliate of a Shareholder, the
Shareholders shall have the right to require the Holders of Registrable
Securities to sell such Registrable Securities to such transferee; provided that
(a) the consideration to be received by the Shareholders of Registrable
Securities shall be the same type of consideration received by the Shareholders
and their Affiliates and, in any event, shall be cash and/or securities
registered under the Securities Act and listed on a national securities exchange
or authorized for quotation on the Nasdaq National Market System, (b) after
giving effect to such transaction, the Shareholders and their Affiliates shall
not beneficially own, directly or indirectly, any Capital Stock or rights to
purchase Capital Stock of the Company and (c) the foregoing provisions shall not
apply to sales of Common Stock by the Company in a registered public offering
under the Securities Act or an offering pursuant to Rule 144A. Any Registrable
Securities purchased from the Holders pursuant to this Section 3.4 shall be paid
for at the same price per share of Common Stock and upon the same terms and
conditions of such proposed transfer of Common Stock by the Shareholders and
their Affiliates. If the Registrable Securities to be purchased include
securities other than Common Stock, the price to be paid for such securities
shall be the same price per share or other denomination paid by the Proposed
Purchaser for like securities purchased from the Shareholders and their
Affiliates or, if like securities are not purchased from the Shareholders and
their Affiliates, the Fair Market Value of such securities.
3.5. Registration of Transfers or Exchanges.
(a) Transfer or Exchange of Definitive Certificates. When Definitive
Certificates are presented to the Transfer Agent with a request from the holder:
(i) to register the transfer of the Definitive Certificates; or
<PAGE>
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(ii) to exchange such Definitive Certificates for an equal number of
Definitive Certificates of other authorized denominations,
the Transfer Agent shall register the transfer or make the exchange as requested
if the requirements under this Agreement as set forth in this Section 3.5 for
such transactions are met; provided, however, that the Definitive Certificates
presented or surrendered by a holder for registration of transfer or exchange:
(x) shall be duly endorsed or accompanied by a written instruction of
transfer or exchange in form satisfactory to the Company and the
Transfer Agent, duly executed by such holder or by his attorney,
duly authorized in writing; and
(y) in the case of Shares the offer and sale of which have not been
registered under the Securities Act and are presented for transfer
or exchange prior to (X) the date which is two years (or such
shorter period as may be prescribed by Rule 144(k) (or any successor
provision thereto)) after the later of the date of original issuance
of the Shares and the last date on which the Company or the LLC or
any or their affiliates was the owner of such Shares, or any
predecessor thereto, and (Y) such later date, if any, as may be
required by any subsequent change in applicable law (the "Resale
Restriction Termination Date"), such Shares shall be accompanied by
the following additional information and documents, as applicable:
(A) if such Shares are being delivered to the Transfer Agent by a
holder for registration in the name of such holder, without
transfer, a certification from such holder to that effect (in
substantially the form of Exhibit C hereto); or
(B) if such Shares are being transferred to a qualified
institutional buyer (as defined in Rule 144A under the
Securities Act) (a "QIB") in accordance with Rule 144A under
the Securities Act, a certification from the transferor to
that effect (in substantially the form of Exhibit C hereto);
or
<PAGE>
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(C) if such Shares are being transferred to an institutional
"accredited investor" within the meaning of subparagraphs
(a)(1), (a)(2), (a)(3) or (a)(7) of Rule 501 under the
Securities Act (an "Institutional Accredited Investor"),
delivery by the transferor of a certification to that effect
(in substantially the form of Exhibit C hereto), and delivery
by the proposed transferee of a Transferee Certificate for
Institutional Accredited Investors (in substantially the form
of Exhibit D hereto); or
(D) if such Shares are being transferred in reliance on Regulation
S under the Securities Act, delivery by the transferor of a
certification to that effect (in substantially the form of
Exhibit C hereto), and a Certificate for Regulation S
Transfers in the form of Exhibit E hereto; or
(E) if such Shares are being transferred in reliance on Rule 144
under the Securities Act, delivery by the transferor of (i) a
certification from the transferor to that effect (in
substantially the form of Exhibit C hereto), and (ii) an
opinion of counsel reasonably satisfactory to the Company or
the LLC, as the case may be, to the effect that such transfer
is in compliance with the Securities Act; or
(F) if such Shares are being transferred in reliance on another
exemption from the registration requirements of the Securities
Act, a certification from the transferor to that effect (in
substantially the form of Exhibit C hereto) and an opinion of
counsel reasonably satisfactory to the Company or the LLC, as
the case may be, to the effect that such transfer is in
compliance with the Securities Act; provided that the Company
or the LLC, as the case may be, may, based upon the views of
its own counsel, instruct the Transfer Agent not to register
such transfer in any case where the proposed transferee is not
a QIB, non-U.S. Person (as defined in Regulation S) or
Institutional Accredited Investor.
(b) Restrictions on Transfer of a Definitive Certificate for a
Beneficial Interest in a Global Certificate. A Definitive Certificate may not be
transferred by a holder for a
<PAGE>
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beneficial interest in a Global Certificate except upon satisfaction of the
requirements set forth below. Upon receipt by the Transfer Agent of a Definitive
Certificate, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Transfer Agent, together with:
(A) certification from such holder (in substantially the form of
Exhibit C hereto) that such Definitive Certificate is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act; and
(B) written instructions directing the Transfer Agent to make, or
to direct the Depositary to make, an endorsement on the Global
Certificate to reflect an increase in the aggregate amount of
the Shares represented by the Global Certificate,
then the Transfer Agent shall cancel such Definitive Certificate and cause, or
direct the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Transfer Agent, the number of
Shares represented by the Global Certificate to be increased accordingly. If no
Global Certificate is then outstanding, the Company shall issue and the Transfer
Agent shall upon written instructions from the Company authenticate a new Global
Certificate in the appropriate amount.
(c) Transfer or Exchange of Global Certificates. The transfer or
exchange of Global Certificates or beneficial interests therein shall be
effected through the Depositary, in accordance with this Section 3.5, the
Private Placement Legend, this Agreement (including the restrictions on transfer
set forth herein) and the procedures of the Depositary therefor.
(d) Transfer or Exchange of a Beneficial Interest in a Global
Certificate for a Definitive Certificate.
(i) Any person having a beneficial interest in a Global Certificate may
transfer or exchange such beneficial interest for a Definitive
Certificate upon receipt by the Transfer Agent of written
instructions or such other form of instructions as is customary for
the Depositary from the Depositary or its nominee on behalf of any
person having a beneficial interest in a Global Certificate,
including a written order containing registration instructions and,
in the case of
<PAGE>
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any such transfer or exchange prior to the Resale Restriction
Termination Date, the following additional information and
documents:
(A) if such beneficial interest is being transferred to the person
designated by the Depositary as being the beneficial owner, a
certification from such person to that effect (in
substantially the form of Exhibit C hereto); or
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a
certification from the transferor to that effect (in
substantially the form of Exhibit C hereto); or
(C) if such beneficial interest is being transferred to an
Institutional Accredited Investor, delivery by the transferor
of a certification to that effect (in substantially the form
of Exhibit C hereto), and delivery by the proposed transferee
of a Transferee Certificate for Institutional Accredited
Investors (in substantially the form of Exhibit D hereto); or
(D) if such beneficial interest is being transferred in reliance
on Regulation S under the Securities Act, delivery by the
transferor of (i) a certification to that effect (in
substantially in the form of Exhibit C hereto), and (ii) a
Certificate for Regulation S Transfers in the form of Exhibit
E hereto; or
(E) if such beneficial interest is being transferred in reliance
on Rule 144 under the Securities Act, delivery by the
transferor of (i) a certification to that effect (in
substantially the form of Exhibit C hereto) and (ii) an
opinion of counsel reasonably satisfactory to the Company or
the LLC, as the case may be, to the effect that such transfer
is in compliance with the Securities Act; or
(F) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification from the transferor to that
effect (in substantially the form of Exhibit C hereto)
<PAGE>
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and an opinion of counsel reasonably satisfactory to the
Company or the LLC, as the case may be, to the effect that
such transfer is in compliance with the Securities Act;
provided that the Company or the LLC, as the case may be, may
instruct the Transfer Agent not to register such transfer in
any case where the proposed transferee is not a QIB, non-U.S.
Person or Institutional Accredited Investor;
then the Transfer Agent will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Transfer Agent, the aggregate amount of the Global Certificate to be
reduced and, following such reduction, the Company will execute and,
upon receipt of an authentication order in the form of an officers'
certificate (a certificate signed by two officers of such company,
one of whom must be the principal executive officer, principal
financial officer or principal accounting officer) (an "Officers'
Certificate"), the Transfer Agent will authenticate and deliver to
the transferee a Definitive Certificate.
(ii) Definitive Certificates issued in exchange for a beneficial interest
in a Global Certificate pursuant to this Section 3.5(d) shall be
registered in such names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Transfer Agent in
writing. The Transfer Agent shall deliver such Definitive
Certificates to the persons in whose names such Shares are so
registered and adjust the Global Certificate pursuant to paragraph
(h) of this Section 3.5.
(e) Restrictions on Transfer or Exchange of Global Certificates.
Notwithstanding any other provisions of this Agreement (other than the
provisions set forth in subsection (f) of this Section 3.5), a Global
Certificate may not be transferred or exchanged as a whole except by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary.
(f) Authentication of Definitive Certificates in Absence of
Depositary. If at any time:
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(i) the Depositary for the Global Certificates notifies the Company that
the Depositary is unwilling or unable to continue as Depositary for
the Global Certificate and a successor Depositary for the Global
Certificate is not appointed by the Company within 90 days after
delivery of such notice; or
(ii) the Company and, if prior to the occurrence of a Liquidation Event,
the LLC, notify the Transfer Agent in writing that it elects to
cause the issuance of Definitive Certificates for all Global
Certificates under this Agreement,
then the Company and, if applicable, the LLC, will execute, and the Transfer
Agent will, upon receipt of an Officers' Certificate requesting the
authentication and delivery of Definitive Certificates, authenticate and deliver
Definitive Certificates, in an aggregate number equal to the aggregate number of
Shares represented by the Global Certificate, in exchange for such Global
Certificate.
(g) Private Placement Legend. Upon the registration of transfer,
exchange or replacement of Share certificates not bearing the legend set forth
in the first paragraph of Exhibit A attached hereto (the "Private Placement
Legend"), the Transfer Agent shall deliver Share certificates that do not bear
the Private Placement Legend. Upon the registration of transfer, exchange or
replacement of Share certificates bearing the Private Placement Legend, the
Transfer Agent shall deliver Share certificates that bear the Private Placement
Legend unless, and the Transfer Agent is hereby authorized to deliver Share
certificates without the Private Placement Legend if, (i) the requested transfer
is not prior to the date which is two years (or such shorter period as may be
prescribed by Rule 144(k) (or any successor provision thereto) under the
Securities Act or any successor provision thereunder) after the later of the
original Issue Date of the Shares or the last day on which the Company or the
LLC, as the case may be, or any of its Affiliates was the owner of the Shares or
any predecessor security, (ii) there is delivered to the Transfer Agent an
opinion of counsel reasonably satisfactory to the Company and the Transfer Agent
to the effect that neither such legend nor the related restrictions on transfer
are required in order to maintain compliance with the provisions of the
Securities Act or (iii) the Shares to be transferred or exchanged represented by
such Share Certificates are being transferred or exchanged pursuant to an
effective registration statement under the Securities Act.
<PAGE>
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(h) Cancellation or Adjustment of a Global Certificate. At such time
as all beneficial interests in a Global Certificate have either been exchanged
for Definitive Certificates, redeemed, repurchased or cancelled, such Global
Certificate shall be returned to the Company or the LLC, as the case may be, or,
upon written order to the Transfer Agent in the form of an Officers' Certificate
from the Company or the LLC, as the case may be, retained and cancelled by the
Transfer Agent. At any time prior to such cancellation, if any beneficial
interest in a Global Certificate is exchanged for Definitive Certificates,
redeemed, repurchased or cancelled, the number of Shares represented by such
Global Certificate shall be reduced and an endorsement shall be made on such
Global Certificate by the Transfer Agent to reflect such reduction.
(i) Obligations with Respect to Transfers or Exchanges of Definitive
Certificates.
(i) To permit registrations of transfers or exchanges, the Company or
the LLC, as the case may be, shall execute, at the Transfer Agent's
request, and the Transfer Agent shall authenticate Definitive
Certificates and Global Certificates.
(ii) All Definitive Certificates and Global Certificates issued upon any
registration, transfer or exchange of Definitive Certificates or
Global Certificates shall be the valid obligations of the Company or
the LLC, as the case may be, entitled to the same benefits under
this Agreement as the Definitive Certificates or Global Certificates
surrendered upon the registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any Shares,
the Transfer Agent and the Company or the LLC, as the case may be,
may deem and treat the person in whose name any Shares are
registered as the absolute owner of such Shares, and neither the
Transfer Agent nor the Company or the LLC, as the case may be, shall
be affected by notice to the contrary.
(j) Compliance. Other than following the applicable terms and
requirements of this Agreement, the Transfer Agent shall have no additional duty
to monitor compliance with federal, state or other securities laws.
<PAGE>
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3.6. Lost, Stolen, Destroyed, Defaced or Mutilated Share
Certificates. Upon receipt by the Company and the Transfer Agent (or any agent
of the Company or the Transfer Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Share certificate and of an indemnity bond satisfactory to them and, in
the case of mutilation or defacement, upon surrender thereof to the Transfer
Agent for cancellation, then, in the absence of notice to the Company or the
Transfer Agent that such Share certificate has been acquired by a bona fide
purchaser or holder in due course, the Company shall execute, and an authorized
signatory of the Transfer Agent shall manually authenticate and deliver, in
exchange for or in lieu of the lost, stolen, destroyed, defaced or mutilated
Share certificate, a new Share certificate representing a like number of Shares,
bearing a number or other distinguishing symbol not contemporaneously
outstanding. Upon the issuance of any new Share certificate under this Section
in a name other than the prior registered holder of the lost, stolen, destroyed,
defaced or mutilated Share certificate, the Company or the LLC, as the case may
be, may require the payment from the holder of such Share certificate of a sum
sufficient to cover any tax, stamp tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Transfer Agent) in connection therewith. Every substitute Share
certificate executed and delivered pursuant to this Section in lieu of any lost,
stolen or destroyed Share certificate shall constitute an additional contractual
obligation of the Company or the LLC, as the case may be, whether or not the
lost, stolen or destroyed Share certificate shall be at any time enforceable by
anyone, and shall be entitled to the benefits of (but shall be subject to all
the limitations of rights set forth in) this Agreement equally and
proportionately with any and all other Share certificates duly executed and
delivered hereunder. The provisions of this Section 3.6 are exclusive with
respect to the replacement of lost, stolen, destroyed, defaced or mutilated
Share certificates and shall preclude (to the extent lawful) any and all other
rights or remedies notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Share certificates.
3.7. Separation of Shares and Notes. The Notes and the LLC Shares
will not be separately transferable until the Separability Date. "Separability
Date" shall mean the earliest to occur of: (i) six months after the offering,
(ii) the date on which a registration statement under the Securities Act,
<PAGE>
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with respect to a registered exchange offer for the Notes or covering the sale
by holders of the Notes is declared effective under the Securities Act, (iii)
the occurrence of an Event of Default (as defined in the Indenture), (iv)
immediately prior to the occurrence of a Change of Control (as defined in the
Indenture) or (v) such earlier date as may be determined by Merrill Lynch & Co.
in its sole discretion and specified to the Company, the LLC, the Trustee, the
Transfer Agent and the Unit Agent in writing. Notwithstanding the foregoing, in
the event a Change of Control (as defined in the Indenture) is proposed and the
Company commences a Change of Control Offer (as defined in the Indenture) prior
to the Separability Date, as determined by the preceding sentence, the
Separability Date shall be such earlier date of commencement. The separation of
the Shares and the Notes is herein referred to as a "Separation."
4. Registration Procedures.
In connection with the obligations of the Company with respect to
any Registration Statement pursuant to Sections 2.1 and 2.2 hereof, the Company
shall:
(a) A reasonable period of time prior to the initial filing of a
Registration Statement or Prospectus and a reasonable period of time prior
to the filing of any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein
by reference), furnish to the Holders of the Registrable Securities
included in such Registration Statement, and the managing underwriters, if
any, copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference)
will be subject to the review of such Holders, and such underwriters, if
any, and use reasonable commercial efforts to cause the officers and
directors of the Company, counsel to the Company and independent certified
public accountants to the Company to respond to such reasonable inquiries
as shall be necessary, in the opinion of respective counsel to such
Holders and such underwriters, to conduct a reasonable investigation
within the meaning of the Securities Act. The Company shall not file any
such Registration Statement or related Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities included in such Registration Statement shall reasonably object
on a timely basis;
<PAGE>
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(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be
necessary to keep such Registration Statement continuously effective for
the applicable time period required hereunder (except for Black Out
Periods); cause the related Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule
424 under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers thereof
set forth in such Registration Statement as so amended or in such
Prospectus as so supplemented;
(c) Notify the holders of Registrable Securities to be sold and the
managing underwriters, if any, promptly, and (if requested by any such
person), confirm such notice in writing, (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment is proposed to be filed,
and (B) with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the
SEC or any other Federal or state governmental authority for amendments or
supplements to a Registration Statement or related Prospectus or for
additional information, (iii) of the issuance by the SEC, any state
securities commission, any other governmental agency or any court or any
stop order, order or injunction suspending or enjoining the use of a
Prospectus or the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the receipt by the
Company of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening
of any proceeding for such purpose, and (v) of the happening of any event
or information becoming known that makes any statement made in a
Registration Statement or related Prospectus untrue in any material
respect or that requires the making of any changes in such Registration
Statement or Prospectus so that, in the case of a Registration Statement,
it will not contain any untrue statement of a material
<PAGE>
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fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and that in the
case of a Prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(d) Use its reasonable best efforts to avoid the issuance of or, if
issued, obtain the withdrawal of any order enjoining or suspending the use
of a Prospectus or the effectiveness of a Registration Statement or the
lifting of any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction described in Section 4(h), at the earliest practicable
moment;
(e) If requested by the managing underwriters, if any, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information as the managing underwriters, if any, reasonably believe
should be included therein, and (ii) make all required filings of such
Prospectus supplement or such post-effective amendment under the
Securities Act as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment; provided, however, that the
Company shall not be required to take any action pursuant to this Section
4(e) that would, in the opinion of counsel for the Company, violate
applicable law;
(f) Upon written request to the Company, furnish to each Holder of
Registrable Securities to be sold pursuant to a Registration Statement and
each managing underwriter, if any, without charge, at least one conformed
copy of such Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed
to be incorporated therein by reference, and all exhibits to the extent
requested (including those previously furnished or incorporated by
reference) as soon as practicable after the filing of such documents with
the SEC;
(g) Deliver to each Holder of Registrable Securities to be sold
pursuant to a Registration Statement, and the underwriters, if any,
without charge, as many copies of the Prospectus (including each form of
prospectus) and each amendment or supplement thereto as such persons
reasonably request; and the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
holders of Registrable Securities and the underwriters, if any, in
connection with
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the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto;
(h) Prior to any public offering of Registrable Securities, use its
reasonable best efforts to register or qualify or cooperate with the
Holders of Registrable Securities to be sold, the underwriters, if any,
and their respective counsel in connection with the registration or
qualification (or exemption from such registration or qualification) of
such Registrable Securities for offer and sale under the securities or
Blue Sky laws of such jurisdictions as any such Holder or underwriter
reasonably requests in writing; keep each such registration or
qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective hereunder and do
any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by
the applicable Registration Statement; provided, however, that the Company
shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified or (ii) take any action
which would subject it to general service of process or to taxation in any
jurisdiction where they are not so subject;
(i) In connection with any sale or transfer of Registrable
Securities that will result in such securities no longer being Registrable
Securities, cooperate with the Holders thereof and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold, which
certificates shall not bear any restrictive legends and shall be in a form
eligible for deposit with The Depository Trust Company and to enable such
Registrable Securities to be in such denominations and registered in such
names as the managing underwriters, if any, or such Holders may request at
least two Business Days prior to any sale of Registrable Securities;
(j) Upon the occurrence of any event contemplated by Section
4(c)(v), except during Black Out Periods as promptly as practicable,
prepare a supplement or amendment, including, if appropriate, a
post-effective amendment, to each Registration Statement or a supplement
to the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, and file
<PAGE>
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any other required document so that, as thereafter delivered, such
Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading;
(k) Enter into such agreements (including an underwriting agreement
in form, scope and substance as is customary in underwritten offerings)
and take all such other reasonable actions in connection therewith
(including those reasonably requested by the managing underwriters, if
any) in order to expedite or facilitate the disposition of such
Registrable Securities, and, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration, (i) make such representations and warranties to the
underwriters and selling Holders, if any, with respect to the business of
the Company and its subsidiaries (including with respect to businesses or
assets acquired or to be acquired by any of them), and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings, and confirm the same if and when requested; (ii) in the case of
an underwritten offering, obtain opinions of counsel to the Company and
updates thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, addressed
to each of the underwriters, and selling Holders), covering the matters
customarily covered in opinions requested in underwritten offerings and
such other matters as may be reasonably requested by such underwriters or
selling Holders; (iii) use their reasonable best efforts to obtain
customary "cold comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company
or of any business acquired by the Company for which financial statements
and financial data is, or is required to be, included in the Registration
Statement), addressed (where reasonably possible) to each of the
underwriters and selling Holders, if any, such letters to be in customary
form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings; (iv) if an
underwriting agreement is entered into, the same shall contain
indemnification provisions
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and procedures no less favorable to the underwriters, if any, than those
set forth in Section 5 hereof (or such other provisions and procedures
acceptable to the managing underwriters, if any); and (v) deliver such
documents and certificates as may be reasonably requested by the managing
underwriters, if any, to evidence the continued validity of the
representations and warranties made pursuant to clause (i) above and to
evidence compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company;
(l) Make available for inspection by a representative of any
underwriter participating in any such disposition of Registrable
Securities, and any attorney, consultant or accountant retained by such
selling Holders or underwriter, at the offices where normally kept, during
reasonable business hours, all pertinent financial and other records,
corporate documents and properties of the Company and its subsidiaries
(including with respect to businesses and assets acquired or to be
acquired to the extent that such information is available to the Company),
and cause the officers, directors, agents and employees of the Company and
its subsidiaries (including with respect to businesses and assets acquired
or to be acquired to the extent that such information is available to the
Company) to supply all information in each case reasonably requested by
any such representative, underwriter, attorney, consultant or accountant
in connection with such Registration Statement; provided, however, that
such persons shall first agree in writing with the Company that any
information that is reasonably and in good faith designated by the Company
in writing as confidential at the time of delivery of such information
shall be kept confidential by such Persons, unless (i) disclosure of such
information is required by court or administrative order or is necessary
to respond to inquiries of regulatory authorities, (ii) disclosure of such
information is required by law (including any disclosure requirements
pursuant to Federal securities laws in connection with the filing of the
Registration Statement or the use of any Prospectus), (iii) such
information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard such information by such
Person or (iv) such information becomes available to such Person from a
source other than the Company and its subsidiaries and such source is not
bound by a confidentiality agreement;
<PAGE>
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(m) Comply with all applicable rules and regulations of the SEC and
make generally available to their securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 under the Securities Act, no later than 45 days after the end of any
12-month period (or 90 days after the end of any 12-month period if such
period is a fiscal year) (i) commencing at the end of any fiscal quarter
in which Registrable Securities are sold to underwriters in a firm
commitment or reasonable efforts underwritten offering and (ii) if not
sold to underwriters in such an offering, commencing on the first day of
the first fiscal quarter after the effective date of a Registration
Statement, which statement shall cover said period, consistent with the
requirements of Rule 158 under the Securities Act; and
(n) Cooperate with each seller of Registrable Securities covered by
any Registration Statement and each underwriter, if any, participating in
the disposition of such Registrable Securities and their respective
counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc.
The Company may require a Holder of Registrable Securities to be
included in a Registration Statement to furnish to the Company such information
regarding (i) the intended method of distribution of such Registrable Securities
(ii) such Holder and (iii) the Registrable Securities held by such Holder as is
required by law to be disclosed in such Registration Statement and the Company
may exclude from such Registration Statement the Registrable Securities of any
Holder who unreasonably fails to furnish such information within a reasonable
time after receiving such request. The Company shall not be required to provide
indemnification to any Underwriter or any other person relating to information
referred to in clauses (i) and (ii) provided to the Company in writing
specifically for inclusion in such Registration Statement.
If any such Registration Statement refers to any Holder by name or
otherwise as the Holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or
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(ii) in the event that such reference to such Holder by name or otherwise is not
required by the Securities Act, the deletion of the reference to such Holder in
any amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(c)(ii), 4(c)(iii),
4(c)(iv) or 4(c)(v) hereof, such Holder will forthwith discontinue disposition
of such Registrable Securities covered by such Registration Statement or
Prospectus until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 4(j) hereof, or until it is advised
in writing (the "Advice") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus. If the Company shall give any such
notice, the Effectiveness Period shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each Holder of Registrable Securities covered by such
Registration Statement shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 4(j) hereof or (y) the Advice, and,
in either case, has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus.
5. Indemnification and Contribution.
(a) Each Issuer agrees, jointly and severally, to indemnify and hold
harmless each Initial Purchaser, each Holder, each underwriter who participates
in an offering of Registrable Securities, their respective Affiliates, each
Person, if any, who controls any of such parties within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act and each of their
respective directors, officers, employees and agents, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto), covering Registrable
Securities, including all documents incorporated therein by reference, or
the omission or alleged omission there-
<PAGE>
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from of a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they
were made, not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus
(or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any court or governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission;
provided that (subject to Section 5(d) below) any such settlement is
effected with the written consent of the Issuers; and
(iii) against any and all expenses whatsoever, as incurred
(including reasonable fees and disbursements of one counsel chosen by
Merrill Lynch), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any court or governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) of this Section 5(a);
provided that this indemnity does not apply to any loss, liability, claim,
damage or expense to the extent arising out of an untrue statement or omission
or alleged untrue statement or omission (i) made in reliance upon and in
conformity with written information furnished to any Issuer by an Initial
Purchaser, such Holder or any underwriter in writing expressly for use in the
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto) or (ii) contained in any preliminary prospectus
if such Initial Purchaser, such Holder or such underwriter failed to send or
deliver a copy of the Prospectus (in the form it was first provided to such
parties for confirmation of sales) to the Person asserting such losses, claims,
damages or liabilities on or prior to the delivery of written confirmation of
any sale of securities covered thereby to such Person in any case where
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such delivery is required by the Securities Act and such Prospectus would have
corrected such untrue statement or omission. Any amounts advanced by any Issuer
to an indemnified party pursuant to this Section 5 as a result of such losses
shall be returned to such Issuer if it shall be finally determined by such a
court in a judgment not subject to appeal or final review that such indemnified
party was not entitled to indemnification by any Issuer.
(b) By accepting the benefits of this Agreement, each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Issuers, each
Initial Purchaser, each underwriter who participates in an offering of
Registrable Securities and the other selling Holders and each of their
respective directors, officers (including each officer of the Issuers who signed
the Registration Statement), employees and agents and each Person, if any, who
controls the Issuers, an Initial Purchaser through Merrill Lynch expressly for
use in the Offering Memorandum, any underwriter or any other selling Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all loss, liability, claim, damage and
expense whatsoever described in the indemnity contained in Section 5(a) hereof,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Issuers by such selling Holder expressly for use in the Registration Statement
(or any amendment thereto), or any such Prospectus (or any amendment or
supplement thereto).
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. In the case of parties indemnified pursuant
to Section 5(a) above, counsel to the indemnified parties shall be selected by
Merrill Lynch and, in the case of parties indemnified pursuant to Section 5(b)
above, counsel to the indemnified parties shall be selected by the Issuers.
Notwithstanding the foregoing sentence, in case any such action is brought
against any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
<PAGE>
-39-
participate therein and, to the extent it may wish, jointly with any other
indemnifying party similarly notified, unless such indemnified party shall have
one or more legal defenses available to it which are not available to the
indemnifying party, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party. After notice from the indemnifying party
to such indemnified party of its election as aforesaid to assume the defense
thereof and approval by such indemnified party of counsel appointed to defend
such action, the indemnifying party will not be liable to such indemnified party
under this Section 5 for any legal or other expenses other than reasonable costs
of investigation, subsequently incurred by such indemnified party in connection
with the defense thereof. An indemnifying party may participate at its own
expense in the defense of any such action; provided, however, that counsel to
the indemnifying party shall not (except with the consent of the indemnified
party) also be counsel to the indemnified party. In no event shall the
indemnifying parties be liable for fees and expenses of more than one counsel
(in addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any Judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 5 (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 5(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying
<PAGE>
-41-
party shall not have reimbursed such indemnified party in accordance with such
request prior to the date of such settlement.
(e) In order to provide for just and equitable contribution in
circumstances under which any of the indemnity provisions set forth in this
Section 5 is for any reason held to be unavailable to the indemnified parties
although applicable in accordance with its terms, the Issuers, each Initial
Purchaser and the Holders shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement incurred by the Issuers, the Initial Purchasers and the Holders, as
incurred; provided that no Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person that was not guilty of such fraudulent
misrepresentation. As between the Issuers, the Initial Purchasers and the
Holders, such parties shall contribute to such aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement in such proportion as shall be appropriate to reflect the relative
fault of either of the Issuers, on the one hand, and the Initial Purchasers and
the Holders, on the other hand, with respect to the statements or omissions
which resulted in such loss, liability, claim, damage or expense, or action in
respect thereof, as well as any other relevant equitable considerations. The
relative fault of either of the Issuers, on the one hand, and of the Initial
Purchasers and the Holders, on the other hand, shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by either of the Issuers, on the one hand, or by
or on behalf of an Initial Purchaser or the Holders, on the other, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Issuers, the Initial
Purchasers and the Holders of the Registrable Securities agree that it would not
be just and equitable if contribution pursuant to this Section 5 were to be
determined by pro rata allocation or by any other method of allocation that does
not take into account the relevant equitable considerations. For purposes of
this Section 5, each Affiliate of each Initial Purchaser or a Holder, and each
director, officer, employee, agent and Person, if any, who controls an Initial
Purchaser or Holder or such Affiliate within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act shall have the same rights to
contribution as such Initial Purchaser or Holder, and each director of the any
Is-
<PAGE>
-41-
suer, each officer of any Issuer who signed the Registration Statement, and
each Person, if any, who controls either Issuer within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Issuers.
6. Rule 144A and Future IPOs
(a) The Company and the LLC shall use their respective best efforts
to file the reports required to be filed by it under the Securities Act and the
Exchange Act in a timely manner and, if at any time it is not required to file
such reports but in the past had been required to or did file such reports, it
will, upon the request of any holder or beneficial owner of Registrable
Securities, make available other information as required by, and so long as
necessary to permit, sales of Registrable Securities pursuant to Rule 144A.
Notwithstanding the foregoing, nothing in this Section 6 shall be deemed to
require the Company or the LLC to register any of its securities pursuant to the
Exchange Act.
(b) The Company hereby agrees not to make an Initial Public Equity
Offering of any class of Common Stock without amending, if necessary, the terms
of the Company's Estatutos to provide that the existing Common Stock is
convertible into such class of Common Stock on a share-for-share basis and that
the rights, conditions and privileges attaching to such class of Common Stock
are not adverse to holders of the existing Common Stock.
7. Underwritten Registrations
No Person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such Registrable Securities on the basis
reasonably provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (ii) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
8. Miscellaneous
(a) Remedies. In the event of a breach by the Company, the LLC, any
Shareholder or by a holder of Shares of any of its obligations under this
Agreement, each holder of Shares, the LLC, any Shareholder and the Company, in
addition to being entitled to exercise all rights granted by law, including re-
<PAGE>
-42-
covery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company, the LLC, any Shareholder and each holder of
Shares agree that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach of any of the provisions of this Agreement
and each hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a remedy
at law would be adequate.
(b) No Inconsistent Agreements. Except for certain registration
rights granted to the Shareholders pursuant to the Registration Rights
Agreement, dated as of December 9, 1996, among the Company and the Shareholders,
the Company, the LLC and the Shareholders have not entered into and shall not
enter into any agreement that is inconsistent with the rights granted to the
holders of Shares and indemnified persons in this Agreement or otherwise
conflicts with the provisions hereof. Except for certain registration rights
granted to the Shareholders pursuant to the Registration Rights Agreement, dated
as of December 9, 1996, among the Company and the Shareholders, without the
written consent of the holders of a majority of the outstanding Shares
(including for this purpose the Percentage Interest of any holder of LLC
Shares), the Company, the LLC and the Shareholders have not granted and shall
not grant to any Person any rights which conflict with or are inconsistent with
the provisions of this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of the holders
of not less than a majority of the then outstanding Shares and/or Registrable
Securities, as applicable (including for this purpose the Percentage Interest of
any holder of LLC Shares). Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of Holders whose securities are being sold pursuant to
a Registration Statement and that does not directly or indirectly affect the
rights of other Holders may be given by Holders of a majority of the Registrable
Securities being sold by such Holders pursuant to such Registration Statement;
provided, however, that the provisions of this sentence may not be amended,
modified or supplemented except in accordance with the provisions of the
immediately preceding sentence. Notwithstanding the foregoing, no amendment,
modification, supplement, waiver or consent with respect to Section 5 shall be
made or given otherwise than with the prior
<PAGE>
-43-
written consent of each Holder or former Holder affected thereby.
(d) Notices. All notices and other communications provided for
herein shall be made in writing by hand-delivery, next-day air courier,
certified first-class mail, return receipt requested, telex or telecopier:
(i) if to the Company, the LLC or the Initial Purchasers, as
provided in the Purchase Agreement,
(ii) if to the Shareholders, as follows:
Warburg, Pincus Ventures, L.P.
c/o E.M. Warburg, Pincus & Co., Inc.
466 Lexington Avenue
10th Floor
New York, New York 10017-3147
Attention: Douglas M. Karp
Paging Network International N.V.
4965 Preston Park Boulevard, Suite 600
Plano, Texas 75093
IVP Paging (Cayman) L.P.
c/o Maples and Calder
P.O. Box 309
George Town, Grand Cayman
Cayman Island, B.W.I.
TVA Sistema de Televisao S.A.
Rua do Rocio, 313
Vila Olimpia
Sao Paulo, Brazil
Multiponto Telecomunicacoes Ltda.
Avenida Presidente Wilson No. 231
Rio de Janeiro, Brazil
(iii) if to any other Person who is then the registered holder of
Shares or Registrable Securities, to the address of such holder as it
appears in the register therefor of the Company or the LLC, as the case
may be.
Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given: when delivered by hand,
if personally delivered; one Business Day after being timely delivered to a
next-day air courier;
<PAGE>
-44-
five Business Days after being deposited in the mail, postage prepaid, if
mailed; when answered back, if telexed; and when receipt is acknowledged by the
recipient's telecopier machine, if telecopied.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties hereto and shall inure to the benefit of each holder of Shares and
Registrable Securities. Neither the Company nor the LLC may assign any of its
rights hereunder without the prior written consent of each holder of Shares and
Registrable Securities, provided that a merger or consolidation of the Company
with another Person pursuant to which the issuer or issuers of any securities
issued to holders of Shares or Registrable Securities in connection with such
merger or consolidation becomes obligated under this Agreement and each of the
Shareholders confirm their agreements with respect to the securities of such
issuer or issuers shall not be considered an assignment. Notwithstanding the
foregoing, no successor or assignee of the Company shall have any of the rights
granted under this Agreement until such Person shall acknowledge its rights and
obligations hereunder by a signed written statement of such Person's acceptance
of such rights and obligations. If any transferee of any holder shall acquire
Shares or Registrable Securities, in any manner, whether by operation of law or
otherwise, such Shares or Registrable Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Shares or
Registrable Securities such person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this Agreement
and such person shall be entitled to receive the benefits hereof.
(f) Counterparts. This Agreement may be executed by manual or
facsimile signature in any number of counterparts and by the parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement.
(g) Governing Law; Submission to Jurisdiction. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK.
THE COMPANY, THE LLC, THE SHAREHOLDERS AND THE INITIAL PURCHASERS HEREBY
IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN
THE BOROUGH OF MANHATTAN
<PAGE>
-45-
IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN
IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT, AND EACH IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE
AFORESAID COURTS.
(h) Severability. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
(i) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
(j) Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. By the execution and delivery of this Agreement, each of the
Company, PNNV, IVP, TVA and MT (i) hereby designates and appoints CT Corporation
System, 1633 Broadway, New York, NY 10019 ("CT Corporation System") (and any
successor entity), as its authorized agent upon which process may be served in
any suit or proceeding arising out of or relating to this Agreement that may be
instituted in any federal or state court in The City of New York, Borough of
Manhattan, State of New York or brought under federal or state securities laws,
and agrees to furnish to each other party hereto, promptly following the
execution hereof, satisfactory evidence that CT Corporation System has accepted
such designation, (ii) submits to the jurisdiction of any such court in any such
suit or proceeding and (iii) agrees that service of process upon CT Corporation
System and written notice of said service to the Company in accordance with
Section 8(d) shall be deemed in every respect effective service of process upon
each of the Issuers and the Shareholders, in any such suit or proceeding.
<PAGE>
-46-
Each of the Issuers and the Shareholders further agrees to take any and all
action, including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and appointment of
CT Corporation System in full force and effect so long as any of the Units, the
Notes, the Exchange Notes or the Private Exchange Notes shall be outstanding;
provided that each of the Issuers and Shareholders may and to the extent CT
Corporation System ceases to be able to be served on the basis contemplated
herein shall, by written notice to the Initial Purchasers, designate such
additional or alternative agent for service of process under this Section 8(j)
that (i) maintains an office located in the Borough of Manhattan, City of New
York, State of New York and (ii) is either (x) counsel for such Issuer or
Shareholder or (y) a corporate service company which acts as agent for service
of process for other persons in the ordinary course of its business. Such
written notice shall identify the name of such agent for service of process and
the address of the office of such agent for service of process in the Borough of
Manhattan, City of New York, State of New York.
To the extent that any of the Issuers or Shareholders has or
hereafter may acquire any immunity from jurisdiction of any court of (i) any
jurisdiction in which they own or lease property or assets, (ii) the United
States or the State of New York or (iii) the Federative Republic of Brazil or
any political subdivision thereof or from any legal process (whether through
service of notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) with respect to itself or its property and assets or
this Agreement or any of the Units, the Notes, Exchange Notes or Private
Exchange Notes (as those terms are defined in the Purchase Agreement) or actions
to enforce judgments in respect of any thereof, each of the Issuers and
Shareholders hereby irrevocably waives such immunity in respect of its
obligations under the above-referenced documents, to the extent permitted by
law.
<PAGE>
-47-
IN WITNESS WHEREOF, the parties have caused this Equity Registration
Rights Agreement to be duly executed as of the date first written above.
PAGING NETWORK DO BRASIL S.A.
By: /s/ Thomas C. Trynin
----------------------------------------
Name: Thomas C. Trynin
Title: President
PAGING BRAZIL HOLDING CO., LLC
By: /s/ David E. Libowitz
----------------------------------------
Name: David E. Libowitz
Title: Manager
WARBURG, PINCUS VENTURES, L.P.
By Warburg, Pincus & Co.
its General Partner
By: /s/ Douglas M. Karp
----------------------------------------
Name: Douglas M. Karp
Title: Partner
PAGING NETWORK INTERNATIONAL N.V.
By: /s/ Barry A. Fromberg
----------------------------------------
Name: Barry A. Fromberg
Title: Chairman and Chief
Executive Officer
<PAGE>
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IVP PAGING (Cayman) L.P.
By: IVP INTERNATIONAL VENTURE
PARTNERS, INC.
By: /s/ Patrice Etlin
----------------------------------------
Name: Patrice Etlin
Title: Partner
TVA SISTEMA DE TELEVISAO S.A.
By: /s/ Jose Augusto Pinto Moreira
/s/ Giancarlo Francesco Civita
----------------------------------------
Name: Jose Augusto Pinto Moreira
Name: Giancarlo Francesco Civita
Title: Officers
MULTIPONTO TELECOMUNICACOES LTDA.
By: /s/ Veronica Valente Dantas Rodenburg
----------------------------------------
Name: Veronica Valente Dantas Rodenburg
Title: Attorney-in-fact
Chase Mellon Shareholder Services
as Transfer Agent with respect to
Sections 3.2 and 3.5 hereof only
By: /s/ William T. Beauchamp
----------------------------------------
Name: William T. Beauchamp
Title: Assistant Vice President
<PAGE>
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MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BEAR, STEARNS & CO. INC.
GOLDMAN SACHS & CO.
By: Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: /s/ Lisa Craig
----------------------------
Name: Lisa Craig
Title: Vice President
<PAGE>
EXHIBIT A
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR
OTHER SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3,) OR (7) UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THIS SECURITY IN AN "OFFSHORE TRANSACTION" PURSUANT TO
REGULATION S, (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS
TWO YEARS (OR SUCH SHORTER PERIOD AS MAY BE PRESCRIBED BY RULE 144(K) (OR
ANY SUCCESSOR PROVISION THEREOF) UNDER THE SECURITIES ACT) AFTER THE LATER
OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY)
OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS
THE OWNER OF THIS SECURITY OR ANY PREDECESSOR OF THIS SECURITY AND (Y)
SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE
"RESALE RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY OF ITS SUBSIDIARIES, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE
UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE
FOR RESALE PURSUANT TO RULE 144A INSIDE THE UNITED STATES, TO A PERSON IT
REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO
OFFERS AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE
A-1
<PAGE>
UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT,
PURSUANT TO RULE 904 OF REGULATION S, (E) TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT IS ACQUIRING THE SECURITIES FOR ITS OWN ACCOUNT, OR FOR THE
ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR, FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH,
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO
ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, (3) AGREES THAT IT SHALL BE BOUND, TO THE EXTENT
APPLICABLE, BY THE TERMS OF THE EQUITY REGISTRATION RIGHTS AGREEMENT DATED
AS OF [ ], 1997 AND (4) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE
RESPECTIVE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT.
A-2
<PAGE>
EXHIBIT B
FORM OF LEGEND FOR GLOBAL CERTIFICATE
Any Global Certificate authenticated and delivered hereunder shall
bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL CERTIFICATE WITHIN THE MEANING OF THE
EQUITY REGISTRATION RIGHTS AGREEMENT HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A
SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS
NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE EQUITY
REGISTRATION RIGHTS AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER
THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE
OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR
ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE EQUITY REGISTRATION RIGHTS AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
B-1
<PAGE>
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF SECURITIES
Re: PAGING NETWORK DO BRASIL S.A. (the "Company")
PAGING BRAZIL HOLDING CO., LLC (the "LLC")
Check the appropriate boxes in A or B below:
A. This Certificate relates to ____ Common Stock of the Company (the
"Common Stock") held in* ___ book-entry or* _______ certificated form by ______
(the "Transferor").
B. This Certificate relates to ____ Class B Holding Shares in the
LLC held in* ___ book-entry or*_______ certificated form by ______ (the
"Transferor").
The Common Stock or the Class B Holding Shares, as applicable, are
herein referred to as the "Securities".
The Transferor:*
|_| has requested the Transfer Agent by written order to deliver in
exchange for its beneficial interest in the Global Certificate held by the
Depositary, Securities in definitive, registered form of authorized
denominations and an aggregate number equal to its beneficial interest in such
Global Certificate (or the portion thereof indicated above); or
|_| has requested the Transfer Agent by written order to exchange or
register the transfer of Securities.
In connection with such request and in respect of such Securities,
the Transferor does hereby certify that Transferor is familiar with the Equity
Registration Rights Agreement relating to the above captioned Securities and the
restrictions on transfers thereof as provided in Section 3.5 of such Equity
Registration Rights Agreement, and that the transfer of the Securities does not
require registration under the Securities Act of 1933, as amended (the "Act")
because[*]:
C-1
<PAGE>
|_| Such Securities are being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 3.5(_) of the Equity
Registration Rights Agreement).
|_| Such Securities are being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Act), in reliance on Rule
144A.
|_| Such Securities are being transferred to an institutional
"accredited investor" (within the meaning of subparagraphs (a)(1), (2), (3) or
(7) of Rule 501 under the Act).
|_| Such Securities are being transferred in reliance on Regulation
S under the Act.
|_| Such Securities are being transferred in accordance with Rule
144 under the Act.
|_| Such Securities are being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act.
------------------------------
[INSERT NAME OF TRANSFEROR]
By:
--------------------------
Date:
----------------------
*Check applicable box.
C-2
<PAGE>
EXHIBIT D
Form of Certificate to Be
Delivered in Connection with
Transfers to Institutional Accredited Investors
-------------, ----
The Chase Manhattan Bank
New York, New York
Attention: Corporate Trust Department
Re: PAGING NETWORK DO BRASIL S.A. (the "Company")
PAGING BRAZIL HOLDING CO., LLC (the "LLC")
Check the appropriate boxes in A or B below:
A. This Certificate relates to ____ Common Stock of the Company (the
"Common Stock") held in* ___ book-entry or* _______ certificated form by ______
(the "Transferor").
B. This Certificate relates to ____ Class B Holding Shares in the
LLC held in*___ book-entry or*_______ certificated form by ______ (the
"Transferor").
The Common Stock or the Class B Holding Shares, as applicable, are
herein referred to as the "Securities".
Ladies and Gentlemen:
In connection with our proposed purchase of Securities we confirm
that:
(i) We have received such information as we deem necessary in order
to make our investment decision.
(ii) We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Equity
Registration Rights Agreement and the undersigned agrees to be bound by, and not
to resell, pledge or otherwise transfer the Securities except in compli-
D-1
<PAGE>
ance with, such restrictions and conditions and the Securities Act of 1933, as
amended (the "Securities Act").
(iii) We understand that the offer and sale of the Securities has
not been registered under the Securities Act, and that the Securities may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except as permitted in the following sentence. We agree, on our
own behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Securities prior to (x) the date which is two
years after the later of the date of original issuance of the Securities (or
such shorter period as may be prescribed by Rule 144(k) under the Securities Act
or any successor provision thereto) or the last day on which the Company or any
affiliate of the Company was owner of such Securities, or any predecessor
thereto, and (y) such later date, if any, as may be required by applicable laws,
we will do so only (A) to the Company, (B) inside the United States in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) inside the United States to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on its behalf by a U.S. broker-dealer) to the Transfer Agent a
signed letter substantially in the form hereof, (D) outside the United States in
accordance with Regulation S under the Securities Act, (E) pursuant to the
exemption from registration provided by Rule 144 under the Securities Act (if
available) (F) pursuant to an effective registration statement under the
Securities Act or (G) pursuant to another available exemption under the
Securities Act, and we further agree to provide to any person purchasing
Securities from us a notice advising such purchaser that resales of the
Securities are restricted as stated herein.
(iv) We understand that, on any proposed resale of Securities, we
will be required to furnish to the Transfer Agent and the Company, such
certification, legal opinions and other information as the Transfer Agent and
the Company may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the Securities
purchased by us will bear a legend to the foregoing effect.
(v) We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experi-
D-2
<PAGE>
ence in financial and business matters as to be capable of evaluating the merits
and risks of our investment in the Securities, and we and any accounts for which
we are acting are each able to bear the economic risk of our or their
investment, as the case may be.
(vi) We are acquiring the Securities purchased by us for our account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
D-3
<PAGE>
You and the Company and any counsel to the Company are entitled to
rely upon this letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
---------------------------------
[Authorized Signatory]
Upon transfer the Securities would be registered in the name of the
new beneficial owner as follows:
Name:
------------------------------
Address:
---------------------------
Taxpayer ID Number:
----------------
D-4
<PAGE>
EXHIBIT E
Form of Certificate to Be
Delivered in Connection
with Regulation S Transfers
---------------, ----
The Chase Manhattan Bank
New York, New York
Attention: Corporate Trust Department
Re: PAGING NETWORK DO BRASIL S.A. (the "Company")
PAGING BRAZIL HOLDING CO., LLC (the "LLC")
Check the appropriate boxes in A or B below:
A. This Certificate relates to ____ Common Stock of the Company (the
"Common Stock") held in* ___ book-entry or* _______ certificated form by ______
(the "Transferor").
B. This Certificate relates to ____ Class B Holding Shares in the
LLC held in*___ book-entry or*_______ certificated form by ______ (the
"Transferor").
The Common Stock or the Class B Holding Shares, as applicable, are
herein referred to as the "Securities".
Ladies and Gentlemen:
In connection with our proposed sale of Securities, we confirm that
such sale has been effected pursuant to and in accordance with Regulation S
under the Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, we represent that:
(1) the offer of the Securities was not made to a person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed
E-1
<PAGE>
that the transferee was outside the United States, or (b) the transaction
was executed in, on or through the facilities of a designated off-shore
securities market and neither we nor any person acting on our behalf knows
that the transaction has been pre-arranged with a buyer in the United
States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S under the Securities Act, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities; and
(6) if the circumstances set forth in Rule 904(c) under the
Securities Act are applicable, we have complied with the additional
conditions therein, including (if applicable) sending a confirmation or
other notice stating that the Securities may be offered and sold during
the restricted period specified in Rule 903(c)(2) or (3), as applicable,
in accordance with the provisions of Regulation S; pursuant to
registration of the Securities under the Securities Act; or pursuant to an
available exemption from the registration requirements under the Act.
You and the Company and any counsel to the Company are entitled to
rely upon this letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or legal proceedings
or official inquiry with respect to the matters covered hereby. Defined terms
used herein without definition have the respective meanings provided in
Regulation S under the Securities Act.
Very truly yours,
[Name of Transferor]
By:
---------------------------------
[Authorized Signature]
E-2
<PAGE>
Upon transfer the Securities would be registered in the name of the
new beneficial owner as follows:
Name:
----------------------------
Address:
-------------------------
Taxpayer ID Number:
--------------
E-3
<PAGE>
ESCROW AND PLEDGE AGREEMENT
This ESCROW AGREEMENT (this "Agreement"), dated as of June 6, 1997,
among The Chase Manhattan Bank, a banking corporation, as escrow agent (in such
capacity, the "Escrow Agent"), The Chase Manhattan Bank, a banking corporation,
as Trustee (in such capacity, the "Trustee") under the Indenture (as defined
herein), and Paging Network do Brasil, S.A., a sociedade anonima organized under
the laws of the Federative Republic of Brazil (the "Company").
R E C I T A L S :
A. Pursuant to the Indenture, dated as of June 1, 1997 (the
"Indenture"), between the Company and the Trustee, the Company is issuing
US$125,000,000 aggregate principal amount of its 13 1/2% Senior Notes due 2005,
Series A (the "Series A Securities") and authorizing the issuance of 13 1/2%
Senior Notes due 2005, Series B (the "Series B" Securities," and together with
the Series A Securities, the "Securities").
B. As security for its obligations under the Securities and the
Indenture, the Company hereby grants to the Trustee, for the benefit of the
Trustee, any predecessor Trustee under the Indenture and the holders of the
Securities, a security interest in and lien upon the Escrow Account (as defined
herein).
C. The parties have entered into this Agreement in order to set
forth the conditions upon which, and the manner in which, funds will be
disbursed from the Escrow Account and released from the security interest and
lien described above.
<PAGE>
-2-
A G R E E M E N T :
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms. All capitalized terms used but not defined herein
shall have the meanings ascribed to them in the Indenture. In addition to any
other defined terms used herein, the following terms shall constitute defined
terms for purposes of this Agreement and shall have the meanings set forth
below:
"Affiliate" of any specified person means any other person which,
directly or indirectly, controls, is controlled by or is under common control
with such specified person. For the purposes of this definition, "control" when
used with respect to any person means the power to direct the management and
policies of such person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise and the terms "affiliated,"
"controlling" and "controlled" have meanings correlative to the foregoing.
"Applied" means that disbursed funds have been applied (i) to the
payment of interest on the Securities, (ii) pursuant to Section 3(c) or (iii)
pursuant to Section 6(b)(iii).
"Available Funds" means (A) the sum of (i) the Initial Escrow Amount
and (ii) interest earned or dividends paid on the funds in the Escrow Account
(including holdings of U.S. Government Securities), less (B) the aggregate
disbursements previously made pursuant to this Agreement.
"Collateral" shall have the meaning given in Section 6(a) hereof.
"Escrow Account" shall mean the escrow account established pursuant
to Section 2.
<PAGE>
-3-
"Escrow Account Statement" shall have the meaning given in Section
2(f).
"Initial Escrow Amount" shall mean US$45,555,756.25.
"Interest Payment Date" means December 6 and June 6 of each year,
commencing on December 6, 1997 until the Securities are paid in full.
"Issue Date" has the meaning set forth in the Indenture.
"Payment Notice and Disbursement Request" means a notice sent by the
Trustee to the Escrow Agent requesting a disbursement of funds from the Escrow
Account, in substantially the form of Exhibit A hereto. Each Payment Notice and
Disbursement Request shall be signed by an officer of the Trustee.
"U.S. Government Securities" means securities that are direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged.
2. Escrow Account; Escrow Agent.
(a) Appointment of Escrow Agent. The Company and the Trustee hereby
appoint the Escrow Agent, and the Escrow Agent hereby accepts appointment, as
escrow agent, under the terms and conditions of this Agreement.
(b) Establishment of Escrow Account. On the Issue Date, the Escrow
Agent shall establish an escrow account entitled the "Escrow Account pledged by
Paging Network do Brasil S.A. to The Chase Manhattan Bank, a banking
corporation, as Trustee" (the "Escrow Account") at its office located at 450
West 33rd Street, 15th Floor, New York, New York 10001-2697. All funds accepted
by the Escrow Agent pursuant to this Agreement shall be held for the exclusive
benefit of the Trustee, any predecessor Trustee under the Indenture and holders
of the Securities, as secured parties hereunder (collectively, the
"Beneficiaries"). All such funds shall be held in the Escrow Account until
disbursed or paid in accordance with the terms hereof. The Escrow Account, the
funds held therein and any
<PAGE>
-4-
U.S. Government Securities held by the Escrow Agent shall be under the sole
dominion and control of the Escrow Agent for the benefit of the Beneficiaries.
On the Issue Date, the Company shall deliver the Initial Escrow Amount to the
Escrow Agent for deposit into the Escrow Account against the Escrow Agent's
written acknowledgment and receipt of the Initial Escrow Amount.
(c) Escrow Agent Compensation. The Company shall pay to the Escrow
Agent such compensation for services to be performed by it under this Agreement
as the Company and the Escrow Agent may agree in writing from time to time. The
Escrow Agent shall be paid any compensation owed to it, in its capacity as such,
directly by the Company and shall not disburse from the Escrow Account any such
amounts. The Company shall reimburse the Escrow Agent upon request for all
reasonable expenses, disbursements, and advances incurred or made by the Escrow
Agent in implementing any of the provisions of this Agreement, including
compensation and the reasonable expenses and disbursements of its counsel. The
Escrow Agent shall be paid any such expenses owed to it directly by the Company
and shall not disburse from the Escrow Account any such amounts.
(d) Investment of Funds in Escrow Account. Funds deposited in the
Escrow Account shall be invested and reinvested only upon the following terms
and conditions:
(i) Acceptable Investments. All funds deposited or held in the
Escrow Account at any time shall be invested by the Escrow Agent in U.S.
Government Securities in accordance with the Initial Instructions annexed
hereto as Schedule A and thereafter, if necessary, the Company's written
instructions from time to time to the Escrow Agent; provided, however,
that the Company shall only designate investment of funds in U.S.
Government Securities maturing in an amount at least sufficient to and/or
generating interest income at least sufficient to, when added to the
balance of funds held in the Escrow Account, provide for the payment of
interest on the outstanding Secu-
<PAGE>
-5-
rities on each Interest Payment Date beginning on and including December
6, 1997 and through and including the Interest Payment Date on June 6,
2000; provided, further, however, that any such written instruction shall
specify the particular investment to be made, shall state that such
investment is authorized to be made hereby and in particular satisfies the
requirements of the preceding proviso and Section 2(d)(v), shall contain
the certification referred to in Section 2(d)(ii), if required, and shall
be executed by an Officer of the Company. All U.S. Government Securities
shall be assigned to and held in the possession of, or, in the case of
U.S. Government Securities maintained in book entry form with the Federal
Reserve Bank (i.e., TRADES), transferred to a book entry account in the
name of, the Escrow Agent, for the benefit of the Trustee, with such
guarantees as are customary, except that U.S. Government Securities
maintained in book entry form with the Federal Reserve Bank shall be
transferred to a book entry account in the name of the Escrow Agent at the
Federal Reserve Bank that includes only U.S. Government Securities held by
the Escrow Agent for its customers and segregated by separate recordation
in the books and records of the Escrow Agent of the security interest in
favor of the Trustee and confirmed in writing to the Trustee. The Company
shall execute and deliver to the Trustee a UCC-1 Financing Statement
covering all its rights in the Collateral and the proceeds thereof, and
the Escrow Agent shall cause such Financing Statement to be filed with the
Department of State of the State of New York as required by the Uniform
Commercial Code of the State of New York. The Escrow Agent shall not be
liable for losses on any investments made by it pursuant to and in
compliance with such instructions. In the absence of qualifying
instructions from the Company that meet the requirements of this Section
2(d)(i), the Escrow Agent shall have no obligation to invest funds held in
the Escrow Account.
(ii) Security Interest in Investments. No investment of funds in the
Escrow Account shall be made unless the Company has certified to the
Escrow Agent and the
<PAGE>
-6-
Trustee that, upon such investment, the Trustee will have a first priority
perfected security interest in the applicable investment. If a certificate
as to a class of investments has been provided to the Escrow Agent, a
certificate need not be issued with respect to individual investments in
securities in that class if the certificate applicable to the class
remains accurate with respect to such individual investments, which
continued accuracy the Escrow Agent may conclusively assume. On the Issue
Date, and on each thereafter until the date upon which the balance of the
Available Funds shall have been reduced to zero, each of the Trustee and
the Escrow Agent shall receive an Opinion of Counsel to the Company, dated
each such date as applicable, which opinion shall meet the requirements of
Section 314(b) of the Trust Indenture Act of 1939, as amended (the "TIA")
and shall comply with Section 12.02 of the Indenture.
(iii) Interest and Dividends. All interest earned and dividends paid
on funds invested in U.S. Government Securities shall be deposited in the
Escrow Account as additional Collateral for the exclusive benefit of the
Beneficiaries and, if not required to be disbursed in accordance with the
terms hereof, shall be reinvested in accordance with the terms hereof at
the Company's written instruction.
(iv) Limitation on Escrow Agent's Responsibilities. The Escrow
Agent's sole responsibilities under this Section 2 shall be (A) to retain
possession of certificated U.S. Government Securities (except, however,
that the Escrow Agent may surrender possession to the issuer of any such
U.S. Government Security in New York for the purposes of effecting
assignment, crediting interest, or reinvesting such security or reducing
such security to cash) and to be the registered or designated owner of
U.S. Government Securities which are not certificated, (B) to follow the
Company's written instructions given in accordance with Section 2(d)(i),
(C) to invest and reinvest funds pursuant to this Section 2(d) and (D) to
use reasonable efforts to reduce to cash such U.S. Government Securities
<PAGE>
-7-
as may be required to fund any disbursement or payment in accordance with
Section 3. In connection with clause (A) above, the Escrow Agent will
maintain continuous possession in the State of New York of certificated
U.S. Government Securities and cash included in the Collateral and will
cause uncertificated U.S. Government Securities to be registered in the
book-entry system of, and transferred to an account of the Escrow Agent or
a sub-agent of the Escrow Agent at, the Federal Reserve Bank of New York.
Except as provided in Section 6, the Escrow Agent shall have no other
responsibilities with respect to perfecting or maintaining the perfection
of the Trustee's security interest in the Collateral and shall not be
required to file any instrument, document or notice in any public office
at any time or times. In connection with clause (D) above and subject to
the following sentence, the Escrow Agent shall not be required to reduce
to cash any U.S. Government Securities to fund any disbursement or payment
in accordance with Section 3 in the absence of written instructions signed
by an Officer of the Company specifying the particular investment to
liquidate. If no such written instructions are received, the Escrow Agent
may liquidate those U.S. Government Securities having the lowest interest
rate per annum or if none such exist, those having the nearest maturity.
(v) Manner of Investment. Funds deposited in the Escrow Account
shall initially be invested in accordance with the Initial Instructions
(attached hereto as Schedule A), which is in a manner such that there will
be sufficient funds available without any further investment by the
Company to cover all interest due on the outstanding Securities, as such
interest becomes due, for each Interest Payment Date occurring from the
Issue Date and ending on (and including) June 6, 2000, provided that such
investments shall have such maturities and/or interest payment dates such
that funds will be available with respect to each such Interest Payment
Date no later than the time the Escrow Agent is required to disburse such
funds to the Trustee pursuant to Section 3(a). The Escrow Agent shall
<PAGE>
-8-
have no responsibility for determining whether funds held in the Escrow
Account shall have been invested in such a manner so as to comply with the
requirements of this clause (v).
(e) Substitution of Escrow Agent. The Escrow Agent may resign by
giving no less than 20 Business Days prior written notice to the Company and the
Trustee. Such resignation shall take effect upon the later to occur of (i)
delivery of all funds and U.S. Government Securities maintained by the Escrow
Agent hereunder and copies of all books, records, plans and other documents in
the Escrow Agent's possession relating to such funds or U.S. Government
Securities or this Agreement to a successor escrow agent acceptable to the
Trustee (which approvals shall not be unreasonably withheld or delayed) and (ii)
the Company, the Trustee and such successor escrow agent entering into this
Agreement or any written successor agreement no less favorable to the interests
of the holders of the Securities and the Trustee than this Agreement; and the
Escrow Agent shall thereupon be discharged of all obligations under this
Agreement and shall have no further duties, obligations or responsibilities in
connection herewith, except as set forth in Section 4. If a successor escrow
agent has not been appointed or has not accepted such appointment within 20
Business Days after notice of resignation is given to the Company, the Escrow
Agent may apply to a court of competent jurisdiction for the appointment of a
successor escrow agent.
(f) Escrow Account Statement. At least 30 days prior to each
Interest Payment Date, the Escrow Agent shall deliver to the Company and the
Trustee a statement setting forth with reasonable particularity the balance of
funds then in the Escrow Account and the manner in which such funds are invested
("Escrow Account Statement"). The parties hereto irrevocably instruct the Escrow
Agent that on the first date upon which the balance in the Escrow Account
(including the holdings of all U.S. Government Securities) is reduced to zero,
the Escrow Agent shall deliver to the Company and to the Trustee a notice that
the balance in the Escrow Account has been reduced to zero.
<PAGE>
-9-
3. Disbursements.
(a) Payment Notice and Disbursement Request; Disbursements. The
Trustee shall, at least five business days prior to an Interest Payment Date,
submit to the Escrow Agent a completed Payment Notice and Disbursement Request
substantially in the form of Exhibit A hereto.
The Escrow Agent's disbursement pursuant to any Payment Notice and
Disbursement Request shall be subject to the satisfaction of the applicable
conditions set forth in Section 3(b). Provided such Payment Notice and
Disbursement Request is not rejected by it, the Escrow Agent, as soon as
reasonably practicable on the Interest Payment Date, but in no event later than
12:00 Noon (New York City time) on the Interest Payment Date, shall disburse the
funds requested in such Payment Notice and Disbursement Request by wire or
book-entry transfer of immediately available funds to the account of the Trustee
for the benefit of the Beneficiaries. The Escrow Agent shall notify the Trustee
as soon as reasonably possible (but not later than two (2) business days from
the date of receipt of the Payment Notice and Disbursement Request) if any
Payment Notice and Disbursement Request is rejected and the reason(s) therefor.
In the event such rejection is based upon nonsatisfaction of the condition in
Section 3(b)(I) below, the Trustee shall thereupon resubmit the Payment Notice
and Disbursement Request with appropriate changes.
(b) Conditions Precedent to Disbursement. The Escrow Agent's payment
of any disbursement shall be made only if: (I) the Trustee shall have submitted,
in accordance with the provisions of Section 3(a) herein, a completed Payment
Notice and Disbursement Request to the Escrow Agent substantially in the form of
Exhibit A with blanks appropriately filled in and (II) the Escrow Agent shall
not have received any notice from the Trustee that as a result of an Event of
Default the indebtedness represented by the Securities has been accelerated and
has become due and payable (in which event the Escrow Agent shall apply all
Available Funds as required by Section 6(b)(iii)).
<PAGE>
-10-
(c) Retired Securities. In the event a portion of the Securities has
been retired by the Company and submitted to the Trustee for cancellation and
there is no Default or Event of Default under the Indenture, funds representing
the lesser of (A) any funds remaining in the Escrow Account that are in excess
of the amount sufficient to pay interest through and including June 6, 2000 on
the Securities not so retired and (B) the interest payments which have not
previously been made on such retired Securities for each Interest Payment Date
through the Interest Payment Date to occur on June 6, 2000 shall, upon the
written request of the Company to the Escrow Agent and the Trustee, be paid to
the Company upon compliance with the release of collateral provisions of the TIA
and upon receipt by the Escrow Agent of a notice relating thereto from the
Trustee.
4. Escrow Agent.
(a) Limitation of the Escrow Agent's Liability; Responsibilities of
the Escrow Agent. The Escrow Agent's responsibility and liability under this
Agreement shall be limited as follows: (i) the Escrow Agent does not represent,
warrant or guaranty to the holders of the Securities from time to time the
performance of the Company; (ii) the Escrow Agent shall have no responsibility
to the Company or the holders of the Securities or the Trustee from time to time
as a consequence of performance or non-performance by the Escrow Agent
hereunder, except for any gross negligence or willful misconduct of the Escrow
Agent; (iii) the Company shall remain solely responsible for all aspects of the
Company's business and conduct; and (iv) the Escrow Agent is not obligated to
supervise, inspect or inform the Company or any third party of any matter
referred to above.
No implied covenants or obligations shall be inferred from this
Agreement against the Escrow Agent, nor shall the Escrow Agent be bound by the
provisions of any agreement beyond the specific terms hereof. Specifically and
without limiting the foregoing, the Escrow Agent shall in no event have any
liability in connection with its investment, reinvestment or liquidation, in
good faith and in accordance with the terms hereof, of any funds or U.S.
Government Securities held by it
<PAGE>
-11-
hereunder, including without limitation any liability for any delay not
resulting from gross negligence or willful misconduct in such investment,
reinvestment or liquidation, or for any loss of principal or income incident to
any such delay.
The Escrow Agent shall be entitled to rely upon any judicial order
or judgment, upon any written opinion of counsel or upon any certification,
instruction, notice, or other writing delivered to it by the Trustee in
compliance with the provisions of this Agreement or by the Company, to the
extent not inconsistent with any instruction of the Trustee, in either case,
without being required to determine the authenticity or the correctness of any
fact stated therein or the propriety or validity of service thereof. The Escrow
Agent may act in reliance upon any instrument comporting with the provisions of
this Agreement or signature believed by it to be genuine and may assume that any
person purporting to give notice or receipt or advice or make any statement or
execute any document in connection with the provisions hereof has been duly
authorized to do so.
At any time the Escrow Agent may request in writing an instruction
in writing from the Company, and may at its own option include in such request
the course of action it proposes to take and the date on which it proposes to
act, regarding any matter arising in connection with its duties and obligations
hereunder; provided, however, that the Escrow Agent shall state in such request
that it believes in good faith that such proposed course of action is consistent
with another identified provision of this Agreement. The Escrow Agent shall not
be liable to the Company for acting without the Company's consent in accordance
with such a proposal on or after the date specified therein if (i) the specified
date is at least two business days after the Company receives the Escrow Agent's
request for instructions and its proposed course of action, and (ii) prior to so
acting, the Escrow Agent has not received the written instructions requested
from the Company.
The Escrow Agent may act pursuant to the written advice of counsel
chosen by it with respect to any matter relating to this Agreement and (subject
to clause (ii) of the first
<PAGE>
-12-
paragraph of this Section 4(a)) shall not be liable for any action taken or
omitted in accordance with such advice.
The Escrow Agent shall not be called upon to advise any party as to
selling or retaining, or taking or refraining from taking any action with
respect to, any securities or other property deposited hereunder.
In the event of any ambiguity in the provisions of this Agreement
with respect to any funds or property deposited hereunder, the Escrow Agent
shall be entitled to refuse to comply with any and all claims, demands or
instructions with respect to such funds or property, and the Escrow Agent shall
not be or become liable for its failure or refusal to comply with conflicting
claims, demands or instructions. The Escrow Agent shall be entitled to refuse to
act until either any conflicting or adverse claims or demands shall have been
finally determined by a court of competent jurisdiction or settled by agreement
between the conflicting claimants as evidenced in a writing, satisfactory to the
Escrow Agent, or the Escrow Agent shall have received security or an indemnity
satisfactory to the Escrow Agent sufficient to save the Escrow Agent harmless
from and against any and all loss, liability or expense which the Escrow Agent
may incur by reason of its acting. The Escrow Agent may in addition elect in its
sole option to commence an interpleader action or seek other judicial relief or
orders as the Escrow Agent may deem necessary.
No provision of this Agreement shall require the Escrow Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder.
5. Indemnity. The Company shall indemnify, hold harmless and defend
the Escrow Agent and its directors, officers, agents, employees and controlling
persons, from and against any and all claims, actions, obligations, liabilities
and expenses, including defense costs, investigative fees and costs, legal fees,
and claims for damages, arising from the Escrow Agent's performance or
non-performance, or in connection with its acceptance or appointment as Escrow
Agent, under this
<PAGE>
-13-
Agreement, except to the extent that such liability, expense or claim is solely
and directly attributable to the gross negligence or willful misconduct of any
of the foregoing persons. The provisions of this Section 5 shall survive any
termination, satisfaction or discharge of this Agreement as well as the
resignation or removal of the Escrow Agent.
6. Grant of Security Interest; Instructions to Escrow Agent.
(a) The Company hereby irrevocably grants a first priority security
interest in and lien on, and pledges, assigns and sets over to the Trustee for
the ratable benefit of the Beneficiaries, all of the Company's right, title and
interest in the Escrow Account, and all property now or hereafter placed or
deposited in, or delivered to the Escrow Agent for placement or deposit in, the
Escrow Account, including, without limitation, all funds held therein, all U.S.
Government Securities held by (or otherwise maintained in the name of) the
Escrow Agent pursuant to Section 2, and all proceeds thereof as well as all
rights of the Company under this Agreement (collectively, the "Collateral"), in
order to secure all obligations and indebtedness of the Company under the
Indenture, the Securities and any other obligation, now or hereafter arising, of
every kind and nature, owed by the Company under the Indenture to the holders of
the Securities or to the Trustee or any predecessor Trustee. The Escrow Agent
hereby acknowledges the Trustee's security interest and lien as set forth above.
The Company shall take all actions necessary on its part to insure the
continuance of a first priority security interest in the Collateral in favor of
the Trustee in order to secure all such obligations and indebtedness.
(b) The Company and the Trustee hereby irrevocably instruct the
Escrow Agent to, and the Escrow Agent shall: (i) (A) maintain sole dominion and
control over funds and U.S. Government Securities in the Escrow Account for the
benefit of the Trustee to the extent specifically required herein, (B) maintain,
or cause its agent within the State of New York to maintain, possession in New
York of all certificated U.S. Government Securities purchased hereunder that are
physically pos-
<PAGE>
-14-
sessed by the Escrow Agent in order for the Trustee to enjoy a continuous
perfected first priority security interest therein under the law of the State of
New York (the Company hereby agreeing that in the event any certificated U.S.
Government Securities are in the possession of the Company or a third party, the
Company shall use its best efforts to deliver all such certificates to the
Escrow Agent), (C) take all steps specified by the Company pursuant to paragraph
(a) of this Section 6 to cause the Trustee to enjoy a continuous perfected first
priority security interest under any applicable Federal and State of New York
law in all U.S. Government Securities purchased hereunder that are not
certificated and (D) maintain the Collateral free and clear of all liens,
security interests, safekeeping or other charges, demands and claims against the
Escrow Agent of any nature now or hereafter existing in favor of anyone other
than the Trustee; (ii) promptly notify the Trustee if a responsible officer of
the Escrow Agent receives written notice that any Person other than the Trustee
has a lien or security interest upon any portion of the Collateral; and (iii) in
addition to disbursing amounts held in escrow pursuant to any Payment Notice and
Disbursement Requests given to it by the Trustee pursuant to Section 3, upon
receipt of written notice from the Trustee of the acceleration of the maturity
of the Securities, and direction from the Trustee to disburse all Available
Funds to the Trustee, as promptly as practicable, after following, if it so
chooses, the procedures set forth in the fourth paragraph of Section 4(a),
disburse all funds held in the Escrow Account to the Trustee and transfer title
to all U.S. Government Securities held by the Escrow Agent hereunder to the
Trustee. The lien and security interest provided for by this Section 6 shall
automatically terminate and cease as to, and shall not extend or apply to, and
the Trustee shall have no security interest in, any funds disbursed by the
Escrow Agent to the Company pursuant to this Agreement to the extent not
inconsistent with the terms hereof. Notwithstanding any other provision
contained in this Agreement, the Escrow Agent shall act solely as the Trustee's
agent for purposes of holding and perfecting the Trustee's security interest in
the Collateral in connection with its duties under this Section 6 or any other
duties herein relating to the Escrow Account or any funds or
<PAGE>
-15-
U.S. Government Securities held thereunder. The Escrow Agent shall not have any
right to receive compensation from the Trustee and shall have no authority to
obligate the Trustee or to compromise or pledge its security interest hereunder.
Accordingly, the Escrow Agent is hereby directed to cooperate with the Trustee
in the exercise of its rights in the Collateral provided for herein.
(c) Any money and U.S. Government Securities collected by the
Trustee pursuant to Section 6(b)(iii) shall be applied as provided in Section
5.06 of the Indenture. Any surplus of such cash or cash proceeds held by the
Trustee and remaining after indefeasible payment in full of all the obligations
under the Indenture shall be paid over to the Company or to whomsoever may be
lawfully entitled to receive such surplus or as a court of competent
jurisdiction may direct.
(d) Upon demand, the Company will execute and deliver to the Trustee
such instruments and documents as the Trustee may deem necessary or advisable to
confirm or perfect the rights of the Trustee under this Agreement and the
Trustee's interest in the Collateral. The Trustee shall be entitled to take all
necessary action to preserve and protect the security interest created hereby as
a lien and encumbrance upon the Collateral.
(e) The Company hereby appoints the Trustee as its attorney-in-fact
with full power of substitution to do any act which the Company is obligated
hereto to do, and the Trustee may exercise such rights as the Company might
exercise with respect to the Collateral and take any action in the Company's
name to protect the Trustee's security interest hereunder. In addition to the
rights provided under Section 6(b)(iii) hereof, upon an Event of Default as
defined in the Indenture and for so long as such Event of Default continues, the
Trustee may exercise in respect of the Collateral, in addition to other rights
and remedies provided for herein or otherwise available to it, all the rights
and remedies of a secured party under the UCC or other applicable law, and the
Trustee may also upon obtaining possession of the Collateral as set forth
herein, without notice to the Company except as specified below, sell the
Collat-
<PAGE>
-16-
eral or any part thereof in one or more parcels at public or private sale, at
any exchange, broker's board or at any of the Trustee's offices or elsewhere,
for cash, on credit or for future delivery, and upon such other terms as the
Trustee may deem commercially reasonable. The Company acknowledges and agrees
that any such private sale may result in prices and other terms less favorable
to the seller than if such sale were a public sale. The Company agrees that, to
the extent notice of sale shall be required by law, at least ten (10) days'
notice to the Company 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.
The Trustee shall not be obligated to make any sale regardless of notice of sale
having been given. The Trustee 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.
7. Termination. This Agreement shall terminate automatically ten
(10) days following disbursement of all funds remaining in the Escrow Account
(including U.S. Government Securities), unless sooner terminated by agreement of
the parties hereto (in accordance with the terms hereof and not in violation of
the Indenture; provided, that the Trustee may not agree to terminate unless it
has received the consent of 100% of the holders of all of the Securities
outstanding); provided, however, that the obligations of the Company under
Section 2(c) and Section 5 (and any existing claims thereunder) shall survive
termination of this Agreement and the resignation of the Escrow Agent; provided,
further, however, that until such tenth day, the Company will cause this
Agreement (or any permitted successor agreement) to remain in effect and will
cause there to be an escrow agent (including any permitted successor thereto)
acting hereunder (or under any such permitted successor agreement).
8. Miscellaneous.
(a) Waiver. Any party hereto may specifically waive any breach of
this Agreement by any other party, but no such waiver shall be deemed to have
been given unless such waiver is
<PAGE>
-17-
in writing, signed by the waiving party and specifically designating the breach
waived, nor shall any such waiver constitute a continuing waiver of similar or
other breaches.
(b) Invalidity. If for any reason whatsoever any one or more of the
provisions of this Agreement shall be held or deemed to be inoperative,
unenforceable or invalid in a particular case or in all cases, such
circumstances shall not have the effect of rendering any of the other provisions
of this Agreement inoperative, unenforceable or invalid, and the inoperative,
unenforceable or invalid provision shall be construed as if it were written so
as to effectuate, to the maximum extent possible, the parties' intent.
(c) Assignment. This Agreement is personal to the parties hereto,
and the rights and duties of any party hereunder shall not be assignable except
with the prior written consent of the other parties. Notwithstanding the
foregoing, this Agreement shall inure to and be binding upon the parties and
their successors and permitted assigns.
(d) Benefit. The parties hereto and their successors and permitted
assigns, but no others, shall be bound hereby and entitled to the benefits
hereof; provided, however, that the Beneficiaries (including holders of the
Securities) and their assigns or successors in interest shall be entitled to the
benefits hereof and to enforce this Agreement.
(e) Time. Time is of the essence with respect to each provision of
this Agreement.
(f) Entire Agreement; Amendments. This Agreement and the Indenture
contain the entire agreement among the parties with respect to the subject
matter hereof and supersede any and all prior agreements, understandings and
commitments, whether oral or written. This Agreement may be amended only in
accordance with Article Nine of the Indenture and further by a writing signed by
a duly authorized representative of each party hereto.
<PAGE>
-18-
(g) Notices. All notices and other communications required or
permitted to be given or made under this Agreement shall be in writing and shall
be deemed to have been duly given and received when actually received,
including: (a) on the day of hand delivery; (b) three business days following
the day sent, when sent by United States certified mail, postage and
certification fee prepaid, return receipt requested, addressed as set forth
below; (c) when transmitted by telecopy with verbal confirmation of receipt by
the telecopy operator to the telecopy number set forth below; or (d) one
business day following the day timely delivered to a next-day air courier
addressed as set forth below: To Escrow Agent:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Corporate Trust Department
Telecopy: (212) 946-8177
Telephone: (212) 946-3014
Delivery Instructions:
Chase NYC/CUST/021000021
Customer Account Number: C24586
Customer Account Title: Paging Network do Brasil
To Trustee:
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Corporate Trust Department
Telecopy: (212) 946-8177
Telephone: (212) 946-3014
To the Company:
<PAGE>
-19-
Paging Network do Brasil S.A.
Rua Alexandre Dumas, 1.711-1(degrees) andar
04717-910 Birmann
12 Chacara Santo Antonio
Sao Paulo, Brazil
Attention: Thomas Trynin
Telecopy: 011-55-521-1814
Telephone: 011-55-522-0663
or at such other address as the specified entity most recently may have
designated in writing in accordance with this Section.
(h) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(i) Captions. Captions in this Agreement are for convenience only
and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
(j) Choice of Law. The existence, validity, construction, operation
and effect of any and all terms and provisions of this Agreement shall be
determined in accordance with and governed by the laws of the State of New York,
without regard to principles of conflicts of laws, except to the extent United
States federal law is applicable to the perfection and priority of security
interests in U.S. Government Securities. The parties to this Agreement hereby
agree that jurisdiction over such parties and over the subject matter of any
action or proceeding arising under this Agreement may be exercised by a
competent Court of the State of New York, or by a United States Court, sitting
in New York City. The Company hereby submits to the personal jurisdiction of
such courts, hereby waives personal service of process upon it and consents that
any such service of process may be made by certified or registered mail,
return-receipt requested, directed to the Company at its address last specified
for notices hereunder, and service so made shall be deemed completed five (5)
days after the same shall have been so mailed, and hereby waives the right to a
trial by jury in any action or proceeding with the Escrow Agent. All
<PAGE>
-20-
actions and proceedings brought by the Company against the Escrow Agent relating
to or arising from, directly or indirectly, this Agreement shall be litigated
only in courts within the State of New York.
(k) Representations and Warranties. (i) The Company hereby
represents and warrants that this Agreement has been duly authorized, executed
and delivered on its behalf and constitutes the legal, valid and binding
obligation of the Company. The execution, delivery and performance of this
Agreement by the Company does not violate any applicable law or regulation to
which the Company is subject and does not require the consent of any
governmental or other regulatory body to which the Company is subject, except
for such consents and approvals as have been obtained and are in full force and
effect.
(ii) Each of the Escrow Agent and the Trustee hereby represents and
warrants that this Agreement has been duly authorized, executed and delivered on
its behalf and constitutes its legal, valid and binding obligation.
(l) Agent for Service; Submission to Jurisdiction; Waiver of
Immunities. By the execution and delivery of this Agreemeent or any amendment or
supplement hereto, the Company, (i) acknowledges that it has, by separate
written instrument, designated and appointed CT Corporation System, currently
located at 1633 Broadway, New York, New York 10019, as its authorized agent upon
which process may be served in any suit, action or proceeding with respect to,
arising out of, or relating to, the Securities, this Agreement or the Indenture
that may be instituted in any Federal or state court in the State of New York,
The City of New York, the Borough of Manhattan, or brought under Federal or
state securities laws or brought by the Trustee (whether in its individual
capacity or in its capacity as Trustee hereunder), and acknowledges that CT
Corporation System has accepted such designation, (ii) submits to the
jurisdiction of any such court in any such suit, action or proceeding, and (iii)
agrees that service of process upon CT Corporation System shall be deemed in
every respect effective service of process upon the Company in any such suit,
action or proceeding. The Company further agrees to take any and all ac-
<PAGE>
-21-
tion, including the execution and filing of any and all such documents and
instruments as may be necessary to continue such designation and appointment of
CT Corporation System in full force and effect so long as this Agreement shall
be in full force and effect; provided that the Company may and shall (to the
extent CT Corporation System ceases to be able to be served on the basis
contemplated herein), by written notice to the Trustee, designate such
additional or alternative agents for service of process under this Section
(8)(l) that (i) maintains an office located in the Borough of Manhattan, The
City of New York in the State of New York, (ii) are either (x) counsel for the
Company or (y) a corporate service company which acts as agent for service of
process for other persons in the ordinary course of its business and (iii)
agrees to act as agent for service of process in accordance with this Section
(8)(l). Such notice shall identify the name of such agent for process and the
address of such agent for process in the Borough of Manhattan, The City of New
York, State of New York. Upon the request of any Holder, the Trustee shall
deliver such information to such Holder. Notwithstanding the foregoing, there
shall, at all times, be at least one agent for service of process for the
Company appointed and acting in accordance with this Section (8)(l).
To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, the
Company hereby irrevocably waives such immunity in respect of its obligations
under this Agreement, the Indenture and the Securities, to the extent permitted
by law.
<PAGE>
-22-
IN WITNESS WHEREOF, the parties have executed and delivered this
Escrow Agreement as of the day first above written.
ESCROW AGENT: THE CHASE MANHATTAN BANK, A
BANKING CORPORATION,
as Escrow Agent
By: /s/ Kevin Binnie
--------------------------------
Name: Kevin Binnie
Title: Vice President
TRUSTEE: THE CHASE MANHATTAN BANK, A
BANKING CORPORATION,
as Trustee
By: /s/ Kevin Binnie
--------------------------------
Name: Kevin Binnie
Title: Vice President
COMPANY: PAGING NETWORK DO BRASIL S.A.
By: /s/ Thomas C. Trynin
--------------------------------
Name: Thomas C. Trynin
Title: President
<PAGE>
EXHIBIT A
Form of Payment Notice and Disbursement Request
[Letterhead of the Trustee]
[Date]
_______________________
_______________________
_______________________
Attention: Corporate Trust Department
Re: Disbursement Request No. ____
[indicate whether revised]
Ladies and Gentlemen:
We refer to the Escrow Agreement, dated as of June 6, 1997 (the
"Escrow Agreement") among you (the "Escrow Agent"), the undersigned as Trustee,
and PAGING NETWORK DO BRASIL S.A., a sociedade anonima organized under the laws
of the Federative Republic of Brazil (the "Company"). Capitalized terms used
herein shall have the meaning given in the Escrow Agreement.
This letter constitutes a Payment Notice and Disbursement Request
under the Escrow Agreement.
[choose one of the following, as applicable]
[The undersigned hereby notifies you that a scheduled interest
payment in the amount of $__________ is due and pay-
<PAGE>
able on ____________, ____ and requests a disbursement of funds contained in the
Escrow Account in such amount to the Trustee.]
[The undersigned hereby notifies you that Securities equalling
$__________ in aggregate principal amount have been retired and authorizes you
to release $__________ of funds in the Escrow Account to the Company (to an
account designated by the Company in writing), which amount represents the
amount permitted to be released in accordance with Section 3(c) of the Escrow
Agreement.]
[The undersigned hereby notifies you that there has been an
acceleration of the maturity of the Securities. Accordingly, you are hereby
requested to disburse all remaining funds contained in the Escrow Account to the
Trustee such that the balance in the Escrow Account is reduced to zero.]
In connection with the requested disbursement, the undersigned
hereby notifies you that:
1. [The Securities have not, as a result of an Event of Default (as
defined in the Indenture), been accelerated and become due and payable.]
2. All prior disbursements from the Escrow Account have been
Applied.
3. [add wire instructions]
The Escrow Agent is entitled to rely on the foregoing in disbursing
funds relating to this Payment Notice and Disbursement Request.
, as Trustee
By: _____________________________________
Name:
Title:
<PAGE>
Schedule A
[initial investment instructions]
<PAGE>
PAGING NETWORK DO BRASIL S.A.
SHAREHOLDERS AGREEMENT
By this private instrument, the undersigned, this 11th day of December,
1996:
(i) Warburg, Pincus Ventures, L.P., a limited partnership organized and
existing under the laws of the State of Delaware, U.S.A., with its main place of
business at 466 Lexington Avenue, New York, NY 10017 ("Warburg");
(ii) Paging Network International N.V., a corporation organized and
existing under the laws of the Netherlands, with its main place of business at
4965 Preston Park Boulevard, Plano, TX 75093 ("PageNet");
(iii) IVP Paging (Cayman) L.P., an exempt limited partnership organized
and existing under the laws of the Cayman Islands with an office at c/o Maples
and Calder, Ugland House, Box 309, George Town, Grand Cayman, Cayman Islands,
British West Indies ("IPC");
(iv) Multiponto Telecomunicacoes Ltda., a limited liability company
organized and existing under the laws of Brazil, with its main place of business
at Avenida Presidente Wilson No. 351, 28(0) Andar (parte), Rio de Janeiro,
Brazil, ("Multiponto");
(v) TVA Sistema Televisao S.A., a limited liability company organized and
existing under the laws of Brazil, with its main place of business at Rua do
Rocio 351, 9th Floor, Sao Paulo, Brazil 04552-904 ("TVA") (Warburg, PageNet,
IPC, Multiponto and TVA are collectively referred to as the "Investors");
(vi) The individuals whose names and addresses appear from time to time on
Schedule I hereto (the "Management Investors" and, together with the Investors,
the "Shareholders"); and
(vii) Paging Network do Brasil S.A., a corporation (sociedade anonima)
under the laws of Brazil with its head office in the Capital of the State of Sao
Paulo, at Avenida das Nacoes Unidas, 12,551 World Trade Center, 17th Floor,
Suite 26, Sao Paulo, Brazil (the "Corporation").
<PAGE>
R E C I T A L S:
WHEREAS, the Investors have, pursuant to the terms of a securities
subscription agreement with the Corporation (the "Securities Subscription
Agreement") have subscribed for certain shares of the Corporation, including
shares of Common Stock of the Corporation (the "Common Stock") and shares of
Preferred Stock of the Corporation (the "Preferred Stock"), as set forth of
Schedules II and III hereto, and have the right to subscribe for additional
shares of Common Stock, as set forth on Schedule IV hereto, and have agreed to
subscribe for additional shares of Preferred Stock, in the proportions set forth
on Schedule V hereto;
WHEREAS, certain of the Investors have, pursuant to the terms of the
Securities Subscription Agreement, the right to subscribe for certain additional
shares of Common Stock of the Corporation, as set forth of Schedule 2 of the
Securities Subscription Agreement; and
WHEREAS, the Shareholders and the Corporation desire to promote their
mutual interests by agreeing to certain matters relating to the operations and
management of the Corporation and the disposition of shares of capital stock in
the Corporation.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto hereby agree as follows:
CLAUSE 1--COVENANTS OF THE PARTIES
(a) Legends. The Corporation's Registered Stock Registrar, on the margin
of the Stock registration (and the certificates representing the Securities, if
any are issued), will bear the following legend reflecting the restrictions on
the transfer of such Securities contained in this Agreement:
"The securities evidenced hereby are subject to the terms of that
certain Shareholders Agreement, dated as of December 11, 1996, by and
among the Corporation and certain investors identified therein, including
certain restrictions on transfer. A copy of this Agreement has been filed
at the Corporation's head office pursuant to and for the purposes of
Article 118 of Law Nr.
6.404, of December 15, 1976.
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY SECURITIES LAW OF
BRAZIL OR ANY OTHER JURISDICTION (THE "SECURITIES LAWS"), AND MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER APPLICABLE
SECURITIES LAWS OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO PAGING NETWORK DO BRASIL, S.A.,
-2-
<PAGE>
QUALIFIES AS AN EXEMPT TRANSACTION UNDER APPLICABLE SECURITIES LAWS AND
THE RULES AND REGULATIONS PROMULGATED THEREUNDER."
(b) Shares Bound by this Agreement. All shares of the Corporation's
capital stock owned by the Shareholders on the date hereof or which may be owned
by the Shareholders in the future, including, without limitation, by means of
subscription, acquisition, bonus distribution, split or reverse split (the
"Shares"), shall be bound by this Agreement. Subscribed, acquired and bonus
shares are covered by the definition of Shares, unless otherwise expressly
excluded in the context.
(c) Additional Investors. The parties hereto acknowledge that, subject to
the terms hereof, certain employees of the Corporation may become shareholders
of the Corporation after the date hereof and that such employees will be
required, as a condition to the issuance of any Securities (or options or
warrants to acquire any Securities), to assent to the terms and conditions and
to execute a counterpart of this Agreement. Upon execution of a counterpart of
this Agreement, such employees shall be deemed to be Management Investors under
this Agreement, shall be added to Schedule I, and shall be entitled to all of
the rights and benefits afforded to the Management Investors, and be bound by
all the obligations contained, hereunder.
CLAUSE 2--CAPITAL STOCK
(a) Total Capital. The total authorized capital stock of the Corporation
shall be 113,000 shares consisting of 50,000 shares of Common Stock, with no par
value (the "Common Stock"), and 63,000 shares of Redeemable Preferred Stock,
with no par value (the "Preferred Stock").
(b) Registration and Transfer of Shares. The Corporation, at its expense,
will cause to be registered in the Corporation's book of registration of Shares
the number of fully paid and non-assessable Shares to which each holder shall be
entitled. The name of each person owning any Shares shall be entered on the book
of registration of the Corporation together with the number of Shares held by
him. The Shares shall be transferable on the book of transfer of the Corporation
by the holders thereof, with such proof as the Corporation or its agents may
reasonably require. A record shall be made of each transfer.
CLAUSE 3--RIGHTS AND PRIVILEGES OF THE SHARES
The relative powers, preferences and rights together with the
qualifications and limitations and restrictions of the Common Stock and the
Preferred Stock are as follows:
-3-
<PAGE>
Section 3.1. Preferred Stock.
(a) Dividends. There shall be one class of Preferred Stock. The holders of
the Preferred Stock (the "Preferred Shareholders") shall be entitled to receive,
when and as declared by the Shareholders' General Meeting (the "Shareholders'
Meeting") of the Corporation, out of any funds legally available therefor:
(i) from the date of issuance to but not including the sixth
anniversary thereof, quarterly preferential fixed cumulative dividends on
the capital value represented by such shares of Preferred Stock at the
rates set forth opposite the corresponding quarterly period following such
issuance; on the sixth anniversary of the issuance, such accumulated
dividends shall be distributed and immediately reinvested in the Company
by the holders of Preferred Stock, with the issuance of corresponding
additional shares of Preferred Stock (the "PIK Preferred Stock"):
Quarter Dividend Rate
------- -------------
1 3.000%
2 3.090%
3 3.183%
4 3.278%
5 3.377%
6 3.478%
7 3.582%
8 3.690%
9 3.800%
10 3.914%
11 4.032%
12 4.153%
13 4.277%
14 4.406%
15 4.538%
16 4.674%
17 4.814%
18 4.959%
19 5.107%
20 5.261%
21 6.321%
22 6.543%
23 6.772%
24 7.009%
(ii) from the sixth anniversary of issuance to but not including
the seventh anniversary of issuance of the Preferred Stock (or in the case
of the PIK Preferred Stock from the date of issuance to but not including
the first anniversary thereof), quarterly preferential fixed cash
dividends on the capital value (including the amount of all accumulated
dividends reinvested in accordance with item
-4-
<PAGE>
(a)(i) above) represented by such shares of Preferred Stock at a rate of
sixteen percent (16%) per annum;
(iii) from the seventh anniversary of issuance to but not including
the eighth anniversary of issuance (or in the case of the PIK Preferred
Stock from the first anniversary to but not including the second
anniversary thereof), quarterly preferential cash dividends on the capital
value (including the amount of all accumulated dividends reinvested in
accordance with item (a)(i) above) represented by such shares of Preferred
Stock at a rate of eighteen percent (18%) per annum; and
(iv) from the eighth anniversary of issuance to but not including
the tenth anniversary of issuance (or in the case of the PIK Preferred
Stock from the second anniversary to but not including the third
anniversary thereof), quarterly preferential cash dividends on the capital
value (including the amount of all accumulated dividends reinvested in
accordance with item (a)(i) above) represented by such shares of Preferred
Stock at a rate of twenty percent (20%) per annum.
(b) Preference. So long as any Preferred Stock remains outstanding, in no
event shall any dividend whatsoever, whether in cash or other property (other
than Common Stock), be paid or declared or any distribution be made on the
Common Stock during any fiscal year, nor shall any Common Stock be purchased,
retired or otherwise acquired (other than through the repurchase of shares
issued pursuant to employee incentive programs or agreements with management
approved by the Shareholders) for a consideration by the Corporation (i) unless
the full dividends of the Preferred Stock for all past dividend periods required
to be paid in cash shall have been paid or declared and a sum set apart
sufficient for the payment thereof, and (ii) unless, if at any time the
Corporation is obligated to retire Preferred Stock pursuant to any mandatory
redemption requirement, sinking fund or a fund of a similar nature, all arrears,
if any, in respect of the retirement of the Preferred Stock shall have been made
good. Subject to the foregoing provisions and not otherwise, such dividends
(payable in cash, stock or otherwise) as may be determined by the Shareholders'
Meeting may be declared and paid on the Common Stock from time to time out of
the remaining funds of the Corporation legally available therefor, and the
Preferred Stock shall not be entitled to participate in any such dividend,
whether payable in cash, stock or otherwise.
(c) Rights on Liquidation.
(i) Priority on Liquidation. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, then, before any distribution or payment shall be made to the
holders of the Common Stock, the holders of the Preferred Stock shall be
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entitled to be paid an amount per Share equal to U.S. $1,000 Dollars or
its equivalent in Reais or other currency, plus an amount equal to any and
all dividends accrued and unpaid thereon as of the date of such
distribution or payment (the "Preferred Priority"). If, upon any
liquidation, dissolution or winding up of the Corporation, the assets to
be distributed to the holders of the Preferred Stock shall be insufficient
to permit the payment to such holders of the full Preferred Priority, then
all of the assets of the Corporation shall be distributed ratably to the
holders of the Preferred Stock based on the aggregate Preferred Priority
for the shares of Preferred Stock held by each holder.
(ii) Distribution of Remaining Assets. If such payment of the
Preferred Priority shall have been made in full to the holders of the
Preferred Stock, the remaining assets and funds of the Corporation, if
any, shall be distributed among the holders of the Common Stock according
to their respective equity investment.
(iii) Merger or Sale of Assets. A consolidation or merger of the
Corporation with or into any other corporation or other entity in which
the holders of the Corporation's outstanding Common Stock before the
merger or consolidation do not retain a majority of the voting power of
the surviving corporation or other entity, or a sale of all or
substantially all of the assets of the Corporation, shall be deemed to be
a liquidation, dissolution or winding up of the Corporation as those terms
are used in this Clause 3.1(c).
(iv) Non-Cash Consideration. In the event that such distribution
to the holders of Preferred Stock shall include any assets other than
cash, the following provisions shall govern. The Shareholders owning
Common Stock shall first determine the fair market value of such assets
for such purpose, and shall notify all holders of Preferred Stock of such
determination. The fair market value of such assets for purposes of the
distribution under this subsection shall be the fair market value as
determined by a majority vote of the Shareholders in good faith, unless
the holders of a majority of the outstanding Preferred Stock shall object
thereto in writing within fifteen (15) days after the date of such notice.
In the event of such objection, the valuation of such assets for purposes
of such distribution shall be determined by an arbitrator selected by the
objecting Shareholders and the other Shareholders, or in the event a
single arbitrator cannot be agreed upon within ten (10) days after the
written objection sent by the objecting Shareholders in accordance with
the previous sentence, the valuation of such assets shall be determined by
arbitration in which (A) the objecting Shareholders shall name in their
notice of objection one arbitrator, (B) the other Shareholders shall name
a second arbitrator within fifteen
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(15) days from the receipt of such notice, (C) the two arbitrators thus
selected shall select a third arbitrator within fifteen (15) days
thereafter, and (D) the three arbitrators thus selected shall determine
the valuation of such assets within fifteen (15) days thereafter for
purposes of such distribution by majority vote. In the event the second or
third arbitrator is not selected as provided herein, then such arbitrator
shall be selected by the President of the American Arbitration Association
("AAA"). The costs of such arbitration shall be borne by the Corporation
or by the holders of Preferred Stock (on a pro rata basis out of the
assets otherwise distributable to them) as follows: (A) if the valuation
as determined by the arbitrators is greater than ninety percent (90%) of
the valuation as determined by the Shareholders, the holders of Preferred
Stock shall pay the costs of the arbitration, and (B) otherwise, the
Corporation shall bear the costs of the arbitration. The arbitration shall
be held in New York, New York in accordance with the International
Arbitration Rules of the AAA. The award made by the arbitrators shall be
binding upon the parties hereto, no appeal shall be taken from such award
and judgment thereon may be entered in any court of competent jurisdiction
to the extent permitted by such jurisdiction.
(d) Redemption.
(i) At the election of the holders of a majority of the
outstanding Preferred Stock, made by written notice to the Corporation,
the Preferred Stock shall be subject to mandatory redemption (to the
extent that such redemption shall not violate any applicable provisions of
the laws of Brazil, based upon the advice of counsel) at a price per share
equal to U.S. $1,000, plus an amount equal to any and all dividends
accrued and unpaid thereon as of the date of such redemption (the
"Redemption Price") as follows:
(A) if the Corporation defaults in the performance of or compliance
with any term contained herein and such default is not remedied
within thirty (30) days after the earlier of (1) a Responsible
Officer obtaining actual knowledge of such default and (2) the
Corporation receiving written notice of such default from any
Preferred Stock holder; or
(B) if a Material Adverse Change (as defined in the Securities
Subscription Agreement) occurs; or
(C) if a Liquidity Event (as defined in the Securities Subscription
Agreement) occurs.
(ii) On the tenth anniversary of the date of issuance of Preferred
Stock pursuant to the Securities Subscription Agreement, all shares of
Preferred Stock then
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outstanding shall be redeemed at the per share price equal to the
Redemption Price.
(iii) If the Corporation is unable to redeem any shares of
Preferred Stock because such redemption would violate the applicable laws
of Brazil, then the Corporation shall redeem such shares to the extent
possible on a pro rata basis and thereafter as soon thereafter as the
restrictions precluding such redemption shall no longer be applicable.
(iv) In case of redemption of only part of the shares of Preferred
Stock at any time outstanding, the shares to be redeemed shall be selected
pro rata (as nearly as may be) from all holders in proportion to the
number of shares of Preferred Stock held by each of them, except as may be
required by applicable law. Notice of every redemption provided for in
this Clause 3.1(d) shall be given by as provided in Clause 12(e) to every
holder of record, any of whose shares are then to be redeemed, not less
than 15 nor more than 30 days prior to the date fixed as the date of the
redemption thereof, at the respective addresses of such holders as the
same shall appear on the stock transfer books of the Corporation. The
notice shall state that the shares specified in such notice will be
redeemed by the Corporation at the Redemption Price and on the date
specified in such notice, accompanied by cash or a certified check in the
amount of any stock transfer tax applicable to such transaction. On and
after the date specified in the notice described above, each holder of
shares called for redemption shall be entitled to receive therefor the
applicable Redemption Price. If the Corporation shall give notice of
redemption as aforesaid (and unless the Corporation shall fail to pay the
Redemption Price in accordance with such notice), all shares called for
redemption shall be deemed to have been redeemed on the date specified in
such notice, and such shares so called for redemption shall from and after
such date cease to represent any interest whatever in the Corporation or
its property, and the holders thereof shall have no rights other than the
right to receive such Redemption Price but without any interest thereon
from or after such date.
(v) Cancellation of Redeemed Shares. All shares of the Preferred
Stock purchased or redeemed by the Corporation shall be forthwith retired
and canceled and shall not be reissued, nor shall any other stock be
issued in place thereof, but the Corporation may, nevertheless, from time
to time thereafter increase its capital stock in the manner and to the
extent permitted by law and by the Corporation's bylaws.
(e) Voting Rights. The Preferred Stock shall be entitled to vote as a
class in connection with the matters set forth in
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Section 4.2 hereof, and each share of Preferred Stock shall be entitled to
one vote in connection therewith.
Section 3.2. Common Stock.
(a) Dividends. Subject to the preferences and other rights of the
Preferred Stock as set out above, the holders of Common Stock shall be entitled
to receive an annual dividend of 1/2 of 1% of the annual net profits of the
Corporation, in the manner declared by the Shareholders Meeting and/or the Board
of Directors and out of funds legally available therefor. Holders of Common
Stock shall be entitled to share equally, share for share, in such dividends.
The holders of Common Stock hereby agree to the accumulation and non-payment of
dividends for a period of ten (10) years from the date hereof or until the
redemption of the Preferred Stock, whichever occurs earlier.
(b) Liquidation. In the event of any liquidation, dissolution or winding
up of the affairs of the Corporation, voluntary or involuntary, after payment or
provision for payment to the holders of Preferred Stock of the amounts to which
they may be entitled as set out above, the remaining assets of the Corporation
available to Shareholders shall be distributed equally per share to the holders
of Common Stock.
(c) Voting Rights. Each share of Common Stock shall be entitled to one
vote in the Shareholders' Meeting.
CLAUSE 4--SHAREHOLDERS' MEETINGS
Section 4.1. Meetings.
(a) Ordinary Meeting. The ordinary meeting of shareholders for the
election of directors, the examination and deliberation of the accounts of
management and the financial statements, and the transaction of any other
business shall be held up to the end of April of each year in such place where
the Corporation has its main offices. If said day be a legal holiday, said
meeting shall be held on the next succeeding business day.
(b) Extraordinary Meetings. Extraordinary meetings of the shareholders for
any purpose may be called at any time by the Board of Directors, or by the
President, and shall be called by the President at the request of the holders of
five percent (5%) (or such other percentage as may be required by Brazilian law)
of the outstanding shares of any class of capital stock entitled to vote.
Extraordinary meetings shall be held at such place where the Corporation has its
main offices.
(c) Notice of Meetings. Written notice of the time and place of any
shareholder's meeting, whether ordinary or extraordinary, shall be given to each
shareholder entitled to vote thereat, by personal delivery or by mailing the
same as provided in Clause 12(e) to him at his address as the same
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appears upon the records of the Corporation at least ten (10) days but not more
than sixty (60) days before the day of the meeting and published as required by
law. Notice of any adjourned meeting need not be given except by announcement at
the meeting so adjourned, unless otherwise ordered in connection with such
adjournment. Such further notice, if any, shall be given as may be required by
law. The Corporation shall consider this notice as renewed as often as is
necessary in order to keep it current.
(d) Quorum. Any number of shareholders, together holding at least a
majority of the capital stock of the Corporation issued and outstanding and
entitled to vote, who shall be present in person or represented by proxy at any
meeting duly called, shall constitute a quorum for the transaction of all
business, except as otherwise provided by law, the Corporation's bylaws or this
Agreement.
(e) Voting. Each shareholder entitled to vote at any meeting may vote
either in person or by proxy, but no proxy shall be voted on or after one year
from its date. Each shareholder entitled to vote shall at every meeting of the
shareholders be entitled to one vote for each share of stock registered in his
name on the record of shareholders. At all meetings of shareholders all matters,
except as otherwise provided by Brazilian corporation law, shall be determined
by the affirmative vote of the majority of shares present in person or by proxy
and entitled to vote on the subject matter. Voting at meetings of shareholders
need not be by written ballot.
(f) Amendment to By-Laws. For so long as any Investor holds directly or
indirectly, at least ten percent (10%) of the Common Stock outstanding on a
fully diluted basis, the Corporation shall not amend its by-laws without the
consent of such Investor.
Section 4.2. Resolutions of the Preferred Shareholders.
(a) The resolutions of the Preferred Shareholders shall be taken by the
quorums and majorities provided by Brazilian law. However, the Corporation will
refrain from taking any of the following actions without the affirmative vote of
the holders of a majority of the Preferred Stock:
(i) Purchase of Assets. The Corporation will not, and will not
permit any of its Subsidiaries to, purchase or otherwise acquire (in one
or a series of related transactions) any part of the property or assets of
any person except that:
(A) the Corporation and its Subsidiaries may transfer assets
among themselves;
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(B) the Corporation and its Subsidiaries may purchase inventory,
materials and equipment as set forth in the Operating Budget
(or, for the nine month period following the Closing Date, the
interim Operating Budget); and
(C) the Corporation and its Subsidiaries may make Permitted
Capital Expenditures (as defined in the Securities
Subscription Agreement).
(ii) Commitments. The Corporation will not, and will not permit
any of its Subsidiaries to, contract, create, incur, assume or suffer to
exist any obligation in excess of U.S.$250,000 or its equivalent in Reais
or other currency unless such obligation has been contemplated in the
Operating Budget (or, for the nine month period following the Closing
Date, the interim Operating Budget).
(iii) Amendment to By-laws. The Corporation will not, and will not
permit any of its Subsidiaries to, amend its by-laws, including, without
limitation, any reduction of the minimum cumulative and fixed dividends of
the Preferred Stock.
(iv) Limitation on Guarantees. Except for the guaranty of
permitted obligations of any Subsidiary, the Corporation will not, and
will not permit any of its Subsidiaries to, contract, create, incur,
assume or suffer to exist any obligation, contingent or otherwise,
directly or indirectly guaranteeing (including, without limitation, as a
result of being a general partner of another Person, unless the underlying
obligation is expressly made non-recourse as to such general partner) any
Indebtedness or other obligation of another Person. Indebtedness as used
herein shall mean all obligations which in accordance with GAAP are
classified as liabilities upon a balance sheet of such Person.
(v) Liens. The Corporation will not, and will not permit any of
its Subsidiaries to, contract, create, incur, assume or suffer to exist
any Lien upon or with respect to any property or assets (real or personal,
tangible or intangible) of the Corporation or any of its Subsidiaries,
whether now owned or hereafter acquired, or sell any such property or
assets subject to an understanding or agreement, contingent or otherwise,
to repurchase such property or assets (including sales of accounts
receivable with recourse to the Corporation or any or its Subsidiaries),
or assign any right to receive income, excluding, however, from the
operation of this Section:
(A) Liens incurred or deposits made in the ordinary course of
business in connection with workers, compensation,
unemployment insurance and other
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types of social security or to secure the performance of
tenders, statutory obligations, bids, leases, government
contracts, performances and return of money bonds and similar
obligations, but not any Lien in favor of a surety arising in
connection with an actual default under a construction
contract;
(B) Liens incidental to the normal conduct of the business of
the Corporation or any Subsidiary or the ownership of its
property (including without limitation leases or subleases
granted to other Persons, mechanics liens, minor survey
exceptions, title defects, minor encumbrances, easements,
reservations, rights of others for rights-of-way, zoning or
other restrictions as to the use of real property), which
are not created in connection with the incurrence of
indebtedness and which do not in the aggregate materially
interfere with the use or value of such property in the
operation of the business of the Corporation and its
Subsidiaries taken as a whole;
(C) Liens of or resulting from any judgment rendered by a court of
competent jurisdiction, the appeal of which the Corporation or
a Subsidiary is prosecuting in good faith, and for which the
Corporation shall have made reserves or other appropriate
provision, if any, in respect thereof in accordance with GAAP;
and
(D) Liens for taxes, assessments or other governmental charges or
levies, either not yet due and payable.
(vi) Indebtedness. The Corporation will not, and will not permit
any of its Subsidiaries to, contract, create, incur, assume or suffer to
exist any Indebtedness in excess of U.S.$250,000 or its equivalent in
Reais or other currency, unless such indebtedness has been contemplated in
the Operating Budget (or, for the nine month period following the Closing
Date, the interim Operating Budget), except accrued expenses and current
trade accounts payable incurred in the ordinary course.
(vii) Transactions with Affiliates. The Corporation will not, and
will not permit any of its Subsidiaries to, enter into any transaction or
series of related transactions (including without limitation the purchase,
lease, sale or exchange of properties of any kind or the rendering of any
service) with any Affiliate (other than the Corporation or another
Subsidiary), except pursuant to the reasonable requirements of the
Corporation's or such Subsidiary's business and upon fair and reasonable
terms no less favorable to the Corporation or such Subsidiary than would
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be obtainable in a comparable arm's-length transaction with a Person not
an Affiliate.
(viii) No Other Business. The Corporation will not, and will not
permit any of its Subsidiaries to, engage directly or indirectly in any
business other than the operation and marketing of wireless messaging
services in Brazil.
(ix) Issuance of Eguity. The Corporation will not, and will not
permit any of its Subsidiaries to, issue any equity interest or any
options or subscription rights to purchase, or securities convertible
into, equity interests, except (A) all shares of Common Stock and
Preferred Stock issued pursuant to the Stock Subscription Agreement or
Section 3.1(a) hereto, (B) shares of Common Stock issued to Management
Investors on the date hereof, and (C) 2,487 shares of Common Stock
reserved for possible issuance to management of the Corporation and its
Subsidiaries, provided, however, that the Corporation or any of its
Subsidiaries may (A) issue replacements of then outstanding shares of
capital stock, (B) declare stock splits, stock dividends and similar
issuances which do not decrease the percentage ownership (on a fully
diluted basis, taking into account the exercise of all permitted
subscription rights) of the Shareholders in the Common Stock of the
Corporation or the Corporation or any of its Subsidiaries in any class of
the capital stock of such Subsidiary, and (C) issue capital stock to
qualify Directors to the extent required by applicable law.
(x) Bankruptcy, Reorganization, Sale of Assets, Etc. The
Corporation will not, and will not permit any of its Subsidiaries to,
enter into any action for a composition with creditors, the winding up,
liquidation or dissolution of the Corporation or its Subsidiaries or
entering into by them of any transaction of merger or consolidation, or
conveyance, sale, lease or other disposition of (or agreement to do any of
the foregoing at any future time) all or substantially all of assets
thereof, whether in a single transaction or a series of related
transactions, except that the Corporation and its Subsidiaries may
transfer assets among themselves.
(xi) Dividends. The Corporation will not, and will not permit any
of its Subsidiaries to, declare, authorize or pay any Dividend (as defined
in Clause 10(a) below) except as otherwise required by Brazilian law or
the Preferred Stock dividend provided for in Section 3.1(a) hereof.
(b) The limitations set forth in Subsections (i), (ii), (iv), (v) and
(viii) of this Section 4(a) will terminate on the date Warburg ceases to own any
Preferred Stock. The Shareholders also hereby agree that on the date Warburg
ceases to own any
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Preferred Stock, they will amend the Corporation's by-laws to terminate those
provisions of such by-laws that correspond to Subsections (i), (ii), (iv), (v)
and (viii) of this Section 4(a).
CLAUSE 5--DIRECTORS
Section 5.1. Board and Meetings.
(a) Composition of the Board. The Corporation's Board of Directors shall
be composed of five (5) permanent members and five (5) alternate members: two
designees of Warburg, one designee of PageNet, one designee of IPC, and the
President/Chief Executive Officer of the Corporation. For so long as (A) PageNet
shall hold at least ten percent (10%) of the shares of the Common Stock
outstanding on a fully diluted basis, taking into account the exercise of all
permitted subscription rights, or (B) the Technical Services Agreement, of even
date herewith, between Paging Network, Inc. and the Corporation is in effect,
PageNet shall be entitled to appoint one (1) permanent member and one (1)
alternate member of the Board of Directors. For so long as IPC shall hold at
least ten percent (10%) of the shares of the Common Stock outstanding on a fully
diluted basis it shall be entitled to appoint one (1) permanent member and one
(1) alternate member of the Board of Directors. Notwithstanding the foregoing,
for so long as Warburg shall hold more shares of the Common Stock outstanding on
a fully diluted basis than any other shareholder of the Corporation, Warburg
shall have the right if it chooses to designate a majority of the members of the
Board of Directors. In the event Warburg is not entitled to designate a majority
of the members of the Board pursuant to the preceding sentence, but Warburg
shall hold at least ten percent (10%) of the shares of the Common Stock
outstanding on a fully diluted basis it shall be entitled to appoint one (1)
permanent member and one (1) alternate member of the Board of Directors. Any
person invited by a Board member may attend and participate (without vote) at
the meetings. In addition to the foregoing, for so long as each of TVA and
Multiponto shall be a Shareholder, each shall be entitled to appoint one (1)
person to attend and participate (without vote) at the meetings. Such attendee
shall receive copies of all minutes of Board meetings. In the event that either
TVA or Multiponto shall hold at least ten percent (10%) of the shares of Common
Stock outstanding on a fully diluted basis it shall be entitled to appoint one
(1) permanent member and one (1) alternate member of the Board of Directors. For
purposes of this Section, "shares of Common Stock outstanding on a fully diluted
basis" shall include shares of Common Stock issuable upon the exercise of any
options or subscription bonds.
(b) Election. The Shareholders undertake to exercise their voting rights
so that such permanent members and alternates are elected in accordance with the
preceding clause.
(c) Presence at Meetings. The Shareholders hereby undertake to endeavor to
use their best efforts so that the
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permanent members appointed by them or their respective alternate members are
present at all meetings of Corporation's Board of Directors and of any of its
Subsidiaries. In the event of absence or impediment of any of the permanent
members, such member shall be mandatorily substituted by his alternate member
who shall vote on behalf of the permanent member as if he was present at the
meeting.
(d) Resignation, Etc. In the event of resignation or permanent impediment
of any member during the term of office to which he was elected, his replacement
shall be appointed by the Shareholder that had appointed the replaced member.
(e) Qualifying Shares. Each Shareholder agrees to obtain from each Board
member appointed by it full powers to exercise the voting right attached to any
Shares owned by each Board member at the Corporation's General Meetings, as well
as powers to transfer such Shares to such Shareholder in case the assigned
member ceases, for any reason, to be a Board member.
(f) Replacement Directors. In the event that any PageNet Director, IPC
Director, or Warburg Director designated in the manner set forth above is unable
to serve, or once having commenced to serve is removed or withdraws from the
Board (a "Withdrawing Director"), such Withdrawing Director's replacement (the
"Substitute Director") will be designated by PageNet, IPC, or Warburg, as the
case may be. A PageNet Director may be removed, with or without cause, by
PageNet and PageNet shall thereafter have the right to nominate a replacement
for such director. An IPC Director may be removed, with or without cause, by IPC
and IPC shall thereafter have the right to nominate a replacement for such
director. A Warburg Director may be removed, with or without cause, by Warburg
and Warburg shall thereafter have the right to nominate a replacement for such
director. A TVA Director, if any, may be removed, with or without cause, by TVA
and TVA shall thereafter have the right to nominate a replacement for such
director. The Shareholders and the Corporation agree to take all action within
their respective power, including, but not limited to, the voting of capital
stock of the Corporation owned by them, to cause the election of such Substitute
Director promptly following his or her nomination.
(g) Ordinary Meetings. The Board of Directors shall hold an annual meeting
for the purpose of organization and the transaction of any business immediately
after the ordinary meeting of the shareholders, provided a quorum of directors
is present. Other regular meetings may be held at such times as may be
determined from time to time by resolution of the Board of Directors.
(h) Extraordinary Meetings. Extraordinary meetings of the Board of
Directors may be called by the Chairman of the Board of Directors or by the
President.
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(i) Notice and Place of Meetings. Meetings of the Board of Directors may
be held at the principal office of the Corporation, or at such other place as
shall be stated in the notice of such meeting. Notice of any extraordinary
meeting, and, except as the Board of Directors may otherwise determine by
resolution, notice of any ordinary meeting also, shall be given as provided in
Clause 12(e) to each director addressed to him at his residence or usual place
of business, so as to arrive at least five days before the day on which the
meeting is to be held, or if sent to him at such place by telegraph or cable, or
delivered personally or by telephone, not later than four days before the day on
which the meeting is to be held. No notice of the annual meeting of the Board of
Directors shall be required if it is held immediately after the annual meeting
of the shareholders and if a quorum is present.
(j) Business Transacted at Meetings, Etc. Any business may be transacted
and any corporate action may be taken at any ordinary or extraordinary meeting
of the Board of Directors at which a quorum shall be present, whether such
business or proposed action be stated in the notice of such meeting or not,
unless special notice of such business or proposed action shall be required by
statute. The Board of Directors shall keep minutes of all business transacted
and actions taken at such meetings.
(k) Quorum. A majority of the Board of Directors at any time in office
shall constitute a quorum, subject to the terms of this Agreement and provided
that at least one Warburg Director is present at such meeting. At any meeting at
which a quorum is present, the vote of a majority of the members present shall
be the act of the Board of Directors unless the act of a greater number is
specifically required by law or by this Agreement. The members of the Board
shall act only as the Board and the individual members thereof shall not have
any powers as such.
(l) Compensation. The directors shall not receive any stated salary for
their services as directors, but by resolution of the Board of Directors a fixed
fee and expenses of attendance may be allowed for attendance at each meeting,
with such approval by the Shareholders as may be required by law. Nothing herein
contained shall preclude any director from serving the Corporation in any other
capacity, as an officer, agent or otherwise, and receiving compensation
therefor.
(m) Action Without a Meeting. Any action required or permitted to be taken
at any meeting of the Board of Directors, or of any committee thereof, may be
taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed in the
minute books with the minutes of the proceedings of the Board or committee.
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(n) Meetings Through Use of Communications Equipment. Members of the Board
of Directors, or any committee designated by the Board of Directors, shall,
except as otherwise provided by law, have the power to participate in a meeting
of the Board of Directors, or any committee, by means of a conference telephone
or similar communications equipment by means of which all persons participating
in the meeting can hear each other, and such participation shall constitute
presence in person at the meeting. Minutes shall be taken at such meetings as
may be required by law.
(o) Chairman of the Board of Directors. The Board of Directors in its
discretion may also elect a Chairman of the Board of Directors. The Chairman of
the Board of Directors shall be a director and shall have such power and perform
such duties as may from time to time be assigned to him by the Board of
Directors.
(p) President. The President shall, when present, preside at all meetings
of the shareholders, and, in the absence of the Chairman of the Board of
Directors, at meetings of the Board of Directors. He shall have power to call
extraordinary meetings of the shareholders or of the Board of Directors or of
the Executive Committee at any time. He shall be the chief executive officer of
the Corporation, and shall have the general direction of the business, affairs
and property of the Corporation, and of its several officers, and shall have and
exercise all such powers and discharge such duties as usually pertain to the
office of President.
(q) Deposits. All funds of the Corporation shall be deposited from time to
time to the credit of the Corporation in such bank or banks or other
depositories as the Board of Directors may select, and, for the purpose of such
deposit, checks, drafts, subscription rights and other orders for the payment of
money which are payable to the order of the Corporation, may be endorsed for
deposit, assigned and delivered by any officer of the Corporation, or by such
agents of the Corporation as the Board of Directors or the President may
authorize for that purpose.
(r) Voting Stock of Other Corporations. Except as otherwise ordered by the
Board of Directors, the President or the Treasurer shall have full power and
authority on behalf of the Corporation to attend and to act and to vote at any
meeting of the shareholders of any corporation of which the Corporation is a
shareholder and to execute a proxy to any other person to represent the
Corporation at any such meeting, and at any such meeting the President or the
Treasurer or the holder of any such proxy, as the case may be, shall possess and
may exercise any and all rights and powers incident to ownership of such stock
and which, as owner thereof, the Corporation might have possessed and exercised
if present. The Board of Directors may from time to time confer like powers upon
any other person or persons.
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CLAUSE 6--OFFICERS
(a) Election, Term of Office and Qualifications. The officers shall be
chosen annually by the Board of Directors. Each such officer shall, except as
herein otherwise provided, hold office until his successor shall have been
elected and taken office. The Chairman of the Board of Directors, if any, and
the President shall be directors of the Corporation, and should any one of them
cease to be a director, he shall ipso facto cease to be such officer. Except as
otherwise provided by law, any number of offices may be held by the same person.
(b) Removal of Officers. Any officer of the Corporation may be removed
from office, with or without cause, by a vote of a majority of the Board of
Directors.
(c) Resignation. Any officer of the Corporation may resign at any time.
Such resignation shall be in writing and shall take effect at the time specified
therein, and if no time be specified, at the time of its receipt by the
President or Secretary. The acceptance of a resignation shall not be necessary
in order to make it effective, unless so specified therein.
(d) Filling of Vacancies. A vacancy in any office shall be filled by
the Board of Directors.
(e) Compensation. The compensation of the officers shall be fixed by the
Board of Directors, or by any committee upon whom power in that regard may be
conferred by the Board of Directors, with such approval by the Shareholders as
may be required by law.
(f) Vice-Presidents. The Vice-Presidents, or any of them, shall, subject
to the direction of the shareholders, at the request of the President or in his
absence, or in case of his inability to perform his duties from any cause,
perform the duties of the President, and, when so acting, shall have all the
powers of, and be subject to all restrictions upon, the President. The
Vice-Presidents shall also perform such other duties as may be assigned to them
by the shareholders, and the shareholders may determine the order of priority
among them.
(g) Secretary. The Secretary shall perform such duties as are incident to
the office of Secretary, or as may from time to time be assigned to him by the
Board of Directors, or as are prescribed by the Corporation's by-laws.
(h) Treasurer. The Treasurer shall perform such duties and have powers as
are usually incident to the office of Treasurer or which may be assigned to him
by the Board of Directors.
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CLAUSE 7--COMMITTEES
(a) Committees. Committees, whose members need not be directors, may be
appointed by the Board of Directors, which committees shall hold office for such
time and have such powers and perform such duties as may from time to time be
assigned to them by the Board of Directors. Any member of such a committee may
be removed at any time, with or without cause, by the Board of Directors. Any
vacancy in a committee occurring from any cause whatsoever may be filled by the
Board of Directors.
(b) Resignation. Any member of a committee may resign at any time. Such
resignation shall be made in writing and shall take effect at the time specified
therein, or, if no time be specified, at the time of its receipt by the
President or Secretary. The acceptance of a resignation shall not be necessary
to make it effective unless so specified therein.
(c) Quorum. A majority of the members of a committee shall constitute a
quorum, subject to the terms of this Agreement. The act of a majority of the
members of a committee present at any meeting at which a quorum is present shall
be the act of such committee. The members of a committee shall act only as a
committee, and the individual members thereof shall not have any powers as such.
(d) Record of Proceedings, Etc. Each committee shall keep a record of its
acts and proceedings, and shall report the same to the Board of Directors when
and as required by the Board of Directors.
(e) Organization, Meetings, Notices, Etc. A committee may hold its
meetings at the principal office of the Corporation, or at any other place which
a majority of the committee may at any time agree upon. Each committee may make
such rules as it may deem expedient for the regulation and carrying on of its
meetings and proceedings. Unless otherwise ordered by the Executive Committee,
any notice of a meeting of such committee may be given by the Secretary of the
Corporation or by the chairman of the committee and shall be sufficiently given
if mailed to each member at his residence or usual place of business at least
two days before the day on which the meeting is to be held, or if sent to him at
such place by telegraph or cable, or delivered personally or by telephone not
later than 24 hours before the time at which the meeting is to be held.
(f) Compensation. Each member of any committee shall be entitled to
compensation only for the out-of-pocket expenses incurred by him as a result of
serving on such committee.
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CLAUSE 8--TRANSFER OF STOCK
(a) Resale of Securities.
(i) No Shareholder shall Transfer any Securities other than in
accordance with the provisions of this Clause 8. Any Transfer or purported
Transfer made in violation of this Clause 8 shall be null and void and of
no effect. For purposes of this Clause 8, the term Common Stock shall
include any subscription bonds or options to acquire shares of Common
Stock.
(ii) For a period commencing on the Closing Date and ending on the
20th annual anniversary thereof, no Shareholder will sell or otherwise
Transfer its Securities without the prior written approval of Warburg,
which approval will not be unreasonably withheld. The foregoing
restriction shall not apply to Transfers to such Shareholder's Affiliates,
which Affiliates agree in writing to be bound by all restrictions
applicable to the transferring Shareholder or to Transfers to Directors as
Directors' qualifying shares. Notwithstanding the foregoing, after the
fifth anniversary of the date hereof, each of IPC and Multiponto shall be
permitted to Transfer Common or Preferred Stock owned by it without the
prior written approval of Warburg, provided that any such Transfer shall
be subject to the provisions of Clause 8(b)(i).
(iii) No Management Investor will sell or otherwise Transfer any of
his or her Common Stock for a period of five (5) years from the date on
which such Common Stock is no longer subject to forfeiture (pursuant to
the Subscription Agreement between the Corporation and such Management
Investor pursuant to which such Common Stock was acquired) without the
prior written approval of the Board, which approval will not be
unreasonably withheld. The foregoing restriction shall not apply to
Transfers (A) to members of such Management Investor's family or trusts
for the benefit of such Management Investor or such Management Investor's
family; provided in each instance that such transferee agrees to be bound
by the provisions of this Agreement as if such transferee were an original
signatory hereto and (B) pursuant to the terms of Section 11 of the
Employment Agreement between the Corporation and such Management Investor.
(b) Right of First Offer.
(i) No Shareholder shall Transfer any of the Securities owned by it
(except for Transfers to one of its Affiliates, provided in each instance
that such Affiliate agrees to be bound by the provisions of this Agreement
as if such Affiliate were an original signatory hereto) unless the
Shareholder desiring to make the Transfer (hereinafter
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referred to as the "Transferor") shall have first provided notice of such
intention to Transfer pursuant to Clause 8(b)(1)(A).
(A) Offer by PageNet. In the event the Transferor wishes to
Transfer any of its Securities (the securities proposed to be
transferred being referred to as the "Subject Securities"), it shall
provide written notice of such intention to PageNet. PageNet shall,
within thirty (30) days of the date of such notice (i) irrevocably
offer in writing to purchase the Subject Securities for an amount
(the "Offer Price") as may be specified by PageNet (the "Offer") or
(ii) inform the Transferor in writing that it does not wish to
purchase the Subject Securities. In the event PageNet fails to
comply with the preceding sentence within such 30-day period, it
shall be deemed to have waived its right to offer to purchase the
Subject Securities. The Offer shall not contain any material
conditions (other than the receipt of all required consents and
approvals) and shall specify a date for the closing of the purchase
which shall not be more than thirty (30) days after the later of the
giving of such notice or the receipt of all required consents and
approvals. The Corporation, PageNet and the Transferor agree to use
their best efforts to obtain all required consents and approvals
promptly.
(B) Acceptance of Offer. Within 10 business days after the
receipt of the Offer, the Transferor may, at its option, accept the
Offer by giving written notice thereof to PageNet.
(C) Closing of Purchase. In the event the Transferor accepts
the Offer, the closing of the purchase shall take place at the
office of the Corporation or such other location as shall be
mutually agreed upon and the purchase price shall be paid at the
closing. At the closing, the Transferor shall deliver to PageNet all
instruments required to transfer the Subject Securities.
(D) Release from Restriction; Termination of Rights. If
PageNet fails to make an Offer in accordance with Clause 8(b)(i)(A),
the Transferor shall be free to Transfer the Subject Securities
without restriction. If PageNet makes an Offer that is not accepted
by the Transferor, the Transferor shall disclose to PageNet the
terms of each offer (including the identity of the offeror) received
by the Transferor in respect of the Subject Securities and shall
thereafter be entitled to Transfer the Subject Securities to a third
party at a price equal to or greater than the Offer Price (and
subject to no
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material conditions other than regulatory approvals and those
contained in PageNet's offer, except as otherwise provided in this
Clause 8(b)(i)(D)); provided that the transferee agrees, in writing,
to be bound by the provisions of this Agreement. If the Transferor
shall fail to Transfer the Subject Securities within 180 days
following the date on which the Transferor receives the Offer or, if
no Offer is received, the last day on which PageNet was entitled to
make the Offer, such Subject Securities shall again become subject
to all the restrictions of this Clause 8. Any Transfer by Warburg
pursuant to this Clause 8(b)(i) shall be subject to the provisions
of Clause 8(d) hereof.
(E) Right to Match Offer. Notwithstanding the provisions of
Clause 8(b)(i)(D), if the offer price received by the Transferor in
connection with a third party offer is no more than seven and
one-half percent (7.5%) greater than the offer price of the Offer
made by PageNet, then PageNet shall have the right, within ten (10)
business days after the Transferor notifies PageNet of such third
party offer, to make an Offer that matches the offer price and is on
terms as favorable as the third party offer. If PageNet makes such
an Offer, such Offer shall be accepted by the Transferor.
(ii) Neither the Corporation nor any of its Subsidiaries shall
Transfer all or substantially all of the assets of the Corporation and its
Subsidiaries, taken as a whole (the "Corporation Assets"), unless it shall
have first provided notice of such intention to effect such Transfer
pursuant to Clause 8(b)(ii)(A).
(A) Offer by PageNet. In the event the Corporation or any of
its Subsidiaries (hereinafter referred to as an "Asset Transferor")
wishes to Transfer the Corporation Assets, it shall provide written
notice of such intention to PageNet. PageNet shall, within thirty
(30) days of the date of such notice (i) irrevocably offer in
writing to purchase the Corporation Assets for an amount (the "Asset
Offer Price") as may be specified by PageNet (the "Asset Offer") or
(ii) inform the Corporation in writing that it does not wish to
purchase the Corporation Assets. In the event PageNet fails to
comply with the preceding sentence within such 30-day period, it
shall be deemed to have waived its right to offer to purchase the
Corporation Assets. The Asset Offer shall not contain any material
conditions (other than the receipt of all required consents and
approvals and those that would be required by any purchaser) and
shall specify a date for the closing of the purchase which shall not
be more than thirty (30) days after the later of the giving of
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such notice or the receipt of all required consents and approvals.
The Corporation, its Subsidiaries and PageNet agree to use their
best efforts to obtain all required consents and approvals promptly.
(B) Acceptance of Offer. Within ten (10) business days after
the receipt of the Asset Offer, the Asset Transferor may, at its
option, accept the Asset Offer by giving written notice thereof to
PageNet.
(C) Closing of Purchase. In the event the Asset Transferor
accepts the Asset Offer, the closing of the purchase shall take
place at the office of the Corporation or such other location as
shall be mutually agreed upon and the purchase price shall be paid
at the closing. At the closing, the Asset Transferor shall deliver
to PageNet all certificates, instruments and other documents
necessary to effectuate the transfer and conveyance of the
Corporation Assets.
(D) Release from Restriction, Termination of Rights. If
PageNet fails to make an Asset Offer in accordance with Clause
8(b)(ii)(A), the Asset Transferor shall be free to Transfer the
Corporation Assets without restriction. If PageNet makes an Asset
Offer that is not accepted by the Asset Transferor, the Asset
Transferor shall disclose the terms of each offer (including the
identity of the offeree) received by it in respect of the
Corporation Assets and shall thereafter be entitled to Transfer the
Corporation Assets to a third party at a price equal to or greater
than the Asset Offer Price (and subject to no material conditions
other than regulatory approvals and those imposed by PageNet). If
the Asset Transferor shall fail to Transfer the Corporation Assets
within 180 days following the date on which it receives the Asset
Offer or, if no Asset Offer is received, the last day on which
PageNet was entitled to make the Asset Offer, such the Corporation
Assets shall again become subject to all the restrictions of this
Clause 8.
(E) Right to Match Offer. Notwithstanding the provisions of
Clause 8(b)(ii)(D), if the offer price received by the Asset
Transferor in connection with a third party offer is no more than
seven and one-half percent (7.5%) greater than the offer price of
the Asset Offer made by PageNet, then PageNet shall have the right,
within ten (10) business days after the Asset Transferor notifies
PageNet of such third party offer, to make an Asset Offer that
matches the offer price and is on terms as favorable as the third
party offer. If PageNet makes such an Offer, such Offer shall be
accepted by the Asset Transferor.
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(iii) For purposes of Clause 8(b)(i) and (b)(ii) above, if the
consideration to be received by the Transferor or the Asset Transferor is
other than cash, indebtedness or securities, the value of such
consideration shall be its fair market value. Any securities offered as
consideration shall be valued as follows:
(A) If traded on a national securities exchange, the value
shall be deemed to be the average of the closing prices of the
securities on such exchange over the 30-day period ending three (3)
days prior to the closing; and
(B) If actively traded over-the-counter, the value shall be
deemed to be the average of the daily averages of the closing bid
and asked prices over the 30-day period ending three (3) days prior
to the closing; and
(C) If there is no active public market, the value shall be
the fair market value thereof, as determined in good faith by the
Transferor or the Asset Transferor, as the case may be; provided,
however, that in the event any such securities are subject to
investment letter or similar restrictions on free marketability,
such securities shall reflect an appropriate discount from the
market value determined pursuant to paragraphs (A), (B) or (C) of
this clause to reflect the fair market value thereof, as determined
in good faith by the Transferor or the Asset Transferor, as the case
may be.
(iv) Neither Warburg, Pincus & Co. nor any of its Affiliates
will Transfer its equity interest in Warburg if the sole purpose of
such Transfer is to circumvent the provisions of this Clause 8(b).
(v) None of TVA, IPC or Multiponto nor any Affiliate thereof
having an ownership interest (direct ownership in the case of a general
partner of a partnership and indirect ownership in the case of a limited
partner of a limited partnership) in the Corporation will undergo a Change
of Control without providing prior written notice of such Change of
Control to PageNet, which shall notify PageNet of all of the facts and
circumstances surrounding such Change of Control. If such a Change of
Control of TVA, IPC or Multiponto, as the case may be, or any such
Affiliate shall have occurred without advance notice to TVA, IPC or
Multiponto, as the case may be, or such Affiliate, IPC shall provide such
notice of Change of Control as soon as practicable after becoming aware of
it. Within thirty (30) days of the date of such notice, PageNet shall have
the right, exercisable by written notice (the "Call Notice") to TVA, IPC
or Multiponto, as the case may be, and such
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Affiliates (the "Callees") to purchase itself or cause to be purchased at
the purchase price set forth below, all but not less than all of the
Securities owned by the Callees, on such date that is the later of thirty
(30) days following the Call Notice, or thirty (30) days after the later
of the date on which all required consents and approvals have been
received, or such shorter time as may be specified by PageNet in the Call
Notice. The purchase price to be paid by PageNet shall be the Fair Market
Value of the Securities, without regard to the Change of Control, on the
date the Call Notice is given. For purposes of this clause (iv), "Fair
Market Value" means the value as determined by PageNet in good faith and
with due care, unless TVA, IPC or Multiponto, as the case may be, shall
object thereto in writing within 15 days after the date of such Call
Notice. In the event of such objection, the Fair Market Value shall be
determined by an arbitrator selected by PageNet and TVA, IPC or
Multiponto, as the case may be, in the event a single arbitrator cannot be
agreed upon within 10 days after the written objection sent by TVA, IPC or
Multiponto, as the case may be, in accordance with the previous sentence,
the Fair Market Value shall be determined by arbitration in which (1) TVA,
IPC or Multiponto, as the case may be, shall name in its notice of
objection one arbitrator, (2) PageNet shall name a second arbitrator
within 15 days from the receipt of such notice, (3) the two arbitrators
thus selected shall select a third arbitrator within 15 days thereafter,
and (4) the three arbitrators thus selected shall determine the Fair
Market Value within 15 days thereafter by majority vote. In the event the
third arbitrator is not selected as provided herein, then such arbitrator
shall be selected by the President of the AAA. The costs of such
arbitration shall be borne by PageNet or TVA, IPC or Multiponto, as the
case may be, as follows: (1) if the Fair Market Value determined by the
arbitrators is greater than 90% of the Fair Market Value as determined by
PageNet, then any of TVA, IPC or Multiponto, as the case may be, shall pay
the costs of the arbitration, and (2) otherwise, PageNet shall bear the
costs of the arbitration. The arbitration shall be held in New York, New
York in accordance with the International Arbitration Rules of the AAA.
The award made by the arbitrators shall be binding upon the parties
hereto, no appeal shall be taken from such award and judgment thereon may
be entered in any court of competent jurisdiction. For purposes of this
Clause 8(b)(v), a "Change of Control" shall occur upon the earlier of (1)
a Person or group of affiliated or associated Persons (an "Acquiring
Person") (in the case of IPC, not including any existing shareholder, or
employee or group of shareholders or group of employees of IPC's general
partner) having acquired beneficial ownership of 50% or more of the
outstanding
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equity securities or equity interests of TVA, IPC or Multiponto, as the
case may be, or such Affiliate (or, in the case of IPC, 50% or more of the
outstanding equity securities or equity interests of the general partner
of such entity or any such Affiliate) or a public announcement or
knowledge by TVA, IPC or Multiponto, as the case may be, or any such
Affiliate that an Acquiring Person intends to acquire beneficial ownership
of 50% or more of such outstanding equity securities or equity interests,
or, in the case of any other Investor or such Affiliate organized as a
partnership or limited liability company, a change in the majority control
of a general or managing partner, of such Investor or Affiliate; or (2)
immediately following the commencement of, or announcement of an intention
to make, a tender offer or exchange offer the consummation of which would
result in the beneficial ownership by a person or group of 50% or more of
such outstanding equity securities or equity interests.
(c) Tag-Along Rights for Management Investors.
(i) In the event the Shareholders, acting together, intend to
Transfer one hundred percent (100%) of their shares of Common Stock, they
shall notify the Management Investors, in writing, of such proposed
Transfer and its terms and conditions. Within ten (10) business days of
the date of such notice, each Management Investor shall notify the
Shareholders if he or she elects to participate in such Transfer. Each
Management Investor who so notifies the Shareholders shall have the right
to sell, at the same price and on the same terms and conditions as the
Shareholders, all (but not less than all) of his or her shares of Common
Stock. Any Transfer by the Shareholders pursuant to this Clause 8(c) shall
be subject to the provisions of Clause 8(b) hereof.
(ii) Notwithstanding anything contained in this Clause 8(c), in the
event that all or a portion of the purchase price consists of securities
and the sale of such securities to the Management Investors would require
either a registration under any securities laws or the preparation of a
disclosure document, then, at the option of the Shareholders, the
Management Investors may receive, in lieu of such securities, the fair
market value of such securities in cash, as determined in good faith by
the Board under this Clause 8(d). Any transfer by the Shareholders
pursuant to this Clause 8(d) shall be subject to the provisions of Clause
8(b) hereof.
(d) Tag-Along Rights of Shareholders.
(i) In the event any Shareholder intends to Transfer its shares of
Common Stock (a "Selling Shareholder") (other than to an Affiliate of such
Selling Shareholder), such Selling Shareholder shall notify the other
Shareholders, in writing, of such proposed Transfer and its terms and
conditions. Within thirty (30) days of
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the date of such notice, each Shareholder shall notify the Selling
Shareholder if it elects to participate in such Transfer. Each Shareholder
that so notifies the Selling Shareholder shall have the right to sell, at
the same price and on the same terms and conditions as the Selling
Shareholder, an amount of shares equal to the shares of Common Stock the
third party actually proposes to purchase multiplied by a fraction, the
numerator of which shall be the number of shares of Common Stock issued
and owned by such Shareholder and the denominator of which shall be the
aggregate number of shares of Common Stock issued and owned by the Selling
Shareholder and each Shareholder exercising its rights under this Clause
8(d). Any Transfer by the Shareholders pursuant to this Clause 8(d) shall
be subject to the provisions of Clause 8(b) hereof.
(ii) In the event the Selling Shareholder intends to Transfer its
Preferred Stock (other than to an Affiliate of the Selling Shareholder),
the Selling Shareholder shall notify the other Shareholders, in writing,
of such proposed Transfer and its terms and conditions. Within thirty (30)
days of the date of such notice, each Shareholder shall notify the Selling
Shareholder if it elects to participate in such Transfer. Each Shareholder
that so notifies the Selling Shareholder shall have the right to sell, at
the same price and on the same terms and conditions as the Selling
Shareholder, a number of shares of Preferred Stock equal to the aggregate
number of shares of Preferred Stock the third party actually proposes to
purchase multiplied by a fraction, the numerator of which shall be the
aggregate number of shares of Preferred Stock owned by such Shareholder
and the denominator of which shall be the aggregate number of shares of
Preferred Stock owned by the Selling Shareholder and each Shareholder
exercising its rights under this Clause 8(d). Any Transfer by the
Shareholders pursuant to this Clause 8(d) shall be subject to the
provisions of Clause 8(b) hereof.
(iii) Notwithstanding anything contained in this Clause 8(d), in
the event that all or a portion of the purchase price consists of
securities and the sale of such securities to the Shareholders would
require either a registration under any securities laws or the preparation
of a disclosure document, then, at the option of the Selling Shareholder,
the Shareholders may receive, in lieu of such securities, the fair market
value of such securities in cash, as determined in good faith by the
Board.
(e) Drag-Along Right.
(i) Subject to the provisions of Clause 8(b), if at any time and
from time to time after the date of this Agreement, Warburg wishes to
Transfer in a bona fide arms' length sale all of its shares of Common
Stock or Preferred
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Stock to any Person or Persons who are not Affiliates of Warburg (for
purposes of this Clause 8(e), the "Proposed Transferee"), Warburg shall
have the right (for purposes of Clause 8(e), the "Drag-Along Right") to
require each Shareholder to sell to the Proposed Transferee all of the
shares of Common Stock (including any subscription rights or options to
acquire Common Stock) or Preferred Stock, as applicable (for the same per
share consideration as proposed to be received by Warburg) then owned by
such Shareholder. Each Shareholder agrees to take all steps necessary to
enable him or it to comply with the provisions of this Clause 8(e) to
facilitate Warburg's exercise of a Drag-Along Right.
(ii) To exercise a Drag-Along Right, Warburg shall give each
Shareholder a written notice (for purposes of this Clause 8(e), a
"Drag-Along Notice") containing (1) the name and address of the Proposed
Transferee and (2) the proposed purchase price, terms of payment and other
material terms and conditions of the Proposed Transferee's offer. Each
Shareholder shall thereafter be obligated to sell the shares of Common
Stock (including shares of Common Stock issuable upon exercise of any
subscription rights or options held directly or indirectly by such
Shareholder), and/or, if applicable, Preferred Stock subject to such
Drag-Along Notice; provided that the sale to the Proposed Transferee is
consummated within ninety (90) days of delivery of the Drag-Along Notice.
If the sale is not consummated within such 90-day period, then each
Shareholder shall no longer be obligated to sell such Shareholder's shares
pursuant to that specific Drag Along Right, but shall remain subject to
the provisions of this Clause 8(e).
(iii) Notwithstanding anything contained in this Clause 8(e), in
the event that all or a portion of the purchase price consists of
securities and the sale of such securities to the Shareholders would
require either a registration under any securities laws or the preparation
of a disclosure document, then, at the option of Warburg, the Shareholders
may receive, in lieu of such securities, the fair market value of such
securities in cash, as determined in good faith by the Board.
(f) Repurchase of Management Shareholder Shares.
(i) In the event that the employment of any Management Investor
with the Corporation or any of its Subsidiaries is terminated by the
Corporation for Just Cause (as defined in the Employment Agreement between
the Corporation and such Management Investor), the Corporation may, at its
option, exercisable by delivering written notice to such Management
Investor at any time specifying the date of the repurchase, repurchase
from such Management Investor any and all shares of Common Stock owned by
such Management Investor, and such Management
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Investor shall sell to the Corporation such Common Stock, at a purchase
price equal to U.S. $1.00 per share of Common Stock.
(ii) In the event that (A) the employment of any Management
Investor with the Corporation or any of its Subsidiaries is terminated by
the Corporation without Just Cause or by the Management Investor for Good
Reason (as defined in such person's Employment Agreement) or (B) any
Management Investor voluntarily terminates employment with the Corporation
or any of its Subsidiaries or (C) the employment of any Management
Investor is terminated by reason of death, disability, or retirement on or
after the normal retirement age set forth in the Corporation's (or any
Subsidiary's) policies, the Corporation may, at its option, exercisable by
delivering written notice to such Management Investor (or his estate) at
any time specifying the date of the repurchase, repurchase from such
Management Investor (or his estate) any and all shares of Common Stock
owned by such Management Investor, and such Management Investor shall sell
to the Corporation such Common Stock, at a purchase price per share equal
to the greater of U.S. $1.00 or the fair market value of such shares of
Common Stock, as determined in good faith by the Board.
(iii) Any repurchase pursuant to clauses (i) or (ii) above by the
Corporation shall be effected by such Management Investor delivering to
the Corporation the duly endorsed stock certificates evidencing the Common
Stock to be repurchased, or such other instrument for the transfer of
ownership thereof as provided by Brazilian law against delivery by the
Corporation to such Management Investor of the aggregate purchase price
for such shares of Common Stock.
(g) Preemptive Right. If at any time after the date hereof, the
Corporation proposes to issue equity securities of any kind (the term "equity
securities" shall include for these purposes any subscription rights, options or
other rights to acquire equity securities and debt securities convertible into
equity securities) of the Corporation, other than the issuance of (i) securities
to the public in a firm commitment underwriting pursuant to a registration
statement filed under any securities laws, (ii) securities pursuant to the
acquisition of another corporation by the Corporation by merger, purchase of
substantially all of the assets or other form of reorganization, (iii) Common
Stock (or options or subscription rights to acquire Common Stock) issued to
Management Investors or pursuant to an employee stock option plan, stock bonus
plan, stock purchase plan or other management equity program approved by the
Shareholders, provided such securities do not exceed seven and one-half percent
(7.5%) of the shares of Common Stock outstanding on the date hereof on a fully
diluted basis after giving effect to the subscription rights held by PageNet,
Multiponto and TVA, with
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respect to which the Shareholders hereby agree to waive their preemptive rights,
then as to each Shareholder, the Corporation shall:
(A) give written notice setting forth in reasonable detail (1) the
designation and all of the terms and provisions of the securities proposed to be
issued (the "Proposed Securities"), including, where applicable, the voting
powers, preferences and relative participating, optional or other special
rights, and the qualification, limitations or restrictions thereof and interest
rate and maturity; (2) the price and other terms of the proposed sale of such
securities; (3) the amount of such securities proposed to be issued; and (4)
such other information as the Shareholders may reasonably request in order to
evaluate the proposed issuance;
(B) offer to issue to each such Shareholder a portion of the Proposed
Securities equal to a percentage determined by dividing (x) the number of shares
of Common Stock held directly or indirectly by such Shareholder and issuable to
such Shareholder, assuming conversion in full of any convertible securities then
held directly or indirectly by such Shareholder, by (y) the total number of
shares of Common Stock then held directly or indirectly by all of the
Shareholders; and
(C) offer to issue to each such Shareholder holding Preferred Stock that
portion of the Proposed Securities necessary to preserve such Preferred
Shareholder's ownership interest of the Corporation represented by such
Preferred Stock.
Each Shareholder holding Preferred Stock hereby agrees to waive its
preemptive rights under Brazilian law except those preemptive rights under (C)
above to purchase the Proposed Securities.
Each Investor must exercise its purchase rights hereunder within ten (10)
days after receipt of such notice from the Corporation. Each Management Investor
must notify the Corporation within ten (10) days after receipt of such notice of
his election to exercise his purchase rights within thirty (30) days after
receipt of such notice, subject only to the procurement of adequate financing.
If all of the Proposed Securities offered to such Shareholders are not fully
subscribed by such Shareholders, the remaining Proposed Securities will be
reoffered to the Shareholders purchasing their full allotment upon the terms set
forth in this Clause 8(g), until all such Proposed Securities are fully
subscribed for or until all such Shareholders have subscribed for all such
Proposed Securities which they desire to purchase, except that such Shareholders
must exercise their purchase rights within five days after receipt of an such
reoffers. To the extent that the Corporation offers two or more securities in
units, Shareholders must purchase such
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units as a whole and will not be given the opportunity to purchase only one of
the securities making up such unit.
Upon the expiration of the offering periods described above, the
Corporation will be free to sell such Proposed Securities that the Shareholders
have not elected to purchase during the ninety (90) days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to such holders. Any Proposed Securities offered but not sold
by the Corporation after such 90-day period must be reoffered to the
Shareholders pursuant to this Clause 8(g).
The election by a Shareholder not to exercise its subscription rights
under this Clause 8(g) in any one instance shall not affect its right (other
than in respect of a reduction in its percentage holdings) as to any subsequent
proposed issuance. Any sale of such securities by the Corporation without first
giving the Shareholders the rights described in this Clause 8(g) shall be void
and of no force and effect.
CLAUSE 9--NONCOMPETITION PROVISIONS
(a) Non-Competition Agreement. Each Investor acknowledges that the
agreements and covenants contained in this Agreement are essential to protect
the value of the Corporation's business and assets and, in its capacity as a
Shareholder, it has obtained and will obtain such confidential or proprietary
knowledge, contacts, know-how and experience and there is a substantial
probability that such knowledge, know-how, contacts and experience could be used
to the substantial advantage of a competitor of the Corporation and to the
Corporation's substantial detriment. Therefore, each Investor other than TVA and
Multiponto agrees that for the period commencing on the date of this Agreement
and ending on the earlier of (i) three years following the date on which such
Investor no longer holds any Common Stock and (ii) the date on which this
Agreement is terminated pursuant to Clause 12(d)(i) (such period is hereinafter
referred to as the "Restricted Period"), neither the Investor nor its controlled
Affiliates shall participate or engage, directly or indirectly, for itself or on
behalf of or in conjunction with any person, partnership, corporation or other
entity, whether as an agent, employee, officer, director, shareholder, partner,
joint venturer, investor or otherwise, in the provision of facilities-based
one-way or two-way paging or portable wireless messaging services (including
without limitation a service that provides substantially the same service as
VoiceNow(R) and other advanced paging services) in Brazil at any time during the
Restricted Period. Notwithstanding the foregoing, nothing herein shall prohibit
an Investor from owning up to 5% of any publicly traded entity. In the event
that TVA engages in any activity that would be prohibited by the provisions of
the second sentence of this Clause 9(a) if it were applicable to TVA, TVA agrees
that, notwithstanding any provisions of this Agreement or the Securities
Subscription Agreement or the bylaws of the
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Corporation or otherwise, it shall no longer be entitled to receive from the
Corporation any information not in the public domain or generally known in the
industry. In the event that Multiponto engages in any activity that would be
prohibited by the provisions of the second sentence of this Clause 9(a) if it
were applicable to Multiponto, Multiponto agrees that, notwithstanding any
provisions of this Agreement or the Securities Subscription Agreement or the
bylaws of the Corporation or otherwise, it shall no longer be entitled to
receive from the Corporation any information not in the public domain or
generally known in the industry.
(b) Nondisclosure of Confidential Information. The Shareholder shall not
disclose to any person or entity or use, either during the Restricted Period or
at any time thereafter, any information not in the public domain or generally
known in the industry, in any form, acquired by the Shareholder or, if acquired
following the Restricted Period, such information which, to the Shareholder's
knowledge, has been acquired, directly or indirectly, from any person or entity
owing a duty of confidentiality to the Corporation or any of its Subsidiaries or
affiliates, relating to the Corporation, its Subsidiaries or affiliates,
including but not limited to information regarding customers, vendors,
suppliers, trade secrets, training programs, manuals or materials, technical
information, contracts, systems, procedures, mailing lists, know-how, trade
names, improvements, price lists, financial or other data (including the
revenues, costs or profits associated with any of the Corporation's products or
services), business plans, code books, invoices and other financial statements,
computer programs, software systems, databases, discs and printouts, plans
(business, technical or otherwise), customer and industry lists, correspondence,
internal reports, personnel files, sales and advertising material, which is or
was used in the business of the Corporation or any of its Subsidiaries. The
Shareholder agrees and acknowledges that all of such information, in any form,
and copies and extracts thereof, are and shall remain the sole and exclusive
property of the Corporation, and upon request of the Board, the Shareholder
shall return to the Corporation the originals and all copies of any such
information provided to or acquired by the Shareholder, and shall have destroyed
or return to the Corporation all files, correspondence and/or other
communications received from the Corporation, maintained and/or originated by
the Shareholder during the Restricted Period. Notwithstanding the foregoing, if
and to the extent that any Investor is a limited partnership, or resells or
transfers the Securities acquired by it to a limited partnership of which such
Investor (or another entity controlled by or under common control with such
Investor) is the majority or controlling general partner or to any other entity
controlled by or under common control with such Investor, financial and other
information regarding the Corporation of the type customarily included in a
private placement memorandum offering interests in a private equity investment
fund may be included in the private placement memorandum or other offering
document used by such
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limited partnership in connection with the offering and sale of its interests.
In addition, financial and other information regarding the Corporation of the
type typically provided to limited partners in private equity investment funds
with respect to the investments made by those funds may be provided on a
periodic basis to the limited partners of such limited partnership, and to the
shareholders of the general partner of such limited partnership, provided that
under no circumstances will any proprietary information (which, for this
purpose, excludes such financial information) of the Corporation be disclosed to
such limited partners or shareholders.
(c) Injunctive Relief; Modification of Provisions. Without intending to
limit the remedies available to the Corporation, each Shareholder acknowledges
that a breach of any of the covenants contained in this Clause 9 may result in
material irreparable injury to the Corporation or its Subsidiaries or Affiliates
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of such a
breach or threat thereof, the Corporation shall be entitled to obtain a
temporary restraining order and/or a preliminary or permanent injunction
restraining the Shareholder from engaging in activities prohibited by this
Clause 9 or such other relief as may be required specifically to enforce any of
the covenants in this Clause 9. If any provision of this Clause 9 is determined
by a court of competent jurisdiction to be invalid in part, it shall be
curtailed, both as to time and location, to the minimum extent required for its
validity under the applicable law and shall be binding and enforceable with
respect to each Shareholder as so curtailed. In any case, whether or not the
injunctive relief provided for herein is obtained, the breach of any of the
covenants contained in this Clause 9 shall give rise to the payment by the
violating shareholder to the Corporation, of a penalty equal to the market value
of the Securities held by such Shareholder.
CLAUSE 10--INTERPRETATION OF THIS AGREEMENT
(a) Terms Defined. As used in this Agreement, the following terms
have the respective meaning set forth below:
Affiliate: means, with respect to any Person, any other Person directly or
indirectly controlling (including, but not limited to, all directors and
officers of such Person), controlled by or under direct or indirect common
control with, such Person (provided that The Opportunity Fund shall not be
deemed an Affiliate of Multiponto as long as the investments of The Opportunity
Fund (i) are not in any person, partnership, corporation or other entity that
provides facilities-based one-way or two-way paging or portable wireless
messaging services (including without limitation a service that provides
substantially the same service as VoiceNow(R) and other advanced paging
services) in Brazil, or (ii) are limited to 10% or less of
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any publicly traded entity). For these purposes, independent of Brazilian law, a
Person shall be deemed to control a corporation (i) where the shares of the
corporation are not publicly traded, if such Person holds, directly or
indirectly, fifty one percent (51%) or more of the Voting Stock of such
corporation, or has the right (by contract or otherwise) to elect a majority or
more of the board of directors of such corporation; and (ii) where the shares of
the corporation are publicly traded, if such Person holds, directly or
indirectly, twenty five percent (25%) or more of the Voting Stock of such
corporation, or has the right (by contract or otherwise) to elect twenty five
percent (25%) or more of the board of directors of such corporation. Each
general partner of a partnership shall be deemed to control such partnership.
Dividend: with respect to any Person shall mean that such Person has
declared, or paid any dividend or returned any capital to, its shareholders or
authorized or made any other distribution, payment or delivery of property
(other than capital stock of the Corporation) or cash to its shareholders as
such, or redeemed, retired, purchased, or otherwise acquired, directly or
indirectly, for consideration, any shares of any class of its capital stock
outstanding on or after the Closing Date (or any options or subscription rights
issued by such Person with respect to its capital stock), or set aside any funds
for any of the foregoing purposes, or shall have permitted any of its
Subsidiaries to purchase or otherwise acquire for a consideration any shares of
any class of the capital stock of such Person outstanding on or after the
Closing Date (or any options or subscription rights issued by such Person with
respect to its capital stock). Without limiting the foregoing, Dividends with
respect to any Person shall also include all payments made or required to be
made by such Person with respect to any stock appreciation rights plans, equity
incentive or achievement plans or any similar plans or the setting aside of any
funds for the foregoing purposes.
GAAP: means generally accepted accounting principles that are consistent
with the principles promulgated or accepted by Ernst & Young Auditores
Independents S.C. and its predecessors, as in effect from time to time in
Brazil.
Operating Budget: means a five-year operating budget of the Corporation
and its Subsidiaries (the first year of which shall include monthly operating
budgets), which shall have been approved in the Operating Budget.
Paging Assets: the goods, equipment, and systems, related to the provision
and operation of the activities of the Corporation, including the
facilities-based one-way or two-way paging or portable wireless messaging
services (including without limitation a service that provides substantially the
same services as VoiceNow(R) and other advanced paging services), as
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well as rights of any nature related to the exploitation of such activities.
Person: an individual, partnership, joint-stock company, corporation,
trust or unincorporated organization, and a government or agency or political
subdivision thereof.
Qualified Initial Public Offering: means an initial public offering of the
Common Stock pursuant to a registration statement declared effective by the
Comissao de Valores Mobiliarios or any other securities regulator pursuant to
any securities laws in which the aggregate net proceeds received by the
Corporation exceed $30 million.
Securities: the shares of Common Stock, options or subscription rights to
acquire Common Stock and/or the Preferred Stock, as the context may require.
Subsidiary: means as to any Person, any corporation, association or other
business entity in which such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a fifty percent (50%) interest in the profits or capital thereof is owned
by such Person or one or more of its Subsidiaries or such Person and one or more
of its Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
Transfer: any sale, assignment, pledge, hypothecation, or other
disposition or encumbrance.
Voting Stock: securities of any class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
(b) Accounting Principles. Where the character or amount of any asset or
amount of any asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is required to
be made for the purposes of this Agreement, this shall be done in accordance
with GAAP at the time in effect, to the extent applicable, except where such
principles are inconsistent with the requirements of this Agreement.
(c) Directly or Indirectly. Where any provision in this Agreement refers
to action to be taken by any Person, or which such Person is prohibited from
taking, such provision shall be
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applicable whether such action is taken directly or indirectly by such Person.
(d) Governing Law Submission to Jurisdiction.
(i) This Agreement shall be governed and constructed in
accordance with the Laws of the Federative Republic of Brazil.
(ii) Except as otherwise provided for in this Agreement, the
parties hereof elect the Courts of the City of Sao Paulo, State of Sao
Paulo to settle any disputes arising herefrom, and hereby waives any other
Courts, as privileged as they may be.
(e) Section Headings. The headings of the sections and subsections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
(f) Monetary Damages, Specific Performance and Injunctive Relief. The
obligations arising from this Agreement shall be registered in the Book of
Registration of Nominative Shares of the Corporation and in the respective share
certificates, if issued, such registration constituting an impediment to the
carrying out of any acts contrary to the provisions of this Agreement, the
Corporation being thus legitimately authorized not to effect, in this case, the
registration of such acts and thus refuse to transfer the ownership or title to
any rights on the shares covered by this Agreement. The failure to comply with
the obligations arising from this Agreement by the Shareholders, their heirs,
successors or assigns, shall give rise to a right of specific performance of
such obligation ("obrigacao de fazer"), the Court order substituting for the
consent of the defaulting party or Shareholders, as provided for in Articles 639
and 641 of the Brazilian Civil Procedure Code, as well as in Article 119 of Law
6.404, of December 15, 1976, notwithstanding the right to receive
indemnification for the losses and damages arising from such violation.
(g) Consent of the Corporation. For purposes of article 118 of Law 6.404,
of December 15, 1976, one of the counterparts of this Agreement shall be filed
at the Corporation's head offices. The Corporation executes this Agreement as a
consenting party and undertakes to faithfully observe all of the terms and
conditions hereof.
CLAUSE 11--INDEMNIFICATION
The Corporation shall indemnify to the fullest extent permitted under and
in accordance with the laws of Brazil any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that he is or was a director,
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officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, trustee, employee or agent of
or in any other capacity with another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall (in the case of any action, suit or proceeding against a
director or officer of the Corporation) or may (in the case of any action, suit
or proceeding against a trustee, employee or agent) be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding as
authorized by the Board upon receipt of an undertaking by or on behalf of the
indemnified person to repay such amount if it shall ultimately be determined
that he is not entitled to be indemnified by the Corporation as authorized in
this Clause.
No director shall be personally liable to the Corporation or any
Shareholder for monetary damages for breach of fiduciary duty as a director,
except for any matter in respect of which such director shall be liable by
reason that, in addition to any and all other requirements for liability, he:
(i) shall have breached his duty of loyalty to the
Corporation or the Shareholder(s);
(ii) shall not have acted in good faith or, in failing to
act, shall not have acted in good faith;
(iii) shall have acted in a manner involving intentional misconduct
or a knowing violation of law or, in failing to act, shall have acted in a
manner involving intentional misconduct or a knowing violation of law; or
(iv) shall have derived an improper personal benefit.
The indemnification and other rights set forth in this Article shall not
be exclusive of any provisions with respect thereto in the By-laws or any other
contract or agreement between the Corporation and any officer, director,
employee or agent of the Corporation.
CLAUSE 12--MISCELLANEOUS
(a) Pre-Incorporation Expenses. Each of the Shareholders agrees that the
Corporation shall reimburse the Shareholders for
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all expenses incurred by it in connection with the provision of services and
equipment prior to the execution and delivery of the Securities Subscription
Agreement, this Agreement and related agreements.
(b) Investment in License Holders. Each of the Shareholders agrees that
they shall use their respective best efforts to cause Multiponto, TVA and San
Francisco Comunicacoes Ltda., a limited liability company organized and existing
under the laws of Brazil ("San Francisco"), to enter into agreements enabling
the Corporation or one of its Affiliates to become a shareholder (to the largest
degree permitted under applicable law) in such entities or such other entity as
may be the transferee of the Licenses.
(c) Shareholder Commitment to Vote. Each of the Shareholders agrees that,
from time to time as may be required, it shall vote any Securities directly or
indirectly held by it in favor of any proposal to effect all of the provisions
of this Agreement.
(d) Termination. The initial term of this Agreement shall commence on the
date hereof and shall continue until the tenth (10th) anniversary of the date
hereof. The initial term shall be extended for a successive ten (10) year term
provided that (i) no less than 25% of the then outstanding Securities are held
directly or indirectly by more than one of the Shareholders and (ii) no
Shareholder has given notice of termination of this Agreement by delivering
notice of termination within 60 days prior to the expiration of the initial term
of this Agreement. Notwithstanding the foregoing, except for the provisions of
Clause 9 hereof, this Agreement shall terminate on the earlier to occur of (x)
the date on which each Shareholder that holds at least ten percent (10%) of the
Common Stock outstanding on a fully diluted basis shall have agreed to terminate
this Agreement or (y) the date on which the Corporation consummates a Qualified
Initial Public Offering.
(e) Notices.
(i) All communications under this Agreement shall be in writing
and shall be delivered by hand, internationally recognized air courier or
facsimile transmission, charges prepaid:
(1) if to Warburg, at 466 Lexington Avenue, New York, New York
10017, facsimile number (212) 878-9351, marked for the attention of
Douglas M. Karp (with a copy to Willkie Farr & Gallagher, One Citicorp
Center, 153 East 53rd Street, New York, New York 10022-4669, facsimile
number (212) 821-8111, Attn: Steven J. Gartner), or at such other address
as Warburg may have furnished in writing to the Corporation and the other
Shareholders,
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(2) if to PageNet, at 4965 Preston Park Boulevard, Plano,
Texas 75093, facsimile number (214) 985-6717, marked for the attention of
Barry A. Fromberg (with a copy to Bingham, Dana & Gould LLP, 150 Federal
Street, Boston, Massachusetts 02110-1726, facsimile number (617) 951-8736,
Attn: Roger D. Feldman), or at such other address as PageNet may have
furnished in writing to the Corporation and the other Shareholders,
(3) if to IPC, Rua Bandeira Paulista, 600-conj. 64, Sao Paulo,
Brazil, 04532-001, facsimile number 11-822-7177, marked for the attention
of Donald Pearson (with a copy to Rogers & Wells, 200 Park Avenue, New
York, New York 10166-0153, facsimile number (212) 878-8375, Attn: Laurence
E. Cranch), or at such other address as it may have furnished in writing
to the Investors.
(4) if to Multiponto, at Avenida Presidente Wilson No. 231,
28(0) Andar (parte), Rio de Janeiro, Brazil, facsimile number
011-55-21-240-1667, marked for the attention of Daniel Dantas (with a copy
to Arthur Carvalho, facsimile number 011-55-21-220-3445), or at such other
address as it may have furnished in writing to the Investors.
(5) if to TVA, at Rua do Rocio 351, 9th Floor, Sao Paulo,
Brazil, 04552-904, facsimile number 011-55-11-822-9335, marked for the
attention of Luis Carlos Guizelini Balieiro (with a copy to Basch & Rameh,
Rua Barao de Capanema, No. 343, 13th Floor, Sao Paulo, Brazil 01411-011,
facsimile number 011-55-852-9447, Attn: Ken Basch and Carlos Rameh), or at
such other address as it may have furnished in writing to the Investors.
(6) if to the Corporation, at Avenida das Nacoes Unidas,
12,551 World Trade Center, 17th Floor, Suite 26, Sao Paulo, Brazil,
facsimile number 011-55-11-521-1814, marked for the attention of the
President (with a copy to Xavier, Bernardes, Braganca, Av. Brasil 1980,
Sao Paulo, Brazil, facsimile number 011-55-11-282-5580, Attn: M. Regina
Lynch), or at such other address as it may have furnished in writing to
the Investors.
(7) if to a Management Investor, at the address set forth
opposite his/her name or the signature page of this Agreement.
(ii) Any notice so addressed shall be deemed to be given: if
delivered by hand, on the date of such delivery; if sent by courier, on
the third Business Day following the date of such mailing; if mailed by
registered or certified airmail, on the sixth Business Day after the date
of such mailing; if sent by facsimile transmission, on the date of
receipt.
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(f) Reproduction of Documents. This Agreement and all documents relating
thereto, including, without limitation, (i) consents, waivers and modifications
which may hereafter be executed, (ii) documents received by each Shareholder
pursuant hereto and (iii) financial statements, certificates and other
information previously or hereafter furnished to each Shareholder, may be
reproduced by each Shareholder by an photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and each Shareholder
may destroy any original document so reproduced. All parties hereto agree and
stipulate that any such reproduction shall be admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was made by each
Shareholder in the regular course of business) and that any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
(g) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, provided
that the provisions of Clauses 8(c) and (d) are not assignable without the
consent of Warburg.
(h) Entire Agreement; Amendment and Waiver. This Agreement constitutes the
entire understanding of the parties hereto relating to the subject matter hereof
and supersedes all prior agreements or understandings with respect to the
subject matter hereof among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of each of the Shareholders; provided, however, that no
amendment that adversely affects that Management Investors and not the
Shareholders shall be effective against the Management Investors unless (i) the
written consent of the holders of a majority of the shares of Common Stock held
directly or indirectly by the Management Investors has been obtained and (ii)
such amendment affects all Management Investors equally.
(i) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner.
(j) No Agency. No party to this Agreement shall, by virtue of having
entered into this Agreement, be deemed to be the legal representative or agent
of any other party, and no party shall have the right or authority to approve,
create, or incur any liability or any obligation of any kind, express or
implied,
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against or in the name of or on behalf of any other party, except to the extent
otherwise expressly provided in this Agreement.
(k) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
(l) Multiponto Proxy. Multiponto agrees to vote all of its Securities in
accordance with the Term of Representation among Multiponto, Brian Thompson and,
to the extent that Brian Thompson's appointment thereunder shall terminate for
any reason whatsoever, in the same manner as Warburg.
(m) Further Agreements.
(A) Each of Multiponto, San Francisco and TVA covenants to cause the
following provisions to be completed within six (6) months of the Closing
Date (as defined in the Securities Subscription Agreement):
(i) use its best efforts to obtain all necessary approvals and to
comply with all applicable regulations and each shall
incorporate a wholly owned new company ("NewCo") for the sole
purpose of holding the Paging Assets; and
(ii) use its best efforts to obtain all necessary approvals and to
comply with all applicable regulations and each shall make the
necessary applications to the Ministry of Communications of
Brazil in order to transfer the Paging Assets to NewCo; and
(iii) assuming such approvals are obtained, transfer the Paging
Assets to NewCo in a lawful manner; and
(iv) assuming such approvals are obtained, each shall permit the
Corporation to purchase 49% of the voting stock and 100% of
the non-voting stock, which shall constitute 66 2/3% of all of
the capital stock, of each NewCo, the consideration being the
receipt by each of Multiponto and TVA of Subscription Bonds
pursuant to the Securities Subscription Agreement and, in the
case of San Francisco, by an indirect participation of its
principal quotaholder, through IPC, in the Corporation; and
(v) assuming such approvals are obtained, use its best efforts to
obtain all necessary approvals in order to transfer to the
Corporation the Licenses
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and the remaining voting stock of NewCo, and all its Paging
Assets; and
(vi) each shall use its best efforts, in cooperation with the
Company, to obtain assurances from the Ministry of
Communications so as to permit the organization of the
business using a reseller structure which employs two-party
subscriber agreements between the Operator or its agents and
the subscribers to the paging services; and each shall take
all measures necessary to amend the operating agreement
between each and the Company so as to achieve this objective
once such assurances have been obtained.
(B) In connection with the foregoing provisions of Section 12(m)(A), the
Corporation agrees to reimburse each of Multiponto, San Francisco and TVA for
their reasonable out-of-pocket expenses incurred in connection with the
foregoing activities, up to a maximum of $10,000 per entity.
(C) In the event of a breach of Section 12(m)(A), the breaching party
shall forfeit its equity interest in the Corporation; provided that the breach
was not the result of the action or inaction of a government or regulatory
authority, such as the Ministry of Communications of Brazil. In the case of a
breach by San Francisco (which does not have an equity interest in the
Corporation), IPC shall forfeit 2,000 of its 8,000 shares of Common Stock and
25% (up to a maximum of 2,000 shares) of its shares of Preferred Stock, but
shall retain the balance of its equity interest in the Corporation.
(D) The Shareholders covenant and agree that they shall organize or
restructure the Corporation in order to comply with Brazilian legal and
regulatory requirements relating to foreign ownership of the Paging Assets.
(E) IPC shall transfer its equity interest in the Corporation (or its
remaining interest in each Paging Assets holding company) to a Brazilian entity
if necessary in order to satisfy Brazilian ownership requirements under
Brazilian law.
(F) The Corporation and the shareholders of the respective Paging Assets
companies will agree to enter into shareholder agreements pursuant to which the
Corporation shall have a veto over any transfer or any other disposition of the
Paging Assets or use of them not related to the conduct of the Corporation's
business.
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IN WITNESS WHEREOF, the parties hereto have executed this Shareholders
Agreement as of the date first above written.
PAGING NETWORK DO BRASIL, S.A.
By:/s/ Thomas C. Trynin
------------------------------------
Name: Thomas C. Trynin
Title: President
WARBURG, PINCUS VENTURES, L.P.
By: WARBURG, PINCUS & CO., its
General Partner
By:/s/ Douglas M. Karp
------------------------------------
Name: Douglas M. Karp
Title: Partner
PAGING NETWORK INTERNATIONAL N.V.
By: /s/ Jose Roberto Opice
------------------------------------
Name: Jose Roberto Opice
Title: Attorney-in-fact
IVP PAGING (CAYMAN) L.P.
By IVP - International Venture Partners,
Inc., its General Partner
By: /s/ Donald D. Pearson
------------------------------------
Name: Donald D. Pearson
Title: Managing Partner
MULTIPONTO TELECOMUNICACOES LTDA.
By: /s/ Eduardo Penido Monteiro
------------------------------------
Name: Eduardo Penido Monteiro
Title: Attorney-in-fact
TVA SISTEMA DE TELEVISAO S.A.
By: /s/ Admilson Ferreria
/s/ Marcelo Vaz Bonini
------------------------------------
Name: Admilson Ferreria
Name: Marcelo Vaz Bonini
Title: Attorneys-in-fact
-43-
<PAGE>
MANAGEMENT INVESTORS
/s/ Thomas C. Trynin
------------------------------------
Thomas Trynin
Address:
R. Amauri, 513 - Apt. 906
Jardim Paulista
CEP 01448-000 - Sao Paulo, Brazil
/s/ Marco Fregenal
------------------------------------
Marco Fregenal
Address:
Av. Jandira, 185 - Apt. 213A
Sao Paulo, Brazil
The undersigned agrees to be bound by the provisions of Section 12(m) of
this Agreement as if made a party hereto.
SAN FRANCISCO COMMUNICACOES LTDA.
/s/ Joaquim Vieira dos Santos
------------------------------------
By: Joaquim Vieira dos Santos
Title: Attorney-in-fact
-44-
<PAGE>
SCHEDULE I
Management Investors
Individuals
Thomas Trynin
Marco Fregenel
SCHEDULE II
Initial Common Stock
TOTAL
NUMBER PRICE PER PURCHASE
OF SHARES SHARE PRICE
Warburg, Pincus Ventures, L.P. 19,996 $1.00 $19,996.00
IVP Paging (Cayman) L.P. 7,998 $1.00 $7,998.00
Multiponto Telecomunicacoes Ltda. 2,000 $1.00 $2,000.00
Paging Network International N.V. 1 $1.00 $1.00
TVA Sistema de Televisao S.A. 1 $1.00 $1.00
Warburg, Pincus Ventures, L.P. board 4 $1.00 $4.00
designees and alternates
IVP Paging (Cayman) L.P. board 2 $1.00 $2.00
designee and alternate
Paging Network International N.V. 2 $1.00 $2.00
board designee and alternate
<PAGE>
SCHEDULE III
Initial Preferred Stock
TOTAL
NUMBER PRICE PER PURCHASE
INVESTOR OF SHARES SHARE PRICE
Warburg, Pincus Ventures, L.P. 14,200 $1,000 $14,200,000
IVP Paging (Cayman) L.P. 5,680 $1,000 $5,680,000
Multiponto Telecomunicacoes Ltda. 1,420 $1,000 $1,420,000
SCHEDULE IV
Subscription Bonds
NUMBER OF EXERCISE TOTAL
SHARES OF PRICE PER EXERCISE
INVESTOR STOCK SHARE PRICE
Paging Network International N.V. 7,997 $1.00 $7,997
Multiponto Telecomunicacoes Ltda. 1,000 $1.00 $1,000
TVA Sistema de Televisao S.A. 999 $1.00 $999
SCHEDULE V
Subsequent Preferred Stock Percentages
INVESTOR PERCENTAGE
Warburg, Pincus Ventures, L.P. 66.667
IVP Paging (Cayman) L.P. 26.667
Multiponto Telecomunicacoes Ltda. 6.667
Multiponto Telecomunicacoes Ltda. 6.667
<PAGE>
AMENDMENT No. 1 AND
WAIVER TO
PAGING NETWORK DO BRASIL S.A.
SHAREHOLDERS AGREEMENT
AMENDMENT NO. 1 AND WAIVER, dated as of March 10. 1997 (this
Amendment and Waiver ), by and among Warburg, Pincus Venures, L.P., a Delaware
limited partnership ( Warburg ), Paging Network International N.V.. a
Netherlands corporation ( PageNet ), IVP Paging (Cayman) L.P., a Cayman Islands
limited partnership( IPC ), Multiponto Telecomunicacoes Ltda., a Brazilian
limited liability company Multiponto ), TVA Sistema de Televisao S.A., a
Brazilian limited liability company TVA ), Thomas C. Trynin ( Trynin ), Marco A.
Fregenal ( Fregenal ), Paging Brazil Holding Co., LLC a Delaware limited
liability company ( Holding LLC ), and Paging Network do Brasil S.A., a
Brazilian corporation (the Corporation ). to the SHAREHOLDERS AGREEMENT, dated
December 11, 1996 (the Shareholders Agreement ), by and among Warburg, PageNet,
IPC. Multiponto, TVA. Trynin. Fregenal and the Corporation.
WHEREAS, THE Corporation desires to issue (the Offering ) its Senior
Notes. due 2005, under an Indenture (the Indenture ) between the Corporation and
The Chase Manhattan Bank, as trustee, to certain investors (the Noteholders ),
and
WHEREAS, in connection with the Offering, the Noteholders will
purchase nonvoting interests in Holding LLC; and
WHEREAS, in connection with the Offering, the Corporation will issue
shares to Holding LLC representing up to 10% of its Common Stock on a fully
diluted basis (the Noteholder Shares ), as an inducement to the Noteholders
making an investment in the Notes. and
WHEREAS, the Corporation has determined it desirable for the
Corporation to issue such Common Stock to Holding LLC and for the Noteholders to
acquire an equity interest in Holding LLC; and
WHEREAS, the Noteholders desire that Warburg contribute shares of
Common Stock held by it to Holding LLC in exchange for an equity interest in
Holding LLC Warburg LLC Interests ), and
WHEREAS, in order to consummate the Offering it is necessary to
amend the terms of the Corporation's Preferred Stock; and
WHEREAS, the parties hereto have determined it desirable to
supplement. amend and waive certain provisions of the Shareholders Agreement in
connection with the Offering.
<PAGE>
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
Section 1. Definitions. Capitalized terms used herein but not
defined herein shall have the meanings given to such terms in the Shareholders
Agreement.
Section 2. Amendment to the Shareholders Agreement.
(A) The parties hereto acknowledge that, in connection with the
Offering, the authorized Common Stock will be increased to (i) effect a stock
split, stock dividend or similar change to the existing Common Stock, which in
any case shall be applicable to all outstanding shares of Common Stock and any
options, warrants, subscription bonds or other securities convertible into or
exchangeable for shares of Common Stock outstanding on the closing of the
Offering (collectively, the Stock Split ) and (ii) create the authorized shares
necessary to issue the Noteholder Shares to Holding LLC. Accordingly. as of the
closing of the Offering, Clause 2 (a) of the Shareholders Agreement shall be
amended (i) to change the reference to 50,000 therein to such number of shares
of Common Stock as the underwriters of the Offering and the Company shall
mutually agree (the New Common Shares ), it being understood that the total
number of Noteholder Shares shall not exceed 10% of the outstanding shares of
Common Stock on a fully diluted basis, and (ii) to change the reference to
113,000 therein to the sum of the New Common Shares and 63,000.
(B) The second sentence of Section 3.1 (a) of the Shareholders
Agreement is hereby amended by replacing the word The at the beginning thereof
with the following:
Subject to the provisions contained in the Indenture restricting the
Corporation's ability to pay dividends, the
(C) Section 3.1 (a) of the Shareholders Agreement is hereby further
amended by inserting the following new paragraph at the end thereof:
If the Corporation is not permitted by the terms of the Indenture to
pay a cash dividend that would otherwise be payable pursuant to clause (ii),
(iii) or (iv) above, then the amount of such cash dividend shall accumulate as
an unpaid dividend as of the date the cash dividend should otherwise have been
declared and the Corporation shall pay in cash such accumulated dividend as soon
thereafter as is permitted by the terms of the Indenture.
(D) Section 3.1 (d) (i) of the Shareholders Agreement is hereby
amended to read in its entirety as follows:
Subject to the provisions contained in the Indenture restricting the
Corporation's ability to redeem capital stock, at the election of the holders of
a majority of the outstanding Preferred Stock, made by written notice to the
Corporation, the preferred Stock shall be subject to redemption (to the extent
that such redemption shall not violate any applicable provisions of the laws of
Brazil, based upon advice of counsel) at a price per share equal to
2
<PAGE>
U.S.$l,000, plus an amount equal to any and all dividends accrued and unpaid
thereon as of the date of such-redemption (the Redemption Price ) if a Liquidity
Event (as defined in the Securities Subscription Agreement) occurs.
(E) The following definitions are hereby added in the appropriate
alphabetical order in the list of definitions contained in Clause 10 (a) of the
Shareholders Agreement:
hold: means, with respect to the ownership of any securities, (i) to
have the power to vote, or to direct the vote of, such securities or (ii) to
have the power to dispose. or to direct the disposition of, such securities.
own: means, with respect to the ownership of any securities, (i) to
have the power to vote, or to direct the vote of, such securities or (ii) to
have the power to dispose. or to direct the disposition of, such securities.
Section 3. Waiver of Preemptive Right. Each Shareholder hereby
waives its preemptive rights pursuant to Clause 8 (g) of the Shareholders
Agreement to purchase shares of Common Stock, and any other preemptive or
similar right of such Shareholder arising under this or any other contractual
arrangement or under Brazilian corporation law, in connection with the issuance
by the Corporation of the Noteholder Shares to Holding LLC in -connection with
the Offering, provided the total number of Noteholder Shares shall not exceed
10% of the outstanding shares of Common Stock on a fully diluted basis.
Section 4. Consent to Transfer of Warburg Shares of Common Stock.
(A) Each Shareholder hereby consents to the Transfer by Warburg of
all shares of Common Stock (the Warburg Shares ) to Holding LLC, which as a
result of such Transfer shall be an Affiliate of Warburg. Holding LLC hereby
agrees to be bound by all the restrictions otherwise applicable to Warburg under
the Shareholder Agreement and shall immediately become a party to the
Shareholders Agreement.
(B) The Shareholder further consent to any subsequent Transfer by
Holding LLC of the Warburg Shares to Warburg and any transfer of the Warburg
Shares shall be deemed to be a transfer by Warburg.
(C) Warburg agrees that any Transfer of Warburg LLC Interests shall
be deemed to be a Transfer of Common Stock under Clause 8 of the Shareholders
Agreement and shall be made in compliance therewith.
Section 5. Agreement. The term Agreement as used in the Shareholders
Agreement shall be deemed to refer to the Shareholders Agreement, as amended
hereby. This Amendment and Waiver shall be effective as of the date hereof and,
except as set forth herein, the Shareholders Agreement shall remain in full
force and effect and be otherwise unaffected hereby
3
<PAGE>
Section 6. Further Assurances. Each party to this Amendment and
Waiver agrees to execute, acknowledge, deliver, file and record such further
certificates, amendments, instruments and documents, and to do all such other
acts and things, as may be required by law or as may be necessary or advisable
to carry out the intent and purpose of this Amendment and Waiver.
Section 7. Heading and Captions. All headings and captions contained
in this Amendment and Waiver are inserted for convenience only and shall not be
deemed a part of this Amendment and Waiver.
Section 8. Governing Law. THIS AMENDMENT AND WAIVER SHALL BE
GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE FEDERATIVE REPUBLIC OF
BRAZIL.
Section 9. Counterparts This Amendment and Waiver may be executed in
two or more counterparts, each of which shall constitute an original and all of
which, when taken together, shall constitute one agreement
Section 10. Invalidity.. Every provision of this Amendment and
Waiver is intended to be several. The invalidity and unenforceability of any
particular provision of the -Amendment and Waiver in any jurisdiction shall not
affect the other provisions hereof, and this Amendment and Waiver shall be
construed in all respects as of such invalid or unenforceable provision were
omitted.
Section 11. Successors and Assigns. This Amendment and Waiver shall
be binding upon the parties hereto and their respective successors, executors,
administrators, legal representatives, heirs and legal assigns and shall inure
to the benefit of the parties hereto and, except as otherwise provided herein,
their respective successors, executors, administrators, legal representatives,
heirs and legal assigns. No person other than the parties hereto and their
respective successors, executors, administrators, legal representatives. heirs
and legal assigns, shall have any rights or claims under this Amendment and
Waiver.
IN WITNESS WHEREOF, the parties have caused this Amendment and
Waiver to be duly executed as of the day and year first above written.
WARBURG, PINCUS VENTURES, L.P.
By: Warburg, Pincus & Co.,
General Partner
/s/ Douglas M. Karp
-----------------------------------------
By: Name: Douglas M. Karp
Title: Partner
4
<PAGE>
PAGING NETWORK INTERNATIONAL N.V.
/s/ Barry Fromberg
-----------------------------------------
By: Name: Barry Fromerg
Title:
IVP PAGING (CAYMAN) L.P.
By: IVP - International Venture
Partners, Inc., General Partner
/s/ Patrice Etlin
-----------------------------------------
By: Name: Patrice Etlin
Title: Partner
MULTIPONTO TELECOMUNICACOES LTDA.
/s/ Veronica Valente Dantas Rodenburg
-----------------------------------------
By: Name: Veronica Valente Dantas Rodenburg
Title: Attorney-in-fact
TVA SISTEMA TELEVISAO S.A.
/s/ Admilson Ferreria
/s/ Marcelo Vaz Bonini
-----------------------------------------
By: Name: Admilson Ferreria
Name: Marcelo Vaz Bonini
Title: Attorneys-in-fact
/s/ Thomas C. Trynin
------------------------------------
Thomas C. Trynin
/s/ Marco A. Fregenal
------------------------------------
Marco A. Fregenal
PAGING BRAZIL HOLDING CO., LLC
/s/ David E. Libowitz
------------------------------------
By: Name: David E. Libowitz
Title: Manager
5
<PAGE>
PAGING NETWORK DO BRASIL S.A.
/s/ Thomas C. Trynin
------------------------------------
By: Name: Thomas C. Trynin
Title: President
6
<PAGE>
PAGING NETWORK DO BRASIL S.A.
SECURITIES SUBSCRIPTION AGREEMENT
This Securities Subscription Agreement ("Agreement") is entered into
on December 11, 1996 by and among (i) Paging Network do Brasil S.A., a
corporation under the laws of Brazil (the "Company"), (ii) Warburg, Pincus
Ventures, L.P., a Delaware limited partnership ("Warburg"), (iii) Paging Network
International N.V., a corporation organized and existing under the laws of the
Netherlands ("PageNet"), (iv) IVP Paging (Cayman) L.P., an exempt limited
partnership organized and existing under the laws of the Cayman Islands ("IPC");
(v) Multiponto Telecomunicacoes Ltda., a limited liability company organized and
existing under the laws of Brazil ("Multiponto"), and (vi) TVA Sistema de
Televisao S.A., a limited liability company organized and existing under the
laws of Brazil ("TVA") (Warburg, PageNet, IPC, Multiponto and TVA are referred
to herein each as an "Investor" and collectively as the "Investors").
WHEREAS, the Company, which is controlled by Warburg, is to receive the
investment to be made by the Investors and conduct the activities contemplated
hereby;
WHEREAS, Warburg will cause the Company to increase its capital and issue
securities in accordance with the terms and conditions hereof; and
WHEREAS, San Francisco Communicacoes Ltda., a limited liability company
organized and existing under the laws of Brazil ("San Francisco"), is (i) the
holder of certain paging licenses granted by the Ministry of Communications,
(ii) entering into certain agreements with the Company to allow the Company to
exploit such licenses and (iii) controlled by Joseph Wallach, who is a member of
the general partner of IPC;
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and agreements contained herein, the parties agree as follows:
SECTION 1. AUTHORIZATION OF AND SUBSCRIPTION FOR SECURITIES
1.1. Authorization of Common Stock, Preferred Stock and Subscription Bonds
(a) Warburg will cause the Company to authorize (i) 50,000 shares of
common stock, with no par value (the "Common Stock"), (ii) 63,000 shares of
preferred stock, with no par value (the "Preferred Stock") and (iii) the issue
of Subscription Bonds (the "Subscription Bonds") for the purchase of an
aggregate of 10,000 shares of Common Stock, to be substantially in the form set
out in Exhibit A.
<PAGE>
1.2. Initial Issuance of Common Stock and Preferred Stock
(a) Subject to the terms and conditions hereof, on the Closing Date
(as defined below), the Company shall offer for subscription to the Investors,
and the Investors shall subscribe for, the number of shares of Common Stock, at
the cash purchase price of Reais Equivalent to U.S.$1.00 per share, set forth
opposite their respective names on Schedule 1.2(a) (such shares, collectively,
the "Initial Common Stock"). Such sales and purchases shall be effected on the
Closing Date by the Company executing and delivering to each Investor, duly
registered in its name or in the names of its Board member designee and
alternate designee, a duly executed Subscription Bulletin and certified copies
of the entries in the book of registration of shares evidencing the Initial
Common Stock being purchased by it, against delivery by each Investor to the
Company of the purchase price by certified check or wire transfer of immediately
available funds to such account as the Company shall designate, which
designation shall occur not less than three (3) Business Days prior to the
Closing Date.
(b) Subject to the terms and conditions hereof, on the Closing Date,
the Company shall offer for subscription to the Investors, and the Investors
shall subscribe to, the number of shares of Preferred Stock, at the cash
purchase price of Reais Equivalent to U.S.$1,000 per share, set forth opposite
their respective names on Schedule 1.2(b) (such shares, collectively, the
"Initial Preferred Stock"). Such sales and purchases shall be effected on the
Closing Date by the Company executing and delivering to such Investor, duly
registered in its name, a duly executed Subscription Bulletin and certified
copies of the entries in the book of registration of shares evidencing the
Initial Preferred Stock being purchased by it, against delivery to the Company
of the amount set forth opposite its name on Schedule 1.2(b)(1). All cash
payments shall be made by certified check or by wire transfer of immediately
available funds to such account as the Company shall designate, which
designation shall occur not less than three (3) Business Days prior to the
Closing Date. Within a reasonable period of time after the Closing (as defined
in Section 1.2(c) below) of the sale and purchase of the Initial Preferred Stock
pursuant to this Agreement, the Company will reimburse each such Investor for
amounts expended by such Investor for equipment, personnel, cash contributions
or other approved expenses, a recent estimate of which are as set forth on
Schedule 1.2(b)(2).
(c) The closing of the sale and purchase of the Initial Common Stock
and the Initial Preferred Stock to be purchased pursuant to Section 1.2(b) (the
"Closing") shall take place at 10:00 a.m., Sao Paulo, Brazil time, on December
11, 1996, or such other date as the Investors and the Company agree in writing
(the "Closing Date"), at the offices of Xavier, Bernardes, Braganca, Av. Brasil,
1980 - 01430-001 Sao Paulo,
-2-
<PAGE>
Brazil, or such other location as the Investors and the Company shall mutually
select.
(d) In the event that any Investor fails to subscribe for its pro
rata share (as set forth on Schedule 1.3(a)) of Subsequent Preferred Stock
pursuant to Section 1.3, the Company may, at its option, exercisable by delivery
of written notice to such Investor at any time following such failure,
repurchase from such Investor, and such Investor shall sell to the Company, that
number of shares of Common Stock equal to the excess of (i) the number of shares
of Initial Common Stock owned by such Investor, over (ii) the number of shares
of Preferred Stock owned by such Investor, with the effect that such Investor
will own the same number of shares of Common Stock and Preferred Stock. Such
repurchase and sale shall be at the same price paid for such shares of Common
Stock.
1.3. Subsequent Issuances of Preferred Stock
(a) Subject to the terms and conditions hereof, from time to time
after the Closing Date at the written request of the Board of Directors of the
Company (the "Board of Directors"), the Company will offer for subscription to
certain of the Investors, and certain of the Investors will subscribe to,
Preferred Stock at the cash price of Reais Equivalent to U.S.$1,000 per share,
with each such Investor purchasing that number of shares equal to the percentage
set forth opposite its name on Schedule 1.3(a) multiplied by the total number of
shares of Preferred Stock set forth in the Company's request ("Subsequent
Preferred Stock"), provided, however, that in no event shall the aggregate
purchase price for Subsequent Preferred Stock subscribed by the Investors exceed
U.S.$8,700,000.
(b) Each sale and purchase of Subsequent Preferred Stock shall be
effected on a date as such Investors and the Company agree in writing, but in no
event earlier than thirty (30) days after receipt by the Investors of the
written request pursuant to paragraph (a) above (a "Subsequent Closing Date"),
by the Company executing and delivering to such Investor, duly registered in its
name, a duly executed Subscription Bulletin and certified copies of the entries
in the book of registration of shares evidencing the Subsequent Preferred Stock
being subscribed by it, against delivery by each such Investor to the Company of
the purchase price by certified check or wire transfer of immediately available
funds to such account as the Company shall designate, which designation shall
occur not less than three (3) Business Days prior to such Subsequent Closing
Date.
(c) The obligation of the Initial Stock Investors to subscribe and
pay for Subsequent Preferred Stock shall be subject to the condition that on the
Subsequent Closing Date there shall exist no event giving rise to a mandatory
redemption of the Preferred Stock pursuant to Section 3.1(d)(i) of the
Shareholders Agreement.
-3-
<PAGE>
1.4. Subscription Bonds
Subject to the terms and conditions hereof, on the Closing Date the
Company shall issue the Subscription Bonds to each of the Investors named on
Schedule 2.1 to purchase the number of shares of Common Stock set forth opposite
their respective names on Schedule 2.1 in accordance with Section 2 below.
1.5. Several Obligations
The obligations of the Investors hereunder are several and not
joint, and no Investor shall be obligated to subscribe for and purchase any
Securities hereunder unless each of the other Investors has subscribed for and
purchased the Securities it is obligated to purchase hereunder.
SECTION 2. SUBSCRIPTION BONDS
2.1. Issuance of Subscription Bonds
The Company hereby agrees to issue to each of the persons named on
Schedule 2.1 (each a "Holder"), a subscription bond (a "Subscription Bond"),
exercisable for an aggregate of 9,996 shares of the Common Stock of the Company
at a purchase price, subject to the provisions of Section 2.4 hereof, of U.S.
$1.00 per share (the "Purchase Price"). The Purchase Price and the number and
character of such shares of Common Stock are subject to adjustment as provided
below.
2.2. Exercise of Subscription Bond
The purchase rights evidenced by each Subscription Bond shall be
exercised by the Holder surrendering such Subscription Bond, with the form of
subscription at the end hereof duly executed by such Holder, to the Company at
its office, accompanied by payment, in cash, by certified or official bank check
or by wire transfer of an amount equal to the Purchase Price multiplied by the
number of shares of Common Stock being purchased pursuant to such exercise of
the Subscription Bond on or before the fifth anniversary of the date of such
Subscription Bond.
2.2.1. Partial Exercise
Each Subscription Bond may be exercised for less than the full
number of shares of Common Stock, in which case the number of shares receivable
upon the exercise of such Subscription Bond as a whole, and the sum payable upon
the exercise of such Subscription Bond as a whole, shall be proportionately
reduced. Upon any such partial exercise, the Company at its expense will
forthwith issue to the Holder a new Subscription Bond or Subscription Bonds of
like tenor calling for the number of shares of Common Stock as to which rights
have not
-4-
<PAGE>
been exercised, such Subscription Bond or Subscription Bonds to be issued in the
name of the Holder or his nominee (upon payment by such Holder of any applicable
transfer taxes).
2.3. Registration of Stock on Exercise
Immediately after the exercise of a Subscription Bond and payment of
the Purchase Price, the Company, at its expense, will cause to be registered in
the Company's book of registration of shares the number of fully paid and
non-assessable shares of Common Stock or other securities or property to which
such Holder shall be entitled upon such exercise. The Company agrees that the
shares of Common Stock so registered shall be deemed to be issued to the Holder
as the record owner of such shares as of the close of business on the date on
which the corresponding Subscription Bond shall have been surrendered and
payment made for such shares as aforesaid.
2.4. Adjustments
The Purchase Price shall be subject to adjustment from time to time
in accordance with this Section 2.4. Upon each adjustment of the Purchase Price
pursuant to this Section 2.4, the Holder shall thereafter be entitled to acquire
upon exercise, at the Purchase Price resulting from such adjustment, the number
of shares of the Common Stock obtainable by multiplying the Purchase Price in
effect immediately prior to such adjustment by the number of shares of the
Common Stock acquirable immediately prior to such adjustment and dividing the
product thereof by the Purchase Price resulting from such adjustment.
2.4.1. Adjustment for Stock Dividends
(a) If and whenever on or after the date of issuance hereof the
Company shall declare a dividend or make any other distribution upon the capital
stock of the Company payable in Common Stock, any rights to subscribe for or to
purchase, or any options or subscription bonds for the purchase of, Common Stock
or any stock of other securities convertible or exchangeable for Common Stock,
if such rights, options or subscription bonds permit the holder thereof to
acquire the Common Stock at a price that is below fair market value (such
rights, options or subscription bonds being herein called "Options" and such
convertible or exchangeable stock or securities being herein called "Convertible
Securities"), then forthwith upon such declaration of a dividend or other
distribution (the "Triggering Transaction"), the Purchase Price shall be reduced
to the Purchase Price (calculated to the nearest tenth of a cent) determined by
dividing:
(i) an amount equal to the product derived by multiplying the
Number of Shares of Common Stock Deemed Outstanding immediately prior to the
Triggering Transaction by the Purchase Price then in effect, by
-5-
<PAGE>
(ii) an amount equal to the sum of (x) the Number of Shares of
Common Stock Deemed Outstanding immediately prior to such Triggering Transaction
plus (y) the number of shares of Common Stock issued (or issuable if all of such
Options or Convertible Securities are exercised or converted as the case may be)
in connection with the Triggering Transaction.
The term "Number of Shares of Common Stock Deemed Outstanding" at
any given time shall mean the sum of (i) the number of shares of the Common
Stock outstanding at such time, and (ii) the total maximum amount of Common
Stock issuable upon the exercise of Options or the conversion or exchange of
Convertible Securities.
For purposes of determining the adjusted Purchase Price under this
Section 2.4.1, Options or Convertible Securities issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold without
consideration.
(b) In case the Company shall at any time subdivide (other than by
means of a dividend payable in Common Stock covered by this Section 2.4.1), its
outstanding shares of Common Stock into a greater number of shares, the Purchase
Price in effect immediately prior to such subdivision shall be proportionately
reduced, and, conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the Purchase Price in
effect immediately prior to such combination shall be proportionately increased.
2.4.2. Reorganization, Reclassification, Consolidation,
Merger or Sale of Assets
If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities, cash or other property with respect to
or in exchange for Common Stock, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby the Holder shall have the right to acquire and receive
upon exercise of a Subscription Bond such shares of stock, securities, cash or
other property issuable or payable (as part of the reorganization,
reclassification, consolidation, merger or sale) with respect to or in exchange
for such number of outstanding shares of the Company's Common Stock as would
have been received upon exercise of such Subscription Bond at the Purchase Price
then in effect. The Company will not effect any such consolidation, merger or
sale, unless prior to the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written
-6-
<PAGE>
instrument mailed or delivered to the Holder at the last address of such Holder
appearing on the books of the Company, the obligation to deliver to such Holder
such shares of stock, securities or assets as, in accordance with the foregoing
provisions, such Holder may be entitled to purchase.
2.4.3. Notices of Record Date, Etc.
In the event that
(1) the Company shall declare any cash dividend upon its Common
Stock, or
(2) the Company shall declare any dividend upon its Common Stock
payable in stock or make any special dividend or other distribution to the
holders of its Common Stock, or
(3) the Company shall offer for subscription pro rata to the holders
of its Common Stock any additional shares of stock of any class or other rights,
or
(4) there shall be any capital reorganization or reclassification of
the capital stock of the Company, including any subdivision or combination of
its outstanding shares of Common Stock, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to, another
corporation, or
(5) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in connection with such event, the Company shall give to the Holder:
(i) at least twenty (20) days' prior written notice of the
date on which the books of the Company shall close or a record shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up; and
(ii) in the case of any such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place.
Such notice in accordance with the foregoing clause (i) shall also
specify, in the case of any such dividend, distribution or subscription rights,
the date on which the holders of Common Stock shall be entitled thereto, and
such notice in accordance with the foregoing clause (ii) shall also specify the
date on which the holders of Common Stock shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification,
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consolidation, merger, sale, dissolution, liquidation or winding up, as the case
may be. Each such written notice shall be given by first class mail, postage
prepaid, addressed to the Holder at the address of such Holder as shown on the
books of the Company.
2.4.4. Adjustment by Shareholders
If any event occurs as to which, in the opinion of the holders of a
majority of the outstanding Preferred Stock, the provisions of this Section 2.4
are not strictly applicable or if strictly applicable would not fairly protect
the rights of the Holder in accordance with the essential intent and principles
of such provisions, then the Company shall make an adjustment in the application
of such provisions, in accordance with such essential intent and principles, so
as to protect such rights as aforesaid, but in no event shall any adjustment
have the effect of increasing the Purchase Price as otherwise determined
pursuant to any of the provisions of this Section 2.4 except in the case of a
combination of shares of a type contemplated in Section 2.4.1 and then in no
event to an amount larger than the Purchase Price as adjusted pursuant to this
Section 2.4.
2.4.5. Officer's Statement as to Adjustments
Whenever the Purchase Price shall be adjusted as provided in Section
2.4 hereof, the Company shall forthwith file at each office designated for the
exercise of this Subscription Bond, a statement, signed by the Chairman of the
Board, the President, any Vice President or Treasurer of the Company, showing in
reasonable detail the facts requiring such adjustment and the Purchase Price
that will be effective after such adjustment. The Company shall also cause a
notice setting forth any such adjustments to be sent by mail, first class,
postage prepaid, to the record Holder at his or its address appearing on the
Company's book of registration of shares. If such notice relates to an
adjustment resulting from an event referred to in Section 2.4.3, such notice
shall be included as part of the notice required to be mailed and published
under the provisions of Section 2.4.3 hereof.
2.5. No Impairment
The Company will not, by amendment of its by-laws or through
reorganization, consolidation, merger, dissolution, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of any Subscription Bond, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Holder
against impairment. Without limiting the generality of the foregoing, the
Company will not increase the par value of any shares of stock receivable upon
the exercise of each Subscription Bond above the amount payable therefor upon
such exercise, and at all times will take all such action as may
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be necessary or appropriate in order that the Company may validly and legally
issue fully paid and non-assessable stock upon the exercise of each Subscription
Bond.
2.6. Reservation of Stock, etc., issuable on exercise of Subscription
Bonds
The Company shall at all times reserve and keep available out of its
authorized but unissued stock, solely for the issuance and delivery upon the
exercise of each Subscription Bond and other similar Subscription Bonds, such
number of its duly authorized shares of Common Stock as from time to time shall
be issuable upon the exercise of each Subscription Bond and all other similar
warrants at the time outstanding.
2.7. Replacement of Subscription Bond
Upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of a Subscription Bond and (in the
case of loss, theft or destruction) upon delivery of an indemnity agreement
(with surety if reasonably required) in an amount reasonably satisfactory to it,
or (in the case of mutilation) upon surrender and cancellation thereof, the
Company will issue, in lieu thereof, a new Subscription Bond of like tenor.
2.8. Remedies
The Company stipulates that the remedies at law of the Holder in the
event of any default by the Company in the performance of or compliance with any
of the terms of a Subscription Bond are not and will not be adequate, and that
the same may be specifically enforced.
2.9. Negotiability, etc.
Each Subscription Bond is issued upon the following terms, to all of
which each taker or owner thereof consents and agrees:
(a) Subject to the legend appearing in Section 2.11 hereof, title to
a Subscription Bond may be transferred by endorsement (by the Holder executing a
form of assignment including guaranty of signature) and delivery in the same
manner as in the case of a negotiable instrument transferable by endorsement and
delivery.
(b) Any person in possession of a Subscription Bond properly
endorsed is authorized to represent himself as absolute owner thereof and is
granted power to transfer absolute title thereto by endorsement and delivery
thereof to a bona fide purchaser thereof for value; each prior taker or owner
waives and renounces all of his equities or rights in a Subscription Bond in
favor of every such bona fide purchaser, and every such bona fide
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purchaser shall acquire title thereto and to all rights represented hereby and
thereby.
(c) Until a Subscription Bond is transferred on the books of the
Company, the Company may treat the registered Holder as the absolute owner
thereof for all purposes without being affected by any notice to the contrary.
(d) Prior to the exercise of a Subscription Bond, the Holder shall
not be entitled to any rights of a stockholder of the Company with respect to
shares for which the Subscription Bond shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.
(e) The Company shall not be required to pay any federal or state
transfer tax or charge in Brazil or the United States that may be payable in
respect of any transfer involved in the transfer or delivery of a Subscription
Bond or the entry in the book of registration of shares of Common Stock or the
entry in the book of transfer of shares of Common Stock upon the exercise of a
Subscription Bond until any and all such taxes and charges shall have been paid
by the Holder or until it has been established to the Company's satisfaction
that no such tax or charge is due.
2.10. Subdivision of Bonds
Each Subscription Bond (as well as any new Subscription Bonds issued
pursuant to the provisions of this Section) is exchangeable, upon the surrender
thereof by the Holder, at the principal office of the Company, for any number of
new Subscription Bonds of like tenor and date representing in the aggregate the
right to subscribe for and purchase the number of shares of Common Stock of the
Company which may be subscribed for and purchased hereunder.
2.11. Legends
All Subscription Bonds shall be in substantially the form as Exhibit
A attached hereto and shall bear the following legends:
THIS SUBSCRIPTION BOND AND THE SECURITIES ISSUABLE UPON ITS EXERCISE
HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR ANY OTHER SECURITIES LAW OF BRAZIL OR ANY OTHER JURISDICTION (THE
"SECURITIES LAWS"), AND MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER APPLICABLE SECURITIES LAWS OR IN A TRANSACTION WHICH, IN THE
OPINION OF COUNSEL REASONABLY SATISFACTORY TO PAGING NETWORK DO BRASIL S.A.,
QUALIFIES AS AN EXEMPT TRANSACTION
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UNDER APPLICABLE SECURITIES LAWS AND THE RULES AND REGULATIONS PROMULGATED
THEREUNDER.
THIS SUBSCRIPTION BOND AND THE SECURITIES ISSUABLE UPON ITS EXERCISE
ARE SUBJECT TO THE TERMS OF THAT CERTAIN SHAREHOLDERS AGREEMENT, DATED AS OF
DECEMBER 11, 1996, BY AND AMONG PAGING NETWORK DO BRASIL S.A. AND CERTAIN
INVESTORS IDENTIFIED THEREIN, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER. A COPY
OF THIS AGREEMENT HAS BEEN FILED WITH THE SECRETARY OF PAGING NETWORK DO BRASIL
S.A. AND IS AVAILABLE UPON REQUEST.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors that:
3.1. Corporate Organization
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of Brazil. Attached hereto as Exhibit B is a
true and complete copy of the by-laws of the Company, as amended through the
date hereof and duly registered with the Board of Commerce of the State of Sao
Paulo (the "by-laws").
(b) The Company has been recently formed by the conversion of a
limited liability company and does not yet conduct any material business. The
Company has imported certain equipment necessary to set up a paging system and
such equipment constitutes the Company's assets; its only liabilities are those
incurred in connection with the Company's formation and the acquisition of such
equipment.
(c) The Board of Directors has authorized the execution, delivery
and performance of this Agreement, and each of the transactions contemplated
hereby. No other action is necessary to authorize such execution, delivery and
performance, and upon such execution and delivery, this Agreement shall
constitute the valid and binding obligation of the Company, enforceable in
accordance with its terms, except as the enforceability hereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting the enforcement of creditors' rights generally and general
principles of equity. The Board of Directors has authorized the issuance of the
Common Stock, the Preferred Stock and the Subscription Bonds (including the
Common Stock issuable thereunder, the "Subscription Bonds Stock"), and upon the
execution and delivery thereof, each Subscription Bond will constitute the valid
and binding obligation of the Company, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to the enforcement of creditors' rights generally.
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3.2. Subsidiaries
The Company on the date hereof does not, and on the Closing Date
will not, have any equity investment in any other company or legal entity.
3.3. Capitalization
(a) On the date hereof, the authorized capital stock of the Company
consists of 50,000 shares of Common Stock and 63,000 shares of Preferred Stock.
On the Closing Date, there will be 30,760 shares of Common Stock outstanding and
21,300 shares of Preferred Stock outstanding. The Company has reserved 33,000
shares of Preferred Stock for issuance to the holders of Preferred Stock as a
payment in kind dividend.
(b) Upon issuance, sale and delivery as contemplated by this
Agreement, the Initial Common Stock and the Initial Preferred Stock will be duly
authorized, validly issued, fully paid and non-assessable shares of the Company,
free of all preemptive or similar rights. The Subsequent Preferred Stock will,
when issued as contemplated by this Agreement, be duly authorized, validly
issued, fully paid and non-assessable shares of the Company, free of all
preemptive or similar rights. The Subscription Bonds Stock will, when issued in
accordance with the terms of the Subscription Bonds, be duly authorized, validly
issued, fully paid and non-assessable shares of the Company, free of all
preemptive or similar rights.
(c) Except for the Subscription Bonds, on the Closing Date there
will be no shares of Common Stock or any other equity security of the Company
issuable upon conversion or exchange of any security of the Company nor will
there be any rights or options outstanding or other agreements to acquire shares
of Common Stock nor will the Company be contractually obligated to purchase,
redeem or otherwise acquire any of its outstanding shares of Common Stock,
except for this Agreement and the Subscription Bonds.
3.4. Consents and Approvals
The creation, authorization, issuance, offer and sale of the Initial
Common Stock, the Preferred Stock, the Subscription Bonds and the Subscription
Bonds Stock do not require any consent, approval or action of, or filing,
registration or qualification with, any governmental or judicial authority on
the part of the Company or the vote, consent or approval in any manner of the
holders of any security of the Company as a condition to the execution and
delivery by the Company of this Agreement and the performance by the Company of
its obligations hereunder will not violate (i) the terms of the by-laws, or any
agreement to which the Company is a party or by which it is bound or (ii) any
federal or state law of Brazil or the United States.
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3.5. Registration Rights
Except as provided in the Registration Rights Agreement, the Company
will not, as of the Closing Date, be under any obligation to register any of its
securities under the securities laws of Brazil or any other jurisdiction.
3.6. CVM Registration
None of the Company's securities are registered, or required to be
registered with the Comissao de Valores Mobiliarios (the "CVM") or any
securities regulator of any other jurisdiction.
3.7. Private Offering
Neither the Company nor anyone acting on its behalf has sold or has
offered any of the Securities for sale to, or solicited offers to buy from, or
otherwise approached or negotiated with respect thereto with, any prospective
purchaser, other than the Investors. Neither the Company nor anyone acting on
its behalf shall offer the Securities for issue or sale to, or solicit any offer
to acquire any of the same from anyone. Based upon the representations of the
Investors set forth in Section 4, the offer, issuance and sale of the Securities
are and will be exempt from the registration and prospectus delivery
requirements of the securities laws of Brazil, and have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable securities
laws of Brazil.
3.8. Brokerage
There are no claims for brokerage commissions or finder's fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement made by or on behalf of the Company and the
Company agrees to indemnify and hold the Investors harmless against any costs or
damages incurred as a result of any such claim.
3.9. Use of Proceeds
The Company shall use the proceeds of the sale of the Securities (a)
to hire management and other employees for the Company, (b) to build out the
infrastructure required for the business of the Company, (c) to provide working
capital for the Company and (d) for the Company's general corporate purposes.
SECTION 4. REPRESENTATIONS AND WARRANTIES
4.1. Representations and Warranties of the Investors
(a) Each of the Investors severally and not jointly represents
and warrants to the Company as follows:
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(i) It has full power and legal right to execute and deliver
this Agreement and to perform its obligations hereunder.
(ii) It is a validly existing organization, duly organized
under the laws of its jurisdiction of organization.
(iii) It has taken, or prior to the Closing Date will have
taken, all action necessary for the authorization, execution, delivery, and
performance of this Agreement and its obligations hereunder, and, upon execution
and delivery by the Company, this Agreement shall constitute the valid and
binding obligation of such Investor, enforceable against such Investor in
accordance with its terms, except that such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to the enforcement of creditors' rights
generally.
(iv) There are no claims for brokerage commissions or finder's
fees or similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement made by or on behalf of such Investor
and such Investor agrees to indemnify and hold the Company harmless against any
costs or damages incurred as a result of any such claim.
(v) Such Investor, and each of its Affiliates that will
acquire any Securities, has such knowledge and experience in financial and
business matters that it is capable of evaluating the merits and risks of its
investment in the Company as contemplated by this Agreement, and is able to bear
the economic risk of such investment for an indefinite period of time. It has
been furnished access to such information and documents as it has requested and
has been afforded an opportunity to ask questions of and receive answers from
representatives of the Company concerning the terms and conditions of this
Agreement and the purchase of the Securities contemplated hereby.
4.2. Representations and Warranties of Multiponto and TVA
In addition to its representations and warranties made in
Section 4.1, each of Multiponto and TVA, severally but not jointly, represents
and warrants to the Company and to the other Investors as follows:
(i) It has full power and legal right to execute and deliver
the License Agreements to which it is a party and to perform its obligations
thereunder.
(ii) It has taken all action necessary for the authorization,
execution, delivery, and performance of the License Agreements to which it is a
party and its obligations thereunder, and, upon execution and delivery by it,
such License
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Agreements shall constitute the valid and binding obligation of it, enforceable
against it in accordance with its respective terms and conditions, except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to the enforcement of creditors' rights generally.
4.3. Representations and Warranties of IPC
(a) IPC represents and warrants to the Company and to the other
Investors as follows:
(i) San Francisco has full power and legal right to execute
and deliver the License Agreement to which it is a party and to perform its
obligations thereunder.
(ii) San Francisco is a validly existing organization, duly
organized under the laws of Brazil.
(iii) San Francisco has taken all action necessary for the
authorization, execution, delivery, and performance of the License Agreement to
which it is a party and its obligations thereunder, and, upon execution and
delivery by it, the License Agreement shall constitute its valid and binding
obligation, enforceable against San Francisco in accordance with its terms and
conditions, except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to the enforcement of creditors' rights generally.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1. Resale of Securities
Each of the Investors severally covenants that it will not sell or
otherwise transfer the Securities except pursuant to the terms and conditions of
the Shareholders Agreement.
5.2. Further Assurance
Each of the parties shall execute such documents and other papers
and take such further actions as may be reasonably required or desirable to
carry out the provisions hereof and the transactions contemplated hereby or by
any other agreement attached hereto. Each such party shall use its reasonable
best efforts to fulfill or obtain the fulfillment of the conditions to the
Closing as promptly as practicable.
SECTION 6. INVESTORS' CLOSING CONDITIONS
The obligation of the Investors to purchase and pay for the Initial
Common Stock and the Initial Preferred Stock on the Closing Date, as provided in
Section 1 hereof, shall be subject
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to the performance by the Company of its agreements theretofore to be performed
hereunder and to the satisfaction, prior thereto or concurrently therewith, of
the following further conditions:
6.1. Representations and Warranties
The representations and warranties of the Company and of IPC,
Multiponto and TVA contained in this Agreement shall be true on and as of the
Closing Date as though such warranties and representations were made at and as
of such date, except as otherwise affected by the transactions contemplated
hereby.
6.2. Compliance with Agreement
The Company and Multiponto and TVA shall have performed and complied
with all agreements, covenants and conditions contained in this Agreement which
are required to be performed or complied with by the Company prior to or on the
Closing Date.
6.3. Officer's Certificate
The Investors shall have received a certificate, dated the Closing
Date, signed by the President of each of the Company, Multiponto and TVA
certifying that the conditions specified in the foregoing Sections 6.1 and 6.2
hereof have been fulfilled.
6.4. License Agreements
Each of Multiponto, TVA and San Francisco shall have executed and
delivered to the Company Operating Agreements, Powers of Attorney, Subscription
Agreement, proxy to execute Subscription Agreements with the Subscribers,
Promise of Assignment and Transfer of Permission and Rights Agreements,
irrevocable proxies to persons chosen by mutual agreement with the Company for
purposes of cooperating in all required proceedings with the Brazilian
authorities, and related Equipment Acquisition Agreements, all in form and
substance satisfactory to PageNet and Warburg (each a "License Agreement" and
collectively "License Agreements"), and accompanied by such legal opinions as
the Company may reasonably request. The transactions contemplated by each
License Agreement shall have been consummated to the reasonable satisfaction of
PageNet and Warburg.
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6.5. Employment Agreements
Each of the employees of the Company listed on Schedule 6.5 shall
have executed an Employment Agreement, substantially in the form attached as
Exhibit B hereto (collectively, the "Employment Agreements").
6.6. Shareholders Agreement
The Company and each of the other parties thereto shall have
executed the Shareholders Agreement, the form of which is attached as Exhibit C
hereto (the "Shareholders Agreement").
6.7. Technical Services Agreement
The Company and Paging Network, Inc., a Delaware corporation, shall
have executed the Technical Services Agreement, the form of which is attached as
Exhibit D hereto (the "Technical Services Agreement").
6.8. Registration Rights Agreement
The Company and each of the other parties thereto shall have
executed the Registration Rights Agreement, the form of which is attached as
Exhibit E hereto (the "Registration Rights Agreement").
6.9. Initial Board of Directors
On the Closing Date, the Board of Directors shall consist of one
designee of IPC, one designee of PageNet, two designees of Warburg and the Chief
Executive Officer of the Company.
6.10. Initial Operating Budget
On the Closing Date, the Company shall have provided to the
Investors a nine-month interim operating budget (which shall include monthly
operating budgets).
6.11. Legal Opinion
On the Closing Date, the Company shall have provided to the
Investors an opinion of counsel, which will cover (i) valid organization and
existence of the Company, (ii) valid authorization, issuance and enforceability
of Securities being issued at Closing, (iii) valid authorization and
enforceability of all agreements being executed in connection with the Closing,
(iv) non-existence of conflicts with the by-laws or agreements to which the
Company is a party or by which the Company is bound, or applicable laws or
regulations, and (v) compliance with all applicable regulatory requirements.
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SECTION 7. COMPANY CLOSING CONDITIONS
The obligation of the Company to issue and deliver the Initial
Common Stock, the Initial Preferred Stock and the Subscription Bonds on the
Closing Date, as provided in Section 1.2 hereof, shall be subject to the
performance by the Investors of their agreements theretofore to be performed
hereunder and to the satisfaction, prior thereto or concurrently therewith, of
the following further conditions:
7.1. Representations and Warranties
The representations and warranties of each of the Investors
contained in this Agreement shall be true on and as of the Closing Date as
though such warranties and representations were made at and as of such date,
except as otherwise affected by the transactions contemplated hereby.
7.2. Compliance with Agreement
Each of the Investors shall have performed and complied with all
agreements, covenants and conditions contained in this Agreement which are
required to be performed or complied with by it prior to or on the Closing Date.
7.3. Investors' Certificates
The Company shall have received a certificate from each of the
Investors, dated the Closing Date, signed by a duly authorized representative of
such Investor, certifying that the conditions specified in the foregoing
Sections 7.1 and 7.2 hereof have been fulfilled.
SECTION 8. COVENANTS
8.1. Financial and Business Information
From and after the date hereof, the Company shall deliver to each of
the Investors so long as such Investor owns any Securities:
(a) Monthly and Quarterly Statements - as soon as practicable, and
in any event within thirty (30) days after the close of each month of each
fiscal year of the Company in the case of monthly statements and thirty-five
(35) days after the close of each of the first three fiscal quarters of each
fiscal year of the Company in the case of quarterly statements, a consolidated
balance sheet, statement of income and statement of cash flows of the Company
and any Subsidiaries as at the close of such month or quarter and covering
operations for such month or quarter, as the case may be, and the portion of the
Company's fiscal year ending on the last day of such month or quarter, all in
reasonable detail and prepared in accordance with both U.S. GAAP and Brazilian
GAAP and reconciled with each other, subject
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to audit and year-end adjustments, setting forth in each case in comparative
form the figures for the comparable period of the previous fiscal year. The
Company shall also provide comparisons of each pertinent item to the budget
referred to in subsection (c) below.
(b) Annual Statements - as soon as practicable after the end, of
each fiscal year of the Company, and in any event within seventy-five (75) days
thereafter, duplicate copies of:
(1) consolidated and consolidating balance sheets of the
Company and any Subsidiaries at the end of such year; and
(2) consolidated and consolidating statements of income,
stockholders' equity and cash flows of the Company and any Subsidiaries for such
year, setting forth in each case in comparative form the figures for the
previous fiscal year,
all in reasonable detail and accompanied by an opinion thereon of independent
certified public accountants of recognized international standing selected by
the Company, which is expected to be Ernst & Young, Auditores Independents S.C.,
which opinion shall state that such financial statements fairly present the
financial position of the Company and any Subsidiaries on a consolidated basis
and have been prepared in accordance with U.S. GAAP and Brazilian GAAP and
reconciled with each other (except for changes in application in which such
accountants concur) and that the examination of such accountants in connection
with such financial statements has been made in accordance with generally
accepted auditing standards, and accordingly included such tests of the
accounting records and such other auditing procedures as were considered
necessary in the circumstances, and the Company shall also provide comparisons
of each pertinent item to the budget referred to in subsection (c) below.
(c) Operating Budget - no later than thirty (30) days prior to the
commencement of each fiscal year of the Company, the Operating Budget for such
fiscal year.
(d) Capital Budget - no later than thirty (30) days prior to the
commencement of each fiscal year of the Company, the Capital Budget for such
fiscal year.
(e) Audit Reports - promptly upon receipt thereof, one copy of each
other financial report and internal control letter submitted to the Company by
independent accountants in connection with any annual, interim or special audit
made by them of the books of the Company and its Subsidiaries.
(f) Other Reports - promptly upon their becoming available, one copy
of each financial statement, report, or notice sent by the Company to
stockholders generally, of each financial statement, report, or notice sent by
the Company or any of its Subsidiaries to the CVM or any successor agency, if
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applicable, of each regular or periodic report and any registration statement,
prospectus or written communication (other than transmittal letters) in respect
thereof filed by the Company or any Subsidiary with, or received by such Person
in connection therewith from, any domestic or foreign securities exchange, the
CVM or any successor agency or any foreign regulatory authority performing
functions similar to the CVM, of any press release issued by the Company or any
Subsidiary, and of any material of any nature whatsoever prepared by the CVM or
any successor agency thereto or any other authority which relates to or affects
in any way the Company or any Subsidiary.
(g) Progress Report - prior to each regularly scheduled meeting of
the Board of Directors, a narrative report shall be delivered to each of the
Investors describing the activities of the Company and its Subsidiaries since
the date of the last such report, including a description of business
development, operating results and marketing efforts.
(h) Requested Information - with reasonable promptness, the Company
and its Subsidiaries shall furnish each of the Investors with such other data
and information as from time to time may be reasonably requested.
8.2. Inspection
As long as an Investor directly or indirectly holds at least five
percent (5%) of the outstanding Common Stock (including shares of Common Stock
issuable upon the exercise of any options or subscription bonds), the Company
shall permit such Investor, its nominees, assignees, and its representatives to
visit and inspect any of the properties of the Company and its Subsidiaries, to
examine all its books of account, records, reports and other papers not
contractually required of the Company to be confidential or secret, to make
copies and extracts therefrom, and to discuss its affairs, finances and accounts
with its officers, directors, key employees and independent public accountants
or any of them (and by this provision the Company authorizes said accountants to
discuss with such Investor, its nominees, assignees and representatives the
finances and affairs of the Company and any Subsidiaries), all at such
reasonable times and as often as may be reasonably requested upon prior written
notice.
8.3. Confidentiality
As to so much of the information and other material furnished under
or in connection with this Agreement (whether furnished before, on or after the
date hereof, including without limitation information furnished pursuant to
Sections 8.1 and 8.2 hereof) as constitutes or contains confidential business,
financial or other information of the Company or any Subsidiary (the
confidentiality of which is essential to the success of the business of the
Company and its Subsidiaries), each of the
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Investors covenants for itself and its directors, officers and partners that it
will use due care to prevent its officers, directors, partners, employees,
counsel, accountants and other representatives, including nominees, and
assignees from disclosing such information to Persons other than their
respective authorized employees, counsel, accountants, stockholders, partners,
limited partners and other authorized representatives; provided, however, that
each Investor may disclose or deliver any information or other material
disclosed to or received by it should such Investor be advised by its counsel
that such disclosure or delivery is required by law, regulation or judicial or
administrative order and, provided, further, that in connection with offerings
by any Investor of interests in itself or any of its Affiliates, such Investor
may disclose certain information, subject to the prior approval of the other
Investors, to potential investors that are not competitors of the Company. The
Investors hereby consent to the previous disclosure by Multiponto to certain
prospective investors and by IPC to certain of its prospective limited partners
(in each case identified on a separate schedule delivered to each of the other
parties hereto) of information regarding the Company (including details
regarding the Company's business plan) and the terms of the transaction
contemplated by this Agreement. Notwithstanding the foregoing, if, and to the
extent that, any Investor is a limited partnership, or resells or transfers the
Securities acquired by it to a limited partnership of which such Investor (or
another entity controlled by or under common control with such Investor) is the
majority or controlling general partner, financial and other information
regarding the Company of the type customarily included in a private placement
memorandum offering interests in a private equity investment fund may be
included in the private placement memorandum or other offering document used by
such limited partnership in connection with the offering and sale of its
interests. In addition, financial and other information regarding the Company of
the type typically provided to limited partners in private equity investment
funds with respect to the investments made by those funds may be provided on a
periodic basis to the limited partners of such limited partnership, provided
that under no circumstances will any proprietary information (which, for this
purpose, excludes such financial information) of the Company be disclosed to
such limited partners or shareholders. In the event of any termination of this
Agreement prior to the Closing Date, the provisions of this Section 8.3 shall
survive such termination and each Investor shall return to the Company all
confidential material previously furnished to such Investor or its officers,
directors, partners, employees, counsel, accountants and other representatives
in connection with this transaction. For purposes of this Section 8.3, "due
care" means at least the same level of care that such Investor would use to
protect the confidentiality of its own sensitive or proprietary information.
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8.4. Conduct of Business and Maintenance of Existence
The Company shall, and shall cause its Subsidiaries to, continue to
engage in business of the same general type as now conducted by it and/or
contemplated to be conducted by it, and preserve, renew and keep in full force
and effect its corporate existence and take all reasonable action to maintain
all rights, privileges and franchises necessary or desirable in the normal
conduct of its business. The Company shall, and shall cause its Subsidiaries to,
require all of its employees or consultants to enter into appropriate
confidentiality agreements to protect confidential information relating to the
business of the Company and its Subsidiaries, including trade secrets.
8.5. Compliance with Laws
The Company shall, and shall cause its Subsidiaries to, comply in
all material respects with all applicable laws, rules, regulations and orders
except where the failure to comply would not have a material adverse effect on
the business, properties, operations, prospects or financial condition of the
Company. Without limiting the generality of the foregoing, neither the Company
nor any Subsidiary of the Company (nor any officer, director, employee, agent of
the Company or any of its Subsidiaries) will, directly or indirectly, make or
authorize any payment, contribution or gift of money, property, or services, (a)
as a kickback or bribe to any Person or (b) to any political organization, or
the holder or any aspirant to any elective or appointive public office except
for personal political contributions not involving the direct or indirect use of
funds of the Company or any of its Subsidiaries.
8.6. Insurance
The Company will maintain insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks as
is usually carried by companies of similar size and credit standing engaged in
similar business and owning similar properties, provided that such insurance is
and remains available to the Company at commercially reasonable rates.
8.7. Keeping of Books
The Company will keep proper books of record and account, in which
full and correct entries shall be made of all financial transactions and the
assets and business of the Company in accordance with U.S. GAAP and Brazilian
GAAP.
8.8. Securities Registers
The ownership of Securities shall be evidenced by the Company's book
of registration of shares and all transfers shall be duly recorded on the
Company's book of transfer of shares.
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8.9. Notice of a Liquidity Event
Promptly and in any event within two (2) Business Days after the
occurrence of a Liquidity Event, the Company will give written notice thereof to
the holders of all outstanding Preferred Stock, which notice shall (A) refer
specifically to this Section 8.9, and (B) describe the Liquidity Event in
reasonable detail. Within thirty (30) days after the date of such notice, the
holders of a majority of the Preferred Stock then outstanding shall have the
right to require the Company to redeem all the outstanding Preferred Stock,
together with any accrued and unpaid dividends thereon. In the case that the
Company has insufficient funds legally available to redeem all the outstanding
Preferred Stock, the Company shall redeem the Preferred Stock pro rata.
For purposes of this Agreement: a "Liquidity Event" will be deemed
to have occurred at such time as the Company (A) winds up, liquidates or
dissolves its affairs or enters into any transaction of merger or consolidation
as a result of which the Investors, as a group, own less than fifty percent
(50%) of the outstanding Voting Stock of the surviving corporation, or conveys,
sells, leases or otherwise disposes of all or substantially all of its assets,
whether in a single transaction or a series of related transactions or (B)
issues any capital stock in a Qualified Initial Public Offering.
SECTION 9. AMENDMENT AND WAIVER
9.1. Requirements
This Agreement may be amended, and the observance of any term hereof
may be waived (either retroactively or prospectively), with (and only with) the
written consent of the Company and each Investor.
9.2. Solicitation of Preferred Stock Holders
The Company will provide each holder of Preferred Stock
(irrespective of the number of shares of Preferred Stock then owned by it) with
sufficient information, sufficiently far in advance of the date a decision is
required, to enable such holder to make an informed and considered decision with
respect to any proposed amendment, waiver or consent in respect of any of the
provisions of this Agreement, pursuant to the first proviso of Section 9.1. The
Company will deliver executed or true and correct copies of each amendment,
waiver or consent effected pursuant to the provisions of this Section 9 to each
holder of Preferred Stock promptly following the date on which it is executed
and delivered by, or receives the consent or approval of, the requisite number
of holders of Preferred Stock.
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<PAGE>
9.3. Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 9
that alters the rights or obligations of the holders of Preferred Stock applies
equally to all holders of Preferred Stock and is binding upon them and upon each
future holder of any shares of Preferred Stock and upon the Company without
regard to whether any such shares have been marked to indicate such amendment or
waiver. No such amendment or waiver will extend to or affect any obligation,
covenant, agreement not expressly amended or waived or impair any right
consequent thereon. No course of dealing between the Company and any holder of
Preferred Stock nor any delay in exercising any rights hereunder shall operate
as a waiver of any rights of any holder of such Preferred Stock. As used herein,
the term "this Agreement" and references thereto shall mean this Agreement as it
may from time to time be amended or supplemented.
SECTION 10. INTERPRETATION OF THIS AGREEMENT
10.1. Terms Defined
As used in this Agreement, the following terms have the respective
meanings set forth below or set forth in the Section hereof following such term:
Affiliate: means, with respect to any Person, any other Person directly or
indirectly controlling (including, but not limited to, all directors and
officers of such Person), controlled by or under direct or indirect common
control with, such Person (provided that The Opportunity Fund shall not be
deemed an Affiliate of Multiponto as long as its investments (i) are not in any
person, partnership, corporation or other entity that provides facilities-based
one-way or two-way paging or portable wireless messaging services (including
without limitation a service that provides substantially the same service as
VoiceNow(R) and other advanced paging services) in Brazil, or (ii) are limited
to 10% or less of any publicly traded entity). For these purposes, independent
of Brazilian law, a Person shall be deemed to control a corporation (i) where
the shares of the corporation are not publicly traded, if such Person holds,
directly or indirectly, fifty one percent (51%) or more of the Voting Stock of
such corporation, or has the right (by contract or otherwise) to elect a
majority or more of the board of directors of such corporation; and (ii) where
the shares of the corporation are publicly traded, if such Person holds,
directly or indirectly, twenty five percent (25%) or more of the Voting Stock of
such corporation, or has the right (by contract or otherwise) to elect twenty
five percent (25%) or more of the board of directors of such corporation. Each
general partner of a partnership shall be deemed to control such partnership.
Board of Directors: shall have the meaning set forth in Section 1.3.
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<PAGE>
Business Day: shall mean a day other than: (i) a Saturday or a Sunday, or
(ii) any other day on which commercial banks in the State of New York, U.S.A.
or in Sao Paulo or Rio de Janeiro, Brazil are required or authorized to close.
Capital Budget: shall mean an annual capital budget describing the intended
capital investment strategy of the Company and its Subsidiaries, which shall
have been approved by the Board of Directors.
Closing: shall have the meaning set forth in Section 1.2(c).
Closing Date: shall have the meaning set forth in Section 1.2(c).
Common Stock: shall have the meaning set forth in Section 1.1.
Employment Agreements: shall have the meaning set forth in Section 6.5.
Brazilian GAAP or U.S. GAAP: shall mean, respectively, Brazil or United States
generally accepted accounting principles, applied on a consistent basis.
Initial Preferred Stock: shall have the meaning set forth in Section 1.2(b).
Initial Common Stock: shall have the meaning set forth in Section 1.2(a).
License Agreements: shall have the meaning set forth in Section 6.4.
Lien: shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), preference, priority or
other security agreement of any kind or nature whatsoever (including, without
limitation, any conditional sale or other title retention agreement, any
financing or similar statement or notice filed under any recording or notice
statute, and any lease having substantially the same effect as any of the
foregoing).
Liquidity Event: shall have the meaning set forth in Section 8.9.
Material Adverse Change: shall mean a material adverse change in the business,
operations, affairs, financial condition, assets or properties of the Company
and its Subsidiaries taken as a whole or otherwise, including, without
limitation, the loss of, or the failure to obtain, licenses necessary for the
normal conduct of the business of the Company and its Subsidiaries.
Operating Budget: shall mean a five-year operating budget of the Company and its
Subsidiaries (the first year of which shall
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<PAGE>
include monthly operating budgets), which shall have been approved by the Board
of Directors.
Permitted Capital Expenditures: shall mean expenditures by the Company and its
Subsidiaries which should be capitalized in accordance with Brazilian GAAP and
which shall have been approved in the Operating Budget.
Person: shall mean any individual, partnership, joint venture, firm,
corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
Preferred Stock: shall have the meaning set forth in Section 1.1.
Qualified Initial Public Offering: shall mean an initial public offering of the
Common Stock pursuant to a registration statement declared effective by the CVM
or any other securities regulator pursuant to the Securities Laws of Brazil or
any other jurisdiction in which the aggregate net proceeds received by the
Company exceed $30 million.
Registration Rights Agreement: shall have the meaning set forth in Section
6.8.
Reais Equivalent: means the amount in Brazilian currency equivalent to U.S.
Dollars as determined by the exchange rate applicable to foreign capital
repatriation and dividend remittances quoted by Banco de Boston, at 11:00 a.m.
on the relevant day (or by Banco de Brasil S.A. in the absence of a quotation by
Banco de Boston).
Required Holders: shall mean, at any time, the holders of at least a majority of
the Preferred Stock at the time outstanding (exclusive of Preferred Stock then
owned by the Company or any of its Subsidiaries).
Securities: shall mean the Initial Common Stock, the Initial Preferred Stock,
the Subsequent Preferred Stock, the Subscription Bonds and/or the
Subscription Bonds Stock.
Stock: shall mean the Initial Common Stock, the Initial Preferred Stock, the
Subsequent Preferred Stock and the Subscription Bonds Stock.
Shareholders Agreement: shall have the meaning set forth in Section 6.6.
Subscription Bonds: shall have the meaning set forth in Section 2.
Subscription Bonds Stock: shall have the meaning set forth in Section 3.1(c).
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<PAGE>
Subsequent Closing Date: shall have the meaning set forth in Section 1.3(b).
Subsequent Preferred Stock: shall have the meaning set forth in Section 1.3(a).
Subsidiary: shall mean, as to any Person, any corporation, association or other
business entity in which such Person or one or more of its Subsidiaries or such
Person and one or more of its Subsidiaries owns sufficient equity or voting
interests to enable it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons performing
similar functions) of such entity, and any partnership or joint venture if more
than a fifty percent (50%) interest in the profits or capital thereof is owned
by such Person or one or more of its Subsidiaries or such Person and one or more
of its Subsidiaries (unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one or more of its
Subsidiaries). Unless the context otherwise clearly requires, any reference to a
"Subsidiary" is a reference to a Subsidiary of the Company.
Technical Services Agreement: shall have the meaning set forth in Section 6.7.
Voting Stock: shall mean, with respect to any Person, any shares of stock or
other equity interests of any class or classes of such Person whose holders are
entitled under ordinary circumstances (irrespective of whether at the time stock
or other equity interests of any other class or classes shall have or might have
voting power by reason of the happening of any contingency) to vote for the
election of a majority of the directors, managers, trustees or other governing
body of such Person.
10.2. Accounting Principles
Where the character or amount of any asset or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with U.S. GAAP at
the time in effect, to the extent applicable, except where such principles are
inconsistent with the requirements of this Agreement.
10.3. Directly or Indirectly
Where any provision in this Agreement refers to action to be taken
by any Person, or which such Person is prohibited from taking, such provision
shall be applicable whether such action is taken directly or indirectly by such
Person.
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<PAGE>
10.4. Governing Law: Submission to Jurisdiction
(a) This Agreement shall be governed by and construed in accordance
with the substantive laws of the State of New York applicable to contracts made
and to be performed entirely within such State, excluding choice-of-law
principles of the law of such State that would require the application of the
laws of a jurisdiction other than such State. Any legal action or proceeding
with respect to this Agreement may be brought in the courts of the State of New
York or of the United States for the Southern District of New York, and, by
execution and delivery of this Agreement, each party hereto irrevocably accepts
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. The Company and each non-United States
Investor hereby irrevocably designates, appoints and empowers CT Corporation
System, with offices on the date hereof at 1633 Broadway, New York, New York
10019 as its designee, appointee and agent to receive, accept and acknowledge
for and on its behalf, and in respect of its property, service of any and all
legal process, summons, notices and documents which may be served in any such
action or proceeding. If for any reason such designee, appointee and agent shall
cease to be available to act as such, the Company agrees to designate a new
designee, appointee and agent in New York City. Each party hereto irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, at the address of such party set forth in
Section 11.1 hereof, such service to become effective thirty (30) days after
such mailing.
(b) Each party hereto hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Agreement
brought in the courts referred to in clause (a) above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum.
10.5. Section Headings
The headings of the sections and subsections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part
thereof.
SECTION 11. MISCELLANEOUS
11.1. Notices
(a) All communications under this Agreement shall be in writing and
shall be delivered by hand, internationally recognized air courier or facsimile
transmission, charges prepaid:
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(1) if to Warburg, at 466 Lexington Avenue, New York, New York
10017, facsimile number (212) 878-9351 marked for attention of Douglas M. Karp
(with a copy to Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd
Street, New York, New York 10022-4669, facsimile number (212) 821-8111, Attn:
Steven J. Gartner), or at such other address as Warburg may have furnished the
Company in writing,
(2) if to PageNet, at 4965 Preston Park Blvd., Plano, Texas
75093, facsimile number (214) 985-6717, marked for attention of Barry A.
Fromberg (with a copy to Bingham, Dana & Gould LLP, 150 Federal Street, Boston,
Massachusetts 02110-1726, facsimile number (617) 951-8736, Attn: Roger D.
Feldman), or at such other address as PageNet may have furnished the Company in
writing; or
(3) if to IPC, at Rua Bandeira Paulista, 600-Conj. 64, Sao
Paulo, Brazil, 04532-001, facsimile number 011-55-11-822-7177, marked for the
attention of Donald Pearson (with a copy to Rogers & Wells, 200 Park Avenue, New
York, New York 10166-0153, facsimile number (212) 878-8375, Attn: Laurence E.
Cranch), or at such other address as it may have furnished in writing to the
Investors.
(4) if to Multiponto, at Avenida Presidente Wilson No. 231,
28(degrees) Andar (parte), Rio de Janeiro, Brazil, facsimile number
011-55-21-240-1667, marked for the attention of Daniel Dantas (with a copy to
Arthur Carvalho, facsimile number 011-55-21-220-3445), or at such other address
as it may have furnished in writing to the Investors.
(5) if to TVA, at Rua do Rocio 351, 9th Floor, Sao Paulo,
Brazil, 04552-904, facsimile number 011-55-11-822-9335, marked for the attention
of Luis Carlos Guizelini Balieiro (with a copy to Basch & Rameh, Rua Barao de
Capanema, No. 343, 13th Floor, Sao Paulo, Brazil, 01411-011, facsimile number
011-55-11-852-9447, Attn: Ken Basch and Carlos Rameh), or at such other address
as it may have furnished in writing to the Investors.
(6) if to the Company, at Avenida das Nacoes Unidas, 12,551
World Trade Center, 17th Floor, Suite 26, Sao Paulo, Brazil, facsimile number
011-55-11-521-1814, marked for the attention of the President (with a copy to
Xavier, Bernardes, Braganca, Av. Brasil 1980, Sao Paulo, Brazil, facsimile
number 011-55-11-282-5580, Attn: M. Regina Lynch), or at such other address as
it may have furnished in writing to the Investors; or
(b) Any notice so addressed shall be deemed to be given: if
delivered by hand, on the date of such delivery; if mailed by courier, on the
third Business Day following the date of such mailing; if mailed by registered
or certified airmail, on the sixth Business Day after the date of such mailing
and if sent be facsimile transmission, on the date of its receipt.
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<PAGE>
11.2. Expenses and Taxes
(a) The Company agrees to pay the reasonable attorneys' fees and
disbursements incurred in connection with the negotiation, preparation,
execution and delivery of this Agreement and the other instruments and
agreements entered into pursuant to this Agreement, and any amendments to the
same, said payment to be made no later than thirty (30) days after a bill for
such fees and/or disbursements has been sent to the Company.
(b) The Company will pay, and save and hold the Investors harmless
from any and all liabilities (including interest and penalties) with respect to,
or resulting from any delay or failure in paying, stamp and other taxes (other
than income taxes), if any, which may be payable or determined to be payable on
the execution and delivery of this Agreement or the acquisition of the Stock or
the shares of Common Stock issuable upon conversion of the Stock.
11.3. Reproduction of Documents
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications which may hereafter
be executed, (b) documents received by the Investors on the Closing Date (except
for certificates or instruments evidencing the Securities themselves), and (c)
financial statements, certificates and other information previously or hereafter
furnished to the Investors, may be reproduced by the Investors by any
photographic, photostatic, microfilm, micro-card, miniature photographic or
other similar process and any Investor may destroy any original document so
reproduced. All parties hereto agree and stipulate that any such reproduction,
to the extent permissible by the applicable procedural law, shall be admissible
in evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by an Investor in the regular course of business) and that
any enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
11.4. Termination and Survival
All representations and warranties contained in this Agreement shall
survive the execution and delivery of this Agreement, regardless of any
investigation made at any time by or on behalf of the Company or any Investor.
All statements contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant to this Agreement shall be deemed
representations and warranties of the Company under this Agreement.
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11.5. Successors and Assigns
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties.
11.6. Entire Agreement
This Agreement and the Exhibits hereto embody the entire agreement
and understanding with respect to the subject matter hereof among the parties
and supersede all prior agreements and understandings relating thereto.
11.7. Limitation on Enforcement of Remedies
The Company hereby agrees that it will not assert against the
limited partners or stockholders of any of the Investors any claim it may have
under this Agreement by reason of any failure or alleged failure by such
Investor to meet its obligations hereunder.
11.8. Counterparts
This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall be considered
one and the same agreement.
IN WITNESS WHEREOF the parties herein have executed this Agreement as of the
date first above written.
PAGING NETWORK DO BRASIL S.A.
By: /s/ Thomas C. Trynin
-----------------------------
Name: Thomas C. Trynin
Title: President
PAGING NETWORK INTERNATIONAL N.V.
By: /s/ Jose Roberto Opice
-----------------------------
Name: Jose Roberto Opice
Title: Attorney-in-fact
WARBURG, PINCUS VENTURES, L.P.
By: WARBURG, PINCUS & CO.,
its General Partner
By: /s/ Douglas M. Karp
-----------------------------
Name: Douglas M. Karp
Title: Partner
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<PAGE>
IVP PAGING (CAYMAN) L.P.
By IVP International Venture Partners,
Inc., its General Partner
By: /s/Donald Pearson
-----------------------------
Name: Donald Pearson
Title: Managing Partner
MULTIPONTO TELECOMMUNICACOES LTDA.
By: /s/ Eduardo Penido Monteiro
-----------------------------
Name: Eduardo Penido Monteiro
Title: Attorney-in-fact
TVA SISTEMA DE TELEVISAO S.A.
By: /s/ Admilson Ferreria
/s/ Marcelo Vaz Bonini
-----------------------------
Name: Admilson Ferreria
Name: Marcelo Vaz Bonini
Title: Attorneys-in-fact
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SCHEDULE 1.2(a)
Initial Common Stock
TOTAL
NUMBER PRICE PER PURCHASE
OF SHARES SHARE PRICE
Warburg, Pincus Ventures, L.P. 19,996 $1.00 $19,996.00
IVP Paging (Cayman) L.P. 7,998 $1.00 $7,998.00
Multiponto Telecommunicacoes Ltda. 2,000 $1.00 $2,000.00
Paging Network International N.V. 1 $1.00 $1.00
TVA Sistema de Televisao S.A. 1 $1.00 $1.00
Warburg, Pincus Ventures, L.P. 4 $4.00
board designees and alternates
IVP Paging (Cayman) L.P. board 2 $2.00
designee and alternate
Paging Network International N.V. 2 $2.00
board designee and alternate
<PAGE>
SCHEDULE 1.2(b)(1)
Initial Preferred Stock
TOTAL
NUMBER PRICE PER PURCHASE
INVESTOR OF SHARES SHARE PRICE
Warburg, Pincus Ventures, L.P. 14,200 $1,000 $14,200,000
IVP Paging (Cayman) L.P. 5,680 $1,000 $5,680,000
Multiponto Telecommunicacoes Ltda. 1,420 $1,000 $1,420,000
<PAGE>
SCHEDULE 1.2(b)(2)
Investor Expenditures
Name Amount
- --------------------------------------------------------------------------------
Warburg, Pincus Ventures, L.P. $1,000,000
IVP Paging (Cayman) L.P. $775,000
Paging Network International N.V. $750,000
Muliponto Telecommunicacoes Ltda. $0
TVA Sistema de Televisao S.A. $0
<PAGE>
SCHEDULE 1.3(a)
Subsequent Preferred Stock Percentages
INVESTOR PERCENTAGE
Warburg, Pincus Ventures, L.P. 66.667
IVP Paging (Cayman) L.P. 26.667
Multiponto Telecommunicacoes Ltda. 6.667
<PAGE>
SCHEDULE 2.1
Subscription Bonds
INVESTOR NUMBER OF EXERCISE TOTAL
SHARES OF PRICE PER EXERCISE
STOCK SHARE PRICE
Paging Network International N.V. 7,997 $1.00 $7,997
Multiponto Telecommunicacoes Ltda. 1,000 $1.00 $1,000
TVA Sistema de Televisao S.A. 999 $1.00 $999
<PAGE>
SCHEDULE 3.2
Subsidiaries
NONE.
<PAGE>
SCHEDULE 6.5
Key Employees
Thomas Trynin
Marco Fregenal
<PAGE>
PAGING NETWORK DO BRASIL S.A.
REGISTRATION RIGHTS AGREEMENT
Agreement, dated as of the 9th day of December, 1996, by and among (i)
Paging Network do Brasil S.A., a corporation in organization under the laws of
Brazil (the "Company"), (ii) Warburg, Pincus Ventures, L.P., a Delaware limited
partnership ("Warburg"), (iii) Paging Network International N.V., a corporation
organized and existing under the laws of the Netherlands ("PageNet"), (iv) IVP
Paging (Cayman), L.P., an exempt limited partnership organized and existing
under the laws of the Cayman Islands ("IPC"), (v) Multiponto Telecomunicacoes
Ltda., a limited liability company organized and existing under the laws of
Brazil ("Multiponto"), and (vi) TVA Sistema de Televisao S.A., a limited
liability company organized and existing under the laws of Brazil ("TVA")
(Warburg, PageNet, PSB, Multiponto and TVA are referred to herein each as an
"Investor" and collectively as the "Investors").
R E C I T A L S
WHEREAS, the parties hereto have entered into a Securities Subscription
Agreement (the "Subscription Agreement"), of even date herewith, pursuant to
which the Investors have agreed to subscribe for certain securities of the
Company, all as more specifically set forth in the Subscription Agreement; and
WHEREAS, it is a condition of the obligations of the Investors under the
Subscription Agreement that the Company execute and deliver a copy of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. REGISTRATION RIGHTS
1.1. Definitions
As used in this Agreement, the following terms shall have the following
meaning:
"CVM" shall mean the Comissao de Valores Mobiliarios of Brazil.
"Exchange Act" shall mean the U.S. Securities Exchange Act of 1934, as
amended;
"Holder" shall mean any holder of Registrable Securities;
<PAGE>
"Initiating Holder" shall mean any Holder or Holders who in the aggregate
are Holders of more than 50% of the then outstanding Registrable Securities;
"Other Holders" shall have the meaning set forth in Section 1.2;
"Person" shall mean an individual, partnership, joint-stock company,
corporation, trust or unincorporated organization, and a government or agency or
political subdivision thereof;
"register," "registered" and "registration" shall mean a registration
effected by preparing and filing a registration statement in compliance with the
Securities Law (and any post-effective amendments filed or required to be filed)
and the declaration or ordering of effectiveness of such registration statement;
"Registrable Securities" shall mean (i) shares of Common Stock of the
Company, (ii) shares of Preferred Stock of the Company and (iii) any capital
stock of the Company issued as a dividend or other distribution with respect to,
or in exchange for or in replacement of, the shares of Common Stock or Preferred
Stock referred to in clauses (i) and (ii);
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Sections 1.2 and 1.3 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, fees and expenses of one counsel for all the Holders in
an amount not to exceed $15,000, blue sky fees and expenses and the expense of
any special audits incident to or required by any such registration (but
excluding the compensation of regular employees of the Company, which shall be
paid in any event by the Company);
"SEC" shall mean the United States Securities and Exchange Commission;
"Securities Act" shall mean the U.S. Securities Act of 1933, as amended;
"Securities Laws" shall mean the securities laws of Brazil, the securities
laws of the United States or any applicable blue sky or state securities laws;
and
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for each of the Holders other than fees and expenses of
one counsel for all the Holders in an amount not to exceed $15,000.
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1.2. Requested Registration
(a) Request for Registration. (i) If the Company shall receive from an
Initiating Holder a written request that the Company effect any registration
with respect to all or a part of the Registrable Securities, the Company will:
(A) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders of Registrable
Securities; and
(B) as soon as practicable, use its diligent best efforts to effect
such registration in the jurisdictions of Brazil or the United States or
any other jurisdiction which may be accessed by the Company (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable Securities Laws and
appropriate compliance with applicable regulations issued under the
Securities Act) as may be so requested and as would permit or facilitate
the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all or such
portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within ten (10) business days after written notice from the Company is
given under Section 1.2(a)(A); provided that the Company shall not be
obligated to effect, or take any action to effect, any such registration
pursuant to this Section 1.2(a):
(x) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Laws;
(y) After the Company has effected two (2) such registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective and the sales of such Registrable Securities shall have
closed; or
(z) If the Registrable Securities requested by all Holders to be
registered pursuant to such request do not have an anticipated aggregate
public offering price (before any underwriting discounts and commissions)
of not less than $15,000,000 (or $30,000,000 if such requested
registration is the initial public offering).
The registration statement filed pursuant to the request of an
Initiating Holder may, subject to the provisions of Section 1.2(b) below,
include other securities of the Company
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which are held by Persons who, by virtue of agreements with the Company, are
entitled to include their securities in any such registration ("Other Holders"),
subject to the terms of this Agreement.
The registration rights set forth in this Section 1 shall be assignable,
in whole or in part, to any transferee of Registrable Securities (who shall be
bound by all obligations of this Section 1).
(b) Underwriting. If an Initiating Holder intends to distribute the
Registrable Securities covered by its request by means of an underwriting, it
shall so advise the Company as a part of its request made pursuant to Section
1.2.
If Other Holders request such inclusion, the Holders shall offer to
include the Registrable Securities of such Other Holders in the underwriting and
may condition such offer on their acceptance of the further applicable
provisions of this Section 1. The Holders whose Registrable Securities are to be
included in such registration and the Company shall (together with Other Holders
proposing to distribute their Registrable Securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected for such underwriting by the
Initiating Holder and reasonably acceptable to the Company. Notwithstanding any
other provision of this Section 1.2, if the representative advises the Holders
in writing that marketing factors require a limitation on the number of shares
of Registrable Securities to be underwritten, the securities of the Company held
by Other Holders shall be excluded from such registration to the extent so
required by such limitation. If, after the exclusion of such shares of
Registrable Securities, further reductions are still required, the number of
shares of Registrable Securities included in the registration by each Holder
shall be reduced on a pro rata basis (based on the number of shares of
Registrable Securities held by such Holder), by such minimum number of shares of
Registrable Securities as is necessary to comply with such request. No
Registrable Securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration. In
addition to the foregoing limitation, if the registration proposed to be
underwritten by the Company relates to Common Stock, but not Preferred Stock (or
vice versa), the registration can, at the election of the Company, be limited to
the type of Registrable Securities proposed to be registered. If any Other
Holder who has requested inclusion in such registration as provided above
disapproves of the terms of the underwriting, such person may elect to withdraw
therefrom by written notice to the Company, the underwriter and the Initiating
Holder. The Registrable Securities so withdrawn shall also be withdrawn from
registration. If the underwriter has not limited the number of Registrable
Securities to be underwritten, the Company may include its securities for its
own account in such registration
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if the representative so agrees and if the number of Registrable Securities and
other securities which would otherwise have been included in such registration
and underwriting will not thereby be limited.
1.3. Company Registration.
(a) Inclusion in Registration. If the Company shall determine to register
any of its securities either for its own account or for the account of a
security holder or holders exercising their respective demand registration
rights, other than a registration relating solely to employee benefit plans, or
a registration relating solely to a SEC Rule 145 transaction, or a registration
on any registration form which does not permit secondary sales or does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable Securities, the
Company will:
(i) promptly give to each of the Holders of Registrable Securities a
written notice thereof (which shall include a list of the jurisdictions in
which the Company intends to attempt to qualify such securities under the
applicable Securities Laws); and
(ii) include in such registration (and any related qualification
under the Securities Laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written
request or requests, made by the Holders within fifteen (15) days after
receipt of the written notice from the Company described in clause (A)
above, except as set forth in Section 1.3(b) below. Such written request
may specify all or a part of the Holders' Registrable Securities.
(b) Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise each of the Holders as a part of the written notice given pursuant to
Section 1.3(a)(i). In such event, the right of each of the Holders to
registration pursuant to this Section 1.3 shall be conditioned upon such
Holders' participation in such underwriting and the inclusion of such Holders'
Registrable Securities in the underwriting to the extent provided herein. The
Holders whose Registrable Securities are to be included in such registration
shall (together with the Company and the Other Holders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the representative of the underwriter or underwriters
selected for underwriting by the Company. Notwithstanding any other provision of
this Section 1.3, if the representative determines that marketing factors
require a limitation on the number of shares of Registrable Securities to be
underwritten, and (x) if such registration is the initial public offering, the
representative may (subject to the allocation priority set forth below) exclude
from such registration and underwriting some or all of the shares of Registrable
Securities which would otherwise be underwritten pursuant hereto, and (y) if
such registration is other than the initial public offering, the representative
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may (subject to the allocation priority set forth below) limit the number of
Registrable Securities to be included in the registration and underwriting to
not less than twenty-five percent (25%) of the Registrable Securities included
therein (based on aggregate market values). The Company shall so advise all
Holders of Registrable Securities requesting registration, and the number of
shares of Registrable Securities that are entitled to be included in the
registration and underwriting shall be allocated in the following manner: The
securities of the Company held by officers, directors and Other Holders of the
Company (other than Registrable Securities and other than securities held by
holders who by contractual right demanded such registration ("Demanding
Holders")) shall be excluded from such registration and underwriting to the
extent required by such limitation, and, if a limitation on the number of shares
is still required, the securities that may be included in the registration and
underwriting by each of the Holders and Demanding Holders shall be reduced, on a
pro rata basis (based on the number of shares held by such Holder), by such
minimum number of shares as is necessary to comply with such limitation. In
addition to the foregoing limitation, if the registration proposed to be
underwritten by the Company relates to Common Stock, but not Preferred Stock (or
vice versa), the registration can, at the election of the Company, be limited to
the type of securities proposed to be registered. If any of the Holders or any
officer, director or Other Holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
1.4. Form S-3
Following an initial public offering in the United States, the Company
shall use its best efforts to qualify for registration on Form S-3 for secondary
sales. After the Company has qualified for the use of Form S-3 (or, if
available, Form F-3), Holders of Registrable Securities shall have the right to
request up to 4 registrations on Form S-3 (such requests shall be in writing and
shall state the Registrable Securities to be disposed of and the intended method
of disposition of such Registrable Securities by such Holders), subject only to
the following:
(a) The Company shall not be required to effect a registration pursuant to
this Section 1.4 unless the Holder or Holders of Registrable Securities
requesting registration propose to dispose of Registrable Securities having an
aggregate price to
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the public (before deduction of underwriting discounts and expenses of sale) of
more than $5,000,000.
(b) The Company shall not be required to effect a registration
pursuant to this Section 1.4 within one hundred eighty (180) days of the
effective date of the most recent registration pursuant to this Section 1
in which securities held by the requesting Holder could have been included
for sale or distribution.
(c) The Company shall not be obligated to effect any registration
pursuant to this Section 1.4 in any particular jurisdiction in which the
Company would be required to execute a general consent to service of
process in effecting such registration, qualification or compliance,
unless the Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act or applicable rules or
regulations thereunder.
The Company shall give written notice to all Holders of such Registrable
Securities of the receipt of a request for registration pursuant to this Section
1.4 and shall provide a reasonable opportunity for other Holders of such
Registrable Securities to participate in the registration, provided that if the
registration is for an underwritten offering, the terms of Section 1.2(b) shall
apply to all participants in such offering. Subject to the foregoing, the
Company will use its best efforts to effect promptly the registration of all
such Registrable Securities on Form S-3 to the extent requested by the Holder or
Holders thereof for purposes of disposition.
1.5. Expenses of Registration
All Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to this Section 1 shall be borne by the
Company, and all Selling Expenses shall be borne by the Holders of the
securities so registered pro rata on the basis of the number of their shares so
registered; provided, however, that the Company shall not be required to pay any
Registration Expenses if, as a result of the withdrawal of a request for
registration by any of the Holders, as applicable, the registration statement
does not become effective, in which case each of the Holders and Other Holders
requesting registration shall bear such Registration Expenses pro rata on the
basis of the number of their shares so included in the registration request, and
provided further that such registration shall not be counted as a registration
pursuant to Section 1.2(a) or 1.4.
1.6. Registration Procedures
In the case of each registration effected by the Company pursuant to this
Section 1, the Company will keep the Holders, as applicable, advised in writing
as to the initiation
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of each registration and as to the completion thereof. At its expense, the
Company will:
(a) keep such registration effective for a period of one hundred twenty
(120) days or until the Holders, as applicable, have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such 120-day period shall be extended for a
period of time equal to the period during which the Holders, as applicable,
refrain from selling any securities in accordance with provisions in Section
1.10 hereof; and (ii) in the case of any registration of Registrable Securities
on Form S-3 which are intended to be offered on a continuous or delayed basis,
such 120-day period shall be extended until all such Registrable Securities are
sold, provided that Rule 415, or any successor rule under the Securities Act,
permits an offering on a continuous or delayed basis, and provided further that
applicable rules under the Securities Act governing the obligation to file a
post-effective amendment permit, in lieu of filing a post-effective amendment
which (y) includes any prospectus required by Section 10(a) of the Securities
Act or (z) reflects facts or events representing a material or fundamental
change in the information set forth in the registration statement, the
incorporation by reference of information required to be included in (y) and (z)
above to be contained in periodic reports filed pursuant to Section 12 or 15(d)
of the Exchange Act in the registration statement; and
(b) furnish such number of prospectuses and other documents incident
thereto as each of the Holders, as applicable, from time to time may reasonably
request.
1.7. Indemnification
(a) The Company will indemnify each of the Holders, as applicable, each of
its officers, directors and partners, and each person controlling each of the
Holders, with respect to each registration which has been effected pursuant to
this Section 1, and each underwriter, if any, and each person who controls any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any 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 any violation by the Company of the Securities Laws
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each of the Holders, each of its officers, directors and
partners, and each person controlling each of the Holders, each such underwriter
and each person who
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controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission based upon written
information furnished to the Company by the Holders or underwriter and stated to
be specifically for use therein.
(b) Each of the Holders will, if Registrable Securities held by it are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter, each Other Holder and each of their officers, directors, and
partners, and each person controlling such Other Holder against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document made by such Holder, or any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements by such Holder therein not misleading, and will reimburse the
Company and such Other Holders, directors, officers, partners, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder and stated to be specifically for use
therein; provided, however, that the obligations of each of the Holders
hereunder shall be limited to an amount equal to the net proceeds to such Holder
of securities sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 1.7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have
reasonably concluded that there may
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be a conflict of interest between the Indemnifying Party and the Indemnified
Party in such action, in which case the fees and expenses of counsel shall be at
the expense of the Indemnifying Party), and provided further that the failure of
any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1.7 unless the
Indemnifying Party is materially prejudiced thereby. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section 1.7 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue (or alleged
untrue) statement of a material fact or the omission (or alleged omission) to
state a material fact relates to information supplied by the Indemnifying Party
or by the Indemnified Party and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with any underwritten public offering contemplated by this
Agreement are in conflict with the foregoing provisions, the provisions in such
underwriting agreement shall be controlling.
(f) The foregoing indemnity agreement of the Company and the Holders is
subject to the condition that, insofar as they relate to any loss, claim,
liability or damage made in a preliminary prospectus but eliminated or remedied
in the amended prospectus on file with the SEC at the time the registration
statement in question becomes effective or the amended prospectus
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filed with the SEC pursuant to SEC Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any underwriter if a copy
of the Final Prospectus was furnished to the underwriter and was not furnished
to the person asserting the loss, liability, claim or damage at or prior to the
time such action is required by the Securities Act.
1.8. Information by the Holders
Each of the Holders holding securities included in any registration shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification or compliance referred to in this Section 1.
1.9. Rule 144 Reporting
With a view to making available the benefits of certain rules and
regulations of the SEC which may permit the sale of restricted securities to the
public without registration, the Company agrees to:
(a) make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act ("Rule 144"), at all
times from and after ninety (90) days following the effective date of the first
registration statement under the Securities Act filed by the Company for an
offering of its securities to the general public;
(b) use its best efforts to file with the SEC in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) so long as the Holder owns any Registrable Securities, furnish to the
Holder upon request, a written statement by the Company as to its compliance
with the reporting requirements of Rule 144 (at any time from and after ninety
(90) days following the effective date of the first registration statement filed
by the Company for an offering of its securities to the general public), and of
the Securities Act and the Exchange Act (at any time after it has become subject
to such reporting requirements), a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed as the
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing the Holder to sell any such securities without registration.
1.10. "Market Stand-off" Agreement
Each of the Holders agrees, if requested by the Company and an underwriter
of Registrable Securities (or other securities) of the Company, not to sell or
otherwise transfer or
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dispose of any Registrable Securities (or other securities) of the Company held
by such Holder during the 180-day period following the effective date of a
registration statement of the Company, provided that:
(a) such agreement only applies to the initial public offering; and
(b) all officers and directors of the Company enter into similar
agreements.
If requested by the underwriters, the Holders shall execute a separate
agreement to the foregoing effect. The Company may impose stop-transfer
instructions with respect to the shares (or securities) subject to the foregoing
restriction until the end of said 180-day period. The provisions of this Section
1.10 shall be binding upon any transferee who acquires Registrable Securities,
whether or not such transferee is entitled to the registration rights provided
hereunder.
1.11. Termination.
The registration rights set forth in this Section 1 shall not be available
to any Holder if, in the opinion of counsel to the Company, all of the
Registrable Securities then owned by such Holder could be sold in any 90-day
period pursuant to Rule 144 (without giving effect to the provisions of Rule
144(k)).
SECTION 2. MISCELLANEOUS
2.1. Notices
(a) All communications under this Agreement shall be in writing and shall
be delivered by hand, internationally recognized air courier or facsimile
transmission, charges prepaid:
(i) if to Warburg, at 466 Lexington Avenue, New York, New York 10017,
facsimile number (212) 878-9351, marked for attention Douglas M. Karp (with a
copy to Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New
York, New York 10022-4669, facsimile number (212) 821-8111 Attn: Steven J.
Gartner), or at such other address as Warburg may have furnished in writing to
the Company,
(ii) if to PageNet, at 4965 Preston Park Boulevard, Plano, Texas 75093,
facsimile number (214) 985-6717, marked for attention of Barry A. Fromberg (with
a copy to Bingham, Dana & Gould, 150 Federal Street, Boston, Massachusetts
02110-1726, facsimile number (617) 951-8736, Attn: Roger D. Feldman), or at such
other address as PageNet may have furnished in writing to the Company,
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(iii) if to IPC, at Rua Bandeira Paulista, 600 - Conj. 64 Sao Paulo,
Brazil, 04532-001, facsimile number 011-55-11-822-7177, marked for attention of
Donald D. Pearson (with a copy to Rogers & Wells, 200 Park Avenue, New York, New
York 10166-0153, facsimile number (212) 878-8375, Attn: Laurence E. Cranch), or
at such other address as IPC may have furnished in writing to the Company and
the other Stockholders,
(iv) if to Multiponto, at Avenida Presidente Wilson No. 231, 28(degrees)
Andar (parte), Rio de Janeiro, Brazil, facsimile number 011-55-21-240-1667,
marked for the attention of Daniel Dantas (with a copy to Arthur Carvalho,
facsimile number 011-55-21-220-34459575), or at such other address as Multiponto
may have furnished the Company in writing,
(v) if to TVA, at Rua do Rocio 351, 9th Floor, Sao Paulo, Brazil,
04552-904, facsimile number 011-55-11-822-9335, marked for attention of Luis
Carlos Guizelini Balieiro (with a copy to Basch & Rameh, Rua Barao de Capanema,
No. 343, 13th Floor, Sao Paulo, Brazil, 01411-011, facsimile number
011-55-11-852-9447, Attn: Ken Basch and Carlos Rameh, or at such other address
as it may have furnished the Company in writing,
(vi) if to the Company, Avenida das Nacoes Unidas, 12,551 World Trade
Center, 17th Floor, Suite 26, Sao Paulo, Brazil, facsimile number
011-55-11-521-1814, marked for the attention of the President, (with a copy to
Xavier, Bernardes, Braganca, Av. Brasil 1980, Sao Paulo, Brazil, facsimile
number 011-55-11-282-5580, Attn: M. Regina Lynch), or at such other address as
it may have furnished in writing to the Investors.
(b) Any notice so addressed shall be deemed to be given: if delivered by
hand, on the date of such delivery; if mailed by courier, on the first business
day following the date of such mailing; and if mailed by registered or certified
mail, on the third business day after the date of such mailing.
2.2. Successors and Assigns
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties.
2.3. Entire Agreement; Amendment and Waiver
This Agreement constitutes the entire understandings of the parties hereto
and supersede all prior agreements or understandings with respect to the subject
matter hereof among such parties. This Agreement may be amended, and the
observance of any term of this Agreement may be waived, with (and only with) the
written consent of each of the parties hereto.
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2.4. Governing Law; Submission to Jurisdiction
(a) This Agreement shall be governed by and construed in accordance with
the substantive laws of the State of New York applicable to contracts made and
to be performed entirely within such State, excluding choice-of-law principles
of the law of such State that would require the application of the laws of a
jurisdiction other than such State. Any legal action or proceeding with respect
to this Agreement may be brought in the courts of the State of New York or of
the United States for the Southern District of New York, and, by execution and
delivery of this Agreement, each party hereto irrevocably accepts for itself and
in respect of its property, generally and unconditionally, the jurisdiction of
the aforesaid courts. The Company hereby irrevocably designates, appoints and
empowers CT Corporation System, with offices on the date hereof at 1633
Broadway, New York, New York 10019, as its designee, appointee and agent to
receive, accept and acknowledge for and on its behalf, and in respect of its
property, service of any and all legal process, summons, notices and documents
which may be served in any such action or proceeding. If for any reason such
designee, appointee and agent shall cease to be available to act as such, the
Company agrees to designate a new designee, appointee and agent in New York
City. Each party hereto irrevocably consents to the service of process out of
any of the aforementioned courts in any such action or proceeding by the mailing
of copies thereof by registered or certified mail, postage prepaid, at the
address of such party set forth in Section 2.1(a) hereof, such service to become
effective thirty (30) days after such mailing.
(b) Each party hereto hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Agreement brought in the
courts referred to in clause (a) above and hereby further irrevocably waives and
agrees not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an inconvenient forum.
2.5. Paragraph and Section Headings
The headings of the sections and subsections of this Agreement are
inserted for convenience only and shall not be deemed to constitute a part
thereof.
2.6. Counterparts
This Agreement may be executed in one or more counterparts each of which
shall be deemed an original and all of which together shall be considered one
and the same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement as of the date first above written.
PAGING NETWORK DO BRASIL, S.A.
By: /s/ Thomas C. Trynin
-----------------------------------
Name: Thomas C. Trynin
Title: President
WARBURG, PINCUS VENTURES, L.P.
By: WARBURG, PINCUS & CO.,
General Partner
By: /s/ Douglas M. Karp
-----------------------
Name: Douglas M. Karp
Title: Partner
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PAGING INTERNATIONAL NETWORK, N.V.
By: /s/ Jose Roberto Opice
-----------------------------
Name: Jose Roberto Opice
Title: Attorney-in-fact
IVP PAGING (CAYMAN), L.P.
By: IVP - International Venture Partners, Inc.,
its General Partner
By: /s/ Donald D. Pearson
-----------------------------
Name: Donald D. Pearson
Title: Managing Director
MULTIPONTO TELECOMUNICACOES LTDA.
By: /s/ Eduardo Penido Monteiro
-----------------------------
Name: Eduardo Penido Monteiro
Title: Attorney-in-fact
TVA SISTEMA DE TELEVISAO S.A.
By: /s/ Admilson Ferreria
/s/ Marcelo Vaz Bonini
-----------------------------
Name: Admilson Ferreria
Name: Marcelo Vaz Bonini
Title: Attorneys-in-fact
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TECHNICAL SERVICES AGREEMENT
This Agreement, made and entered into this 11th day of December 1996, by
and between PAGING NETWORK, INC., a Delaware corporation ("PageNet"), and PAGING
NETWORK DO BRASIL S.A., a Brazilian corporation (together with its wholly owned
subsidiaries, "PNB").
W I T N E S S E T H
- - - - - - - - - -
Whereas, PNB desires to develop, maintain and improve a system for
operating wireless voice (VoiceNow-Registered Trademark-) and data paging,
messaging and similar services (the "Telecommunications Services") throughout
Brazil (the "Territory") with PageNet's assistance;
Whereas, PNB desires to avail itself of the considerable expertise and
skill that PageNet has developed as a leading operator of Telecommunications
Services throughout the United States of America in order to assist PNB in the
operation of Telecommunications Services in the Territory; and
Whereas, in purchasing equipment to operate Telecommunications Services in
the Territory, PNB desires to partake in the benefits of the enhanced purchasing
power PageNet has acquired through its volume purchases of such equipment.
Now, therefore, in consideration of the mutual promises and covenants
contained herein, and for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
Section 1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
1.1. "Affiliate" of a party shall mean an entity that controls, is
controlled by or is under common control with such party.
1.2. "Agreement" shall mean this Technical Services Agreement, and the
exhibit(s) attached hereto.
1.3. "Brazilian Regulations" shall have the meaning set forth in Section 7.
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1.4. "Brazilian Regulators" shall have the meaning set forth in Section 7.
1.5. "Charges" shall have the meaning set forth in Section 6.
1.6. "Confidential Information" shall mean any trade secret or any
information of a confidential and/or proprietary nature as to which PNB or
PageNet, as the Disclosing Party, has developed or acquired, or during the Term
of this Agreement develops or acquires including, without limitation, trade
"know-how," secrets, customer lists, pricing policies, operational methods,
marketing plans or strategies, product development techniques or plans, relating
to the conduct of business by either, which, prior to the date hereof, or during
the term of this Agreement, was or is disclosed to the other party, as the
Receiving Party, exclusive of data or information: (i) which has been published,
is in the public domain, or otherwise becomes a matter of public knowledge by
any means other than the Receiving Party's default in the observance or
performance of any term or provision contained in this Agreement on its part to
be observed or performed, or (ii) which was known to the Receiving Party at the
time of such disclosure, as evidenced by the Receiving Party's written business
records predating such disclosure and maintained in the ordinary course of
business, or (iii) which is, at any time, disclosed to the Receiving Party by
any person or entity not a party hereto who has the right to disclose the same.
1.7. "Disclosing Party" shall have the meaning set forth in Section 12.
1.8. "End-user" shall mean users and subscribers of the Telecommunications
Services.
1.9. "Equipment" shall have the meaning set forth in Section 4.1.
1.10 "License" shall have the meaning set forth in Section 3.1(a).
1.11 "Marks" shall have the meaning set forth in Section 3.1(a).
1.12."PageNet" shall have the meaning set forth in the preamble to this
Agreement.
1.13 "PageNet Intellectual Property" shall have the meaning set forth in
Section 3.1(a).
1.14."PageNet Services" shall have the meaning set forth in Section 2.1.
1.15."PNB" shall have the meaning set forth in the preamble to this
Agreement.
1.16."Receiving Party" shall have the meaning set forth in Section 12.
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1.17 "Sublicense" shall have the meaning set forth in Section 3.1(e).
1.18."Telecommunications Services" shall have the meaning set forth in the
first Whereas clause of this Agreement.
1.19."Term" shall have the meaning set forth in Section 9.
1.20."Territory" shall have the meaning set forth in the first Whereas
clause of this Agreement.
Section 2. PageNet's Services.
2.1. PageNet Services. PageNet shall provide the following services (the
"PageNet Services") to PNB: (a) assist with the conversion, where necessary, of
PNB's current facilities and equipment and with the construction, where
necessary, of additional facilities and sites for the provision of
Telecommunications Services by PNB in the Territory, and (b) provide the
services listed on Exhibit A hereto from time to time upon the request of PNB.
PNB shall request PageNet Services either in writing or orally if confirmed in
writing within 24 hours. All PageNet Services will be supplied to PNB at the
earliest practicable time, with the understanding that although PageNet will
consider the provision of such services to PNB to be of the same importance as
the provision of such services by PageNet to its own operations, PageNet has
limited personnel resources that will have to be allocated by PageNet. PageNet
agrees to complete the requested PageNet Services as promptly as is reasonably
practicable in a professional manner, conforming to PageNet's standards. PageNet
shall have the sole and exclusive right to determine who shall perform the
PageNet Services (whether they be employees, subcontractors or others) and
PageNet shall have sole and complete authority for the direction of, and shall
remain responsible for, the PageNet Services to be performed.
2.2. Costs and Expenses. The provision of PageNet Services hereunder shall
be without charge by PageNet, except that PageNet shall invoice PNB, and PNB
shall reimburse PageNet, for any out-of-pocket costs and expenses incurred by
PageNet in connection with the provision of PageNet Services, including, but not
limited to: (i) expenses of PageNet in connection with providing the employees
listed on Exhibit A hereto (such expenses to include those paid pursuant to its
expatriate policy and those, such as stock options (valued at the time of grant
according to the Black-Scholes Formula), benefits and contributions to its
401(k) plan, paid by agreement with such employees), and (ii) expenses relating
to PageNet personnel travel to and from, and accommodations and transportation
within, Brazil. PageNet may request in writing to PNB that certain expenses in
connection with PageNet Services be paid directly by PNB to others.
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2.3. Invoicing. PageNet shall submit to PNB an invoice for monthly payments
due under Section 2.2 on before the tenth (10th) business day after the close of
such month. PNB shall pay the full amount set forth in such invoice, without
offset, on or before the thirtieth (30th) day after the receipt of the invoice
and in accordance with Section 6.
Section 3. License of PageNet Intellectual Property.
3.1. Grant of License.
(a) PageNet hereby grants to PNB, and PNB hereby accepts, during the term
of this Agreement and thereafter to the extent and as provided in Section 3.5
hereof, an exclusive, royalty-free, nontransferable (except as otherwise
provided in Section 3.4 hereof) license (the "License") to use and otherwise
exploit in the Territory the trade names, trademarks and service marks owned by
PageNet and set forth on Exhibit B hereto (as said Exhibit B may be amended from
time to time) (the "Marks") and any trade secrets, patents, copyrights or other
intellectual property included in the Confidential Information disclosed or
provided by PageNet to PNB in connection with this Agreement (all of the
foregoing, including the Marks, collectively referred to herein as the "PageNet
Intellectual Property"), in connection with (and limited solely to) PNB's
advertisement, promotion, marketing, sale, development and provision of the
Telecommunication Services and products and services related thereto (all such
Telecommunication Services and related products and services referred to as the
"Licensed Services") in the Territory. For purposes of this Agreement,
"exclusive" means that PageNet, (i) during the term of this Agreement, will
neither use itself nor grant to any third party a license to use the PageNet
Intellectual Property in connection with the advertising, promotion, marketing,
sale, development or provision of Licensed Services in the Territory, and
(ii) during the term of the License (and thereafter in accordance with and to
the extent provided in Section 3.5(e) hereof), will neither use itself nor grant
to any third party a license to use the Marks in connection with any products,
services or business activity in the Territory.
(b) The granting of the foregoing License shall in no manner whatsoever
limit the rights of PageNet, except as specifically provided in Sections 3.1(a)
and 3.5(e) hereof; and except as so provided PageNet hereby expressly reserves
full and unrestricted rights to use and exploit itself the PageNet Intellectual
Property, and to grant to others rights and licenses to use and exploit the
PageNet Intellectual Property, including without limitation the rights to use
and exploit itself and to grant to others licenses to use and exploit (i) the
PageNet Intellectual Property outside of the Territory in connection with any
products, services or business activities, and (ii) the PageNet Intellectual
Property (excluding the Marks) within the Territory other than for Licensed
Services.
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(c) PNB acknowledges PageNet's sole and exclusive ownership of the PageNet
Intellectual Property and any and all registrations or applications with respect
thereto (whether issued by or filed with the relevant governmental authorities
in the Territory or otherwise), and that the provisions of this Agreement do not
convey to PNB and PNB shall not obtain any title to or ownership right or
interest in the PageNet Intellectual Property or any such registrations or
applications. All use of the Marks by PNB in connection with the
Telecommunications Services or otherwise hereunder shall inure to the exclusive
benefit of PageNet. Each party agrees, at the reasonable request of the other
party, to execute and deliver any and all instruments and documents deemed
necessary or desirable by the requesting party to develop, protect, preserve,
extend or enforce the parties' respective rights relating to the PageNet
Intellectual Property, including but not limited to any documents required by
the United States Patent and Trademark Office or the Brazilian National
Institute of Intellectual Property to show the relationship between PNB and
PageNet.
(d) It is the specific intent of the parties hereto that nothing contained
in this Agreement shall in any way endanger, jeopardize or adversely affect any
right of PageNet in and to the PageNet Intellectual Property. To that end,
should any provision or provisions of this Agreement be interpreted by a court
or other governmental authority so as to endanger, jeopardize or adversely
affect such right or rights, whether or not such interpretation is made at the
instance of PNB or another, the parties agree that such provision or provisions
shall be deemed deleted from this Agreement, and the parties shall negotiate in
good faith to replace such deleted provision(s) with substitute provision(s)
which do not endanger, jeopardize or adversely affect such right(s) but which,
to the extent practicable, implement the purposes and intent of the parties as
set forth in the deleted provision(s).
(e) Subject to the prior written consent of PageNet, which consent will
not be unreasonably withheld or delayed, PNB shall have the right under the
License to grant to any third party (a "Sublicensee") a sublicense (a
"Sublicense"), to use and otherwise exploit in the Territory, the PageNet
Intellectual Property in connection with PNB's and/or such Sublicensee's
advertisement, promotion, marketing, sale, development and provision of Licensed
Services in the Territory. The granting of any Sublicense by PNB pursuant to
this subsection (e) shall be subject to all of the following: (i) such
Sublicense shall be subject to the provisions of this Section 3, any Sublicensee
shall be subject to any and all of the obligations of PNB contained in this
Section 3, mutatis mutandis, and upon the request of PageNet any such
Sublicensee shall expressly acknowledge such obligations in a written instrument
delivered to PageNet; (ii) the granting of such Sublicense shall in no manner
whatsoever relieve, waive, or excuse the performance of, any of the obligations
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<PAGE>
and/or responsibilities of PNB with respect to the License or the provisions of
this Section 3; (iii) with respect to the granting of such Sublicense, PNB
covenants and agrees that it will take any and all steps, as may be necessary or
appropriate or as reasonably requested by PageNet, to ensure the full and
complete performance of, and compliance with, the obligations under such
Sublicense by such Sublicensee; (iv) any breach by such Sublicensee under such
Sublicense, which breach--if committed by PNB--would be a breach of the License,
shall be deemed a breach of the License and the provisions of this Section 3 by
PNB; and (v) any termination of the License hereunder (whether with respect to
the Marks, the PageNet Intellectual Property other than the Marks, or all of the
PageNet Intellectual Property) shall automatically terminate such Sublicense
with respect to the affected PageNet Intellectual Property.
3.2. Quality Control; Compliance with Laws.
(a) PNB will not use the Marks without PageNet's express prior written
consent to such use, which consent will not be unreasonably withheld or delayed;
provided, however, that this Agreement shall constitute such prior written
approval of PageNet unless PageNet notifies PNB in writing that PageNet has
determined, reasonably and in good faith, that (i) the Marks have been or are
proposed to be used incorrectly from a technical standpoint (i.e., proper
trademark usage) or otherwise not in compliance with the License, or (ii) PNB's
actual or proposed use of the Marks would materially adversely affect the value
of the Marks or materially adversely affect PageNet's ability to register,
protect, preserve or enforce its rights and interests in the Marks (whether
inside or outside the Territory). Copies or prototypes of all proposed Licensed
Services-related advertising, promotional, marketing, sales and operating
materials or items using and/or bearing the Marks will be submitted by PNB to
PageNet, a reasonable time prior to any use, sale or distribution of the same.
If at any time PageNet, reasonably and in good faith, determines that any use
and/or display of the Marks by PNB is not in compliance with the License or does
or may materially adversely affect the value of the Marks or materially
adversely affect PageNet's ability to register, protect, preserve or enforce its
rights and interests in the Marks (whether inside or outside the Territory),
PageNet may issue instructions to PNB concerning the manner in which PNB may
continue to use the Marks in compliance with the License, and PNB will promptly
comply with such instructions or the parties will negotiate in good faith to
reach agreement on an alternative use and/or display of the Marks that complies
with the License and is reasonably acceptable to both parties.
(b) PNB shall advertise, promote, market, sell and provide the Licensed
Services in accordance with the terms of this Agreement and in a high quality,
professional manner consistent with the quality of similar services and/or
products either (i) provided by PageNet or others under the Marks in the United
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States or other countries outside the Territory, or (ii) provided by significant
competitors of PNB or other significant such service providers within the
Territory (taking into account the then-current commercial and technical
standards and capabilities then prevailing in the Territory), and, in either
case, consistent with the high quality, professional image of and goodwill
associated with the Marks and taking into consideration for a reasonable and
appropriate period the start-up nature of PNB's operations (all of the foregoing
referred to as the "Quality Standard").
(c) In order to ensure that the Licensed Services are provided in an
appropriate manner commensurate with the Quality Standard, PNB, upon reasonable
prior oral or written notice to PNB by PageNet, will allow representatives of
PageNet to make reasonable tests or inspections of the Licensed Services, and to
have access to PNB premises or facilities at any reasonable time during business
hours; provided, however, that PNB shall not be required to allow any such
tests, inspections or access more than twice in any one-year period. In
connection therewith, PNB shall make available to such representatives any
facilities, equipment, services or information reasonably requested and permit
such representatives to test or inspect the Licensed Services and to inspect its
premises and facilities and any and all items and/or materials provided to
customers or others in connection with the Licensed Services at any reasonable
time during business hours, and PNB shall otherwise cooperate with PageNet as
PageNet may reasonably request.
(d) If PageNet reasonably determines that the Licensed Services (or any
portion thereof) do not meet the Quality Standard, then PageNet will provide PNB
with written notice (the "Defect Notice") of such failure, specifying the
specific product or service and the particular deficiency, and (if applicable)
the relevant geographic region of the Territory, together with any reasonably
available supporting documentation of such deficiency. If PNB shall not have
met such Quality Standard for such specific product or service and does not
(i) take appropriate action to diligently commence to cure such deficiency
within sixty (60) days after receipt of the Defect Notice, and (ii) cure such
deficiency by causing such product or service to meet such Quality Standard and
provide documentation of such cure reasonably acceptable to PageNet within
ninety (90) days after receipt of the Defect Notice (or, if such deficiency is
not reasonably susceptible to cure within such 90-day period, within one hundred
eighty (180) days after the receipt of the Defect Notice), then PageNet may, by
written notice to PNB (the "Suspension Notice"), immediately suspend the License
of the Marks only with respect to the particular product or service (and the
relevant geographic region, if applicable) specified in the Defect Notice, and
PNB shall as promptly as possible cease all use of the Marks with respect to
such particular product or service (in such geographic region, if applicable).
As long as the License remains in effect hereunder with respect to the Marks, if
at any subsequent time PNB demonstrates, to PageNet's reasonable satisfaction,
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that such particular product or service (with respect to which the License of
the Marks had been suspended) then meets the Quality Standard (in the relevant
geographic area, if applicable), then the License of the Marks shall be
reinstated and once again in effect with respect to such product or service (in
the relevant geographic area, if applicable). However, if PageNet sends more
than three (3) Suspension Notices in any period of twenty-four (24) months or
less with respect to separate violations of the Quality Standard, PageNet shall
have the right, by written notice to PNB, immediately to terminate the License
of the Marks (only) provided herein.
(e) In connection with its use of the Marks and its advertisement,
promotion, marketing, sale and provision of the Licensed Services, PNB shall, at
all times during the term of this Agreement and thereafter during the term of
the License, comply in all material respects with all applicable laws and
regulations, including, without limitation, the Brazilian Regulations and any
other terms or conditions that may be imposed by the Brazilian Regulators, any
of their successor departments or agencies, or any other departments or agencies
serving the same or similar function, and any state or local agencies.
3.3. Infringement and Adverse Governmental Action. Each of PageNet and PNB
will promptly notify the other party of any infringement or misappropriation and
of any adverse governmental action or the commencement of any legal action by a
third party relating to the PageNet Intellectual Property or the Licensed
Services within the Territory, of which it becomes aware. Each party shall also
notify the other party of any other factor of which it becomes aware that may
materially affect the PageNet Intellectual Property or the provision of the
Licensed Services. PNB shall have the right, exercisable at its option and with
notice to PageNet, (a) to prosecute any and all actions against alleged
infringers or misappropriators of the PageNet Intellectual Property and/or
defend the PageNet Intellectual Property against any and all claims or actions
made or brought by third parties with respect thereto within the Territory, and
(b) to seek to remedy governmental actions adversely affecting the PageNet
Intellectual Property or the provision of the Licensed Services in the
Territory; PageNet will cooperate in any action brought or defended against by
PNB within the Territory, at PNB's request and expense. If PNB does not
commence to prosecute, defend against or seek to remedy any of the foregoing
actions within ninety (90) days after PNB becomes aware thereof, then PageNet
shall have the right, exercisable at its option and with notice to PNB, to
prosecute, defend against or seek to remedy any such actions; PNB will cooperate
in any action brought or defended against by PageNet within the Territory, at
PageNet's request and expense. Each party will bear the costs of its own legal
expenses and other costs in connection with any actions taken, and the party
bearing the costs will be entitled to receive any amounts received in settlement
and/or damages awarded.
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3.4 Assignment or Transfer of the License.
(a) Except as provided in Sections 3.4(b) and (c), PNB shall not have the
right to assign or transfer the License to any third party, whether by sale or
assignment of assets or stock, merger consolidation or otherwise.
(b) As long as this Agreement remains in full force and effect, PNB shall
have the right to assign or transfer the License in conjunction with any
permitted assignment or transfer of this Agreement pursuant to Section 13.1
hereof.
(c) At any time upon or subsequent to a termination of this Agreement
whereby the provisions of this Section 3 have survived such termination and
PageNet has not terminated the License (either with respect to the Marks only or
the entire License) pursuant to Section 3.5, then PNB shall have the right to
assign or transfer the License, with respect to the PageNet Intellectual
Property for which the License remains in effect at the time of such assignment
or transfer, to any third party to which PNB shall simultaneously assign or
transfer all or substantially all of PNB's assets (other than this Agreement)
associated with its Licensed Services business (however such assignment or
transfer is structured, e.g., as an assignment of assets, sale of stock, merger,
consolidation, or otherwise), provided that both of the following conditions are
satisfied prior to or at the time of such assignment or transfer: (i) such
assignee or transferee shall be subject to any and all of the obligations of PNB
contained in this Section 3, mutatis mutandis, and shall expressly acknowledge
such obligations in a written instrument delivered to PageNet; and (ii) such
assignee or transferee represents and warrants to PageNet, in writing, that it
is such party's intention itself to continue to carry on and conduct the
Licensed Services business being acquired by such party from PNB.
3.5. Effect of Termination.
(a) Notwithstanding anything in this Agreement to the contrary, the
provisions of this Section 3 shall survive termination of this Agreement, other
than: (i) a termination pursuant to Section 10.1; or (ii) a termination
initiated by PageNet pursuant to Section 10.2 where the relevant breach or
default by PNB is a breach or default under the terms of the License set forth
in this Section 3; or (iii) a termination pursuant to Section 10.3 if such
termination is on account of governmental action which requires a termination of
the License, provided, however, if such governmental action (with respect to its
required termination of the License) is reversed within the period up to and
including the first anniversary of the date of such termination pursuant to this
clause (iii), PNB shall have the right to reinstate the License by delivery to
PageNet of written notice of such reversal and reinstatement within such time
period or up to five (5) business days thereafter, whereupon the provisions of
this Section 3 shall be reinstated and revived and in full force and effect. In
the event of any post-termination survival and/or reinstatement of this Section
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3, the License shall remain exclusive only with respect to the Marks and shall
become non-exclusive with respect to any and all other PageNet Intellectual
Property (as provided in Section 3.1(a)).
(b) At any time subsequent to a termination of this Agreement whereby the
provisions of this Section 3 have survived such termination (or been reinstated
pursuant to Section 3.5(a)(iii)) and remain in full force and effect pursuant to
Section 3.5(a), PageNet may thereafter (i) partially suspend or terminate the
License of the Marks (only) pursuant to Section 3.2(d), or (ii) terminate the
License if PNB commits any breach or default of any of the terms or conditions
of the License (other than a breach or default to which Section 3.2(d) applies)
and such breach or default has not been cured within ninety (90) days after
receipt by PNB of PageNet's notice of such breach or default (or, if such breach
or default is not reasonably susceptible to cure within such 90-day period,
within one hundred eighty (180) days after receipt by PNB of PageNet's notice of
such breach or default).
(c) Upon any termination of the License of the Marks, whether pursuant to
Section 3.2(d) or Section 3.5(b), then:
(i) all rights and licenses granted hereunder by PageNet to PNB
(including but not limited to the License) with respect to the Marks shall
terminate, and PNB shall have no claim against PageNet for losses or expenses
incurred or for lost profits or goodwill;
(ii) PNB shall promptly cease entirely the use of all of the Marks;
(iii) PNB shall promptly change its corporate name from "Paging
Network do Brasil S.A." to "Warburg Paging do Brasil S.A." or such other
corporate name as long as such name does not include, is not similar to or
likely to be confused with, and is not a colorable imitation of any of the
Marks, and PNB shall file with the appropriate Brazilian authorities the
necessary documentation in connection with such name change within thirty (30)
days following the date of any such termination;
(iv) in order to protect and preserve PageNet's rights in and the
identity of the Marks, PNB agrees that it will not use or register or apply to
register any trademark or trade name which is similar to or likely to be
confused with or is a colorable imitation of the Marks; and
(v) subsections (iii) and (iv) are intended to prevent confusion,
mistake or deception among purchasers of and users of the same or related
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goods or services which might be caused by the same or similar corporate
names, trademarks or trade names.
(d) If the License (in its entirety) is terminated pursuant to Section
3.5(b), or if this Agreement is terminated pursuant to Section 10.1, pursuant to
Section 10.2 at the initiation of PageNet where the relevant breach or default
by PNB is a breach or default under the terms and conditions of the License set
forth in this Section 3, or pursuant to Section 10.3 if such termination is on
account of governmental action which requires a termination of the License and
PNB does not reinstate the License pursuant to Section 3.5(a)(iii), then in
addition to the application of clauses (i) - (v) of Section 3.5(c):
(i) all rights and licenses granted hereunder by PageNet to PNB
(including but not limited to the License) shall terminate, and PNB shall have
no claim against PageNet for losses or expenses incurred or for lost profits or
goodwill; and
(ii) PNB shall promptly cease entirely the use of all of the PageNet
Intellectual Property.
(e) Upon any termination of the License with respect to the Marks (whether
alone or as part of a termination of the License with respect to all the PageNet
Intellectual Property), PageNet shall not, for a period of two (2) years
immediately following such termination, either directly itself or indirectly
through a licensee, use the Marks in the Territory for or in association with
any Licensed Services.
Section 4. Equipment Purchase Option.
4.1. Procurement of Equipment. PageNet agrees to use its commercially
reasonable efforts to arrange with vendors to furnish to PNB equipment relating
to the operation of the Telecommunications Services in the Territory (the
"Equipment"), as and when requested by PNB to PageNet in writing from time to
time, at prices and terms (including but not limited to financing and
cooperative advertising) as favorable to PNB as PageNet is able to obtain for
such Equipment for itself. If such favorable prices and terms cannot be secured,
PageNet shall use its commercially reasonable efforts to order such Equipment
from vendors on PNB's behalf with the vendors directly billing PNB therefor. At
PNB's request, PageNet shall use its commercially reasonable efforts to have
vendors extend credit to PNB for Equipment purchased either directly by PNB or
by PageNet on behalf of PNB; provided, however, that under no circumstances
shall PageNet be obligated to use its own credit with vendors to procure
Equipment for or on behalf of PNB. If Equipment ordered by PageNet for or on
behalf of PNB is actually invoiced by vendors to PageNet, PageNet shall
immediately forward such invoice to PNB and PNB shall directly pay such
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invoice in accordance with its terms. If, for any reason, PageNet, in its
sole discretion (a) pays vendors with its own funds, or (b) uses its own
credit with vendors to obtain Equipment for or on behalf of PNB, PageNet
shall advise PNB in writing of such payment or credit arrangement along with
appropriate documentation and PNB shall reimburse PageNet for the price
actually paid or to be paid by PageNet for such Equipment, including all
shipping, handling, insurance, taxes, duties and other charges, in accordance
with the provisions of Sections 4.2 and 6.
4.2. Invoicing. PageNet shall submit to PNB an invoice for Equipment
purchased or procured by PageNet for or on behalf of PNB under Section 4.1 on or
before the tenth (10th) business day after the close of the month during which
such Equipment was ordered. PNB shall pay the full amount set forth in such
invoice, without offset, on or before the fifth (5th) business day prior to the
date that the vendor of the Equipment has required payment and in accordance
with Section 6. If the vendor has other requirements for payment, such as
C.O.D., PNB shall comply with such payment terms as if it were the direct
purchaser of the Equipment.
4.3 Warranties. If PageNet shall purchase any Equipment on behalf of PNB,
PageNet shall, to the extent possible, pass through to PNB all warranties
provided by the vendor of such Equipment, and, if the vendor does not permit
PageNet's pass through of such warranties, PageNet will use its best efforts to
enforce such warranties on behalf of PNB. PageNet and PNB shall work together to
preserve any benefits that PageNet would receive from the vendor as the
purchaser of the Equipment.
4.4. Shipping. To the extent possible, the Equipment shall be shipped and
delivered in accordance with PNB's instructions. If for any reason PageNet must
take delivery of and reship Equipment to PNB, any additional expenses in
connection therewith shall be invoiced by PageNet to PNB, and PNB shall pay such
invoices in the manner set forth in Section 6. PageNet shall use commercially
reasonable efforts to arrange shipping, delivery and title transfers so as to
minimize duties and other import levies.
4.5. Relationship between PageNet and PNB. As between PageNet and PNB, it
is intended by the parties that PageNet's role as a facilitator of purchases of
the Equipment by PNB is ministerial and that PNB is to be considered the
purchaser of the Equipment even if PageNet must purchase the Equipment in its
name for and on behalf of PNB. Therefore, PageNet assumes no risk by acting in
this capacity. Consistent with the foregoing, but not in limitation thereof, all
risk of loss on all Equipment shipped by any vendor or PageNet shall be borne by
PNB and not PageNet (even if delivered to PageNet).
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Section 5. Disclaimer: Limitation of Liability and Damages.
ALL EQUIPMENT PROCURED, PURCHASED, SUPPLIED OR INSTALLED BY PAGENET FOR PNB
IS PROVIDED TO PNB ON AN "AS IS" BASIS, WITHOUT ANY REPRESENTATION OR WARRANTY
OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. PageNet
shall not be liable for any delay in the performance of orders or contracts for
Equipment, or for any delay in the shipment or delivery thereof, or for any
direct or indirect damages suffered by PNB by reason of such delays.
Section 6. Payments, Taxes and Exchange Control.
All payments by PNB hereunder shall be made in United States Dollars (or,
if requested by PageNet, in Brazilian Reais at the prevailing exchange rate on
the date of payment) in immediately available funds. Payments to PageNet shall
be made to the address set forth in Section 13.2 or at such other address as
PageNet may specify from time to time. PNB shall, at its own expense, be solely
responsible for obtaining all governmental and non-governmental approvals
required or necessary for the prompt and complete remittance of payments under
this Agreement. All payments shall be made in the full and actual amounts
invoiced and no deductions shall be made for of any direct or indirect taxes,
duties, fees, costs, expenses, commissions, contributions, surcharges or other
amounts of any kind that may be imposed or required on such payments by any
third party (including but not limited to governmental authorities or financial
institutions) (all of such amounts, the "Charges"). PNB shall be solely
responsible for the prompt and complete payment of all Charges. PageNet shall
assess a late charge of one and one-half percent (1.5%) per month, or at
PageNet's sole discretion, the highest applicable rate permitted under
prevailing law, on any amount due from PNB to PageNet which is not received when
due for payment.
Section 7. Regulations.
PageNet and PNB acknowledge that the activities of PNB and/or its
Affiliates in connection with the operation of Telecommunications Services in
the Territory hereunder are subject to the Brazilian Telecommunications Code and
other applicable laws (all of such laws, statutes, orders, rules and
regulations, together the "Brazilian Regulations") and are regulated by the
Ministry of Communications of Brazil and other Brazilian regulatory agencies and
governmental authorities (all such regulatory entities or authorities, together
the "Brazilian Regulators"). Accordingly, PageNet and PNB mutually agree as
follows:
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7.1. Consents. The execution, delivery and performance of this Agreement
and the transactions contemplated hereby may be subject to the receipt of any
necessary prior approvals or authorizations by or from the Brazilian Regulators
or any other governmental authority. PageNet and PNB agree to use their best
efforts to promptly obtain any such approvals or authorizations applicable to
them. PNB shall, at its own expense, be responsible for obtaining all Brazilian
approvals for the importation of Equipment or relocation of persons necessary to
perform the PageNet Services into the Territory.
7.2. Compliance. PageNet and PNB shall each comply, in all material
respects, with all Brazilian Regulations and all applicable laws and regulations
of the United States of America. In the event Brazilian Regulators or any
governmental authority shall require any material additions, deletions, or
modifications to the terms or conditions of this Agreement, PNB and PageNet
shall use commercially reasonable efforts to reconstitute this Agreement to
comply with such requirements.
7.3. Records. Each of PNB and PageNet shall maintain complete and accurate
records regarding its business activities, showing the information required (i)
to permit calculation of all amounts owed hereunder by PNB to PageNet, (ii) to
permit the verification of costs and expenses referred to in Section 2.2, and
(iii) to compile any information required by the Brazilian Regulators or any
other governmental authority. Each of PNB and PageNet shall have the right, at
its own expense, to examine (or to have its duly authorized agent examine) on a
confidential basis and upon at least ten (10) days prior notice thereof such
records and books of account with respect to operation of the Telecommunications
Services in the Territory of the other during regular business hours.
7.4. Control of Radio Facilities. PageNet acknowledges that PNB has, or has
entered into agreements with others to obtain, the rights to operate the
frequencies and facilities necessary to re-sell Telecommunications Services in
the Territory. PNB shall ensure that the frequencies and facilities are
operated in compliance with the Brazilian Regulations. No provision of this
Agreement shall be construed as vesting in PageNet any control over legal
entities holding concessions or licenses for the operation of frequencies or
facilities utilized to re-sell Telecommunication Services in the Territory by
PNB. PNB shall take all actions necessary to ensure that all of the terms and
conditions of the licenses are complied with and fulfilled and the frequencies
remain available for the operation of Telecommunication Services in the
Territory by PNB. PNB shall maintain full responsibility for the control,
supervision, maintenance, and expense of such operation of frequencies and
facilities. PNB shall promptly notify PageNet of any complaints received from
End-users relating to the
14
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operation of Telecommunications Services in the Territory and shall confirm
such complaints to PageNet in writing.
Section 8. Representations and Warranties.
8.1. Representations and Warranties of PNB. PNB represents and warrants to
PageNet as follows:
(a) It is a corporation duly organized and validly existing under the laws
of Brazil, with full power to conduct its affairs as currently conducted and
contemplated hereunder. All necessary corporate action has been taken to enable
it to execute and deliver this Agreement and perform its obligations hereunder.
(b) No governmental or other third party consent is required in connection
with its execution, delivery or performance of this Agreement, except such
regulatory approvals as may be contemplated under Sections 6 and 7.
(c) This Agreement is PNB's valid and binding obligation enforceable in
accordance with its terms, except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies. PNB has the unencumbered right to enter into
this Agreement and to fulfill its duties hereunder. It is not and will not
become party to any agreement in conflict herewith.
8.2. PageNet Representations and Warranties. PageNet represents and
warrants to PNB as follows:
(a) It is a corporation duly organized and validly existing under the laws
of Delaware, with full power to conduct its affairs as currently conducted and
contemplated hereunder. All necessary corporate action has been taken to enable
it to execute and deliver this Agreement and perform its obligations hereunder.
(b) No governmental or other third party consent is required in connection
with its execution, delivery or performance of this Agreement, except such
regulatory approvals as may be contemplated under Sections 6 and 7.
(c) This Agreement is PageNet's valid and binding obligation enforceable
in accordance with its terms, except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies. PageNet has the unencumbered right to enter
into this Agreement and to fulfill its duties hereunder. It is not and will not
become party to any agreement in conflict herewith.
15
<PAGE>
Section 9. Term.
9.1. Initial Term. The initial term of this Agreement shall commence on
the date hereof and shall continue until the fifth (5th) anniversary of the date
hereof. The initial term shall be extended for successive three (3) year terms
unless either party gives notice of its intent not to so extend at least one (1)
year prior to the end of the initial term or any additional term.
9.2. Termination Under Certain Circumstances.
(a) Notwithstanding the provisions of Section 9.1, this Agreement shall
terminate, at PageNet's election, six (6) months after PageNet's ceasing to own
at least 5% (on a fully diluted basis) of PNB common stock and/or subscription
bonds to purchase such common stock, or anyone other than Warburg, Pincus
Ventures, L.P. owns 50% or more (on a fully diluted basis) of PNB common stock
and/or subscription bonds to purchase such common stock.
(b) Notwithstanding the provisions of Section 9.1, this Agreement shall
terminate immediately upon the consummation or closing of any transaction for
which PageNet's consent is required (but has not been given) pursuant to Section
13.1 hereof.
Section 10. Termination.
Anything set forth herein to the contrary notwithstanding, this Agreement
may be terminated by PNB or PageNet as provided below by the giving of written
notice of such termination by the terminating party at least thirty (30) days in
advance:
10.1. Non-Payment. PageNet may terminate this Agreement if PNB has
failed to pay any amounts due under Sections 2 and 4, and such failure continues
for a period of thirty (30) days after the receipt by PNB of notice of
non-payment from PageNet; provided, however, that any such termination by
PageNet shall not terminate the License pursuant to Section 3 hereof, if PNB
reasonably and in good faith disputes its obligation to pay PageNet the amount
not paid (as evidenced by written notice given by PNB to PageNet within such
30-day period setting forth the amount in dispute and PNB's reasonable and good
faith basis for disputing such obligation), unless and until such dispute is
resolved (whether by agreement, settlement, mediation, arbitration decision,
court decision or otherwise) and PNB shall not have paid PageNet the amount (if
any) which PNB is obligated to pay pursuant to such resolution within thirty
(30) days after the effective date of such resolution.
10.2. Breach. Either party may terminate this Agreement if the other
party commits a material breach or default of any of the provisions of this
Agreement (other than actual or potential material breaches or defaults to
16
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which Section 3.2(d) hereof applies) and such breach or default has not been
cured within thirty (30) days after receipt by the breaching party of the
non-breaching party's notice of such breach or default. Either party may
terminate this Agreement if the other party commits any other breach or
default of any of the provisions of this Agreement (other than actual or
potential other breaches or defaults to which Section 3.2(d) hereof applies)
and such breach or default has not been cured within sixty (60) days after
receipt by the breaching party of the non-breaching party's notice of such
breach or default.
10.3. Government Restrictions. Either party may terminate this
Agreement if the performance of this Agreement pursuant to the terms hereof has
been prohibited or made illegal by any Brazilian Regulator, court, governmental
authority or regulatory body, by a final, nonappealable rule, decision, order or
law and the parties are unable to reconstitute this Agreement pursuant to
Section 13.4.
10.4. Consequences of Termination. The termination of this Agreement
pursuant to this Section 10 shall not relieve the parties of any obligations
incurred hereunder up to and including the date of termination.
Section 11. Indemnification.
11.1. PageNet Indemnity. Subject to any limitations in Section 5 and any
other terms of this Agreement, PageNet shall indemnify and hold harmless PNB,
its Affiliates, their respective directors, officers, employees, agents,
subsidiaries, affiliates, subcontractors and assignees, or any of them, from and
against all claims, damages and liabilities resulting from the failure by
PageNet to perform its obligations hereunder. Notwithstanding any provision of
this Agreement, in no event shall PageNet nor its directors, officers, employees
or agents be liable for any loss of profits, loss of business, loss of goodwill,
indirect, special, exemplary, consequential or punitive damages that may be
suffered by PNB, its directors, officers, employees' agents or End-users arising
from the performance or non-performance of the provisions of this Agreement or
any acts or omissions associated therewith, including, without limitation, all
activities related to the use of any Equipment furnished hereunder or to the
provision of PageNet Services hereunder, whether the basis of the liability is
breach of contract, tort (including negligence and strict liability), statutes,
or any legal theory.
11.2. PNB Indemnity. PNB shall indemnify and hold harmless PageNet, its
Affiliates, their respective directors, officers, employees, agents,
subsidiaries, affiliates, subcontractors and assignees, or any of them, from and
against all claims, damages and liabilities resulting from PageNet's performance
of its obligations hereunder and from the acts or omissions of PNB or the
17
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failure by PNB to perform its obligations hereunder or any acts or omissions
associated therewith.
Section 12. Confidentiality.
All Confidential Information made available by one party (the "Disclosing
Party") to the other party (the "Receiving Party") in connection with this
Agreement shall be held in strict confidence by the Receiving Party for a period
extending through the date five (5) years from the expiration or termination of
this Agreement, provided that such Confidential Information continues to be
"Confidential Information" as defined hereunder, during such five-year period.
Such Confidential Information shall not be disclosed or used by the Receiving
Party except as expressly contemplated in this Agreement. Each party shall
require its employees, officers, directors and agents to whom Confidential
Information is disclosed to keep such Confidential Information in strict
confidence and to disclose the same to no one except those (i) authorized in
writing by the Disclosing Party and (ii) entering into an appropriate agreement
to keep the Confidential Information confidential. Nothing in this Agreement
shall be construed as a grant by either party to the other of rights in
Confidential Information belonging to the Disclosing Party, except the right to
use Confidential Information for the purposes and to the extent set forth in
this Agreement. Each party shall, upon termination of this Agreement or request
of the other party, either (A) promptly return to the other all writings,
drawings, diagrams, tapes, records, discs, other forms of data storage, other
documents or materials constituting originals or copies of Confidential
Information furnished by the other party, or (B) destroy or erase such originals
and copies. If at any time either party has acknowledged or becomes aware of any
potential or actual unauthorized use, transfer or disclosure of Confidential
Information belonging to the other party, such party shall promptly notify the
other party and the other party shall have the exclusive right to take whatever
action it deems appropriate with respect thereto. In the event that any action
or proceeding is brought as a result of such unauthorized use, transfer or
disclosure, the other party shall fully cooperate with the party owning the
Confidential Information involved. Any Confidential Information reasonably
classifiable as a trade secret shall, as between the parties and their
employees, remain a trade secret and be fully protected as such in spite of any
failure by the Disclosing Party to constantly admonish the Receiving Party of
the trade secret nature of the information disclosed or because of any failure
of the Disclosing Party to pursue an active course of conduct designed to inform
the Receiving Party or its employees that the secrets and information are to
remain confidential.
Section 13. Miscellaneous.
13.1. Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns; provided,
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<PAGE>
however, that this Agreement may not be assigned by either party in any manner,
including in connection with the acquisition of the stock or assets of such
party, without the prior written consent of the other; provided, however, that
PNB shall also have the right to assign or transfer the License pursuant to and
in accordance with Section 3.4(c) hereof.
13.2. Notices.
(i) All communications under this Agreement shall be in writing and shall
be delivered by hand, internationally recognized air courier or facsimile
transmission, charges prepaid:
(1) if to PageNet, at 4965 Preston Park Boulevard, Plano, Texas
75093, facsimile number (214) 985-6717 marked for attention of Barry A.
Fromberg (with a copy to Bingham, Dana & Gould LLP, 150 Federal Street,
Boston, Massachusetts 02110-1726, facsimile number (617) 951-8736 Attn:
Roger D. Feldman), or at such other address as PageNet may have furnished
in writing to PNB,
(2) if to PNB, at Avenida das Nacoes Unidas, 12,551 World Trade
Center, 17th Floor, Suite 26, Sao Paulo, Brazil, facsimile number
_______________, marked for the attention of the President (with a copy to
Xavier, Bernardes, Braganca, Av. Brasil 1980, Sao Paulo, Brazil, facsimile
number 011-55-11-282-5580, Attn: M. Regina Lynch), or at such other address
as it may have furnished in writing to the Investors.
(ii) Any notice so addressed shall be deemed to be given: if delivered by
hand, on the date of such delivery; if sent by courier, on the third
business day following the date of such mailing; and if mailed by
registered or certified airmail, on the sixth business day after the date
of such mailing.
13.3. Relationship of the Parties. PageNet's relationship to PNB is
that of an independent contractor and no other relationship is intended or
created between the parties hereto. Nothing in this Agreement shall be construed
to make PageNet an agent or partner of PNB.
13.4. Severability. If any provision of this Agreement is declared or
found to be illegal, unenforceable, or void, the parties shall negotiate in good
faith to agree on a substitute provision that is legal and enforceable and is as
nearly as possible consistent with the intentions underlying the original
provision. If the remainder of this Agreement is not materially affected by such
declaration or finding and is capable of substantial performance, then the
remainder shall be enforced to the extent permitted by law.
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<PAGE>
13.5. No Waiver. No delay or omission by either party to exercise any
right or power shall impair any such right or power or be construed to be a
waiver thereof. A waiver by any party of any of the covenants, conditions or
contracts to be performed by the other or any breach thereof shall not be
construed to be a waiver of any succeeding breach thereof, or of any other
covenant, condition or contract herein contained. No change, waiver or discharge
hereof shall be valid unless it is in writing, and signed by an authorized
representative of the party against which such change, waiver or discharge is
sought to be enforced.
13.6. Counterparts. This Agreement may be executed by the parties in
counterpart copies which together shall constitute the entire agreement between
the parties hereto. When executed, this Agreement shall supersede all prior and
contemporaneous agreements, written or oral, of the parties with respect to the
subject matter hereof and this Agreement may not be amended except by a writing
signed by the authorized representative of each party.
13.7. Sections and Section Headings. The headings of sections and
subsections are for reference only and shall not limit or control the meaning
thereof.
13.8. No Implied Rights or Remedies. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm or corporation, except PNB
and PageNet, any rights or remedies under or by reason of this Agreement.
13.9. Force Majeure. Subject to Sections 10.3 and 10.4, no party hereto
shall be liable to any other party for failure or delay in the performance of
any obligation required by this Agreement, if that failure or delay is due in
whole or in part to any cause beyond the reasonable control of that party,
including, but not limited to, strikes, work stoppages, fires, accidents, acts
of government, whether legal or otherwise, or acts of God provided notice
thereof is given to the other party. The period of time within which any party
hereto is required to fulfill its obligations under this Agreement shall be
extended by the period of the delay resulting from any of the foregoing events.
13.10. Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive law of the State of New York, excluding its
conflicts of law rules.
13.11. Arbitration. All disputes and differences arising from or in
connection with this Agreement, and in all relations between the Parties with
respect to the subject matter hereof, shall be finally settled by binding
arbitration in accordance with the International Arbitration Rules of the
American Arbitration Association. The number of arbitrators shall be three, the
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place of arbitration shall be New York, New York, and the arbitration
proceedings shall be conducted in English.
13.12. Construction. The authoritative text of this Agreement shall be
the English text.
[Rest of Page Intentionally Left Blank]
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In witness whereof, the parties hereto have executed this Agreement the day
and year first above written.
PAGING NETWORK DO BRASIL S.A.
By: /s/ Thomas C. Trynin
------------------------------
Name: Thomas C. Trynin
Title: President
PAGING NETWORK, INC.
By: /s/ Jose Roberto Opice
-------------------------------
Name: Jose Roberto Opice
Title: Attorney-in-fact
22
<PAGE>
Exhibit A
PageNet Services
1. PageNet has identified Messrs. Thomas Trynin, Marco Fregenel and [-] to act
as on-site senior management of PNB.
2. Management supervision of PNB will be supplied by PageNet designated senior
management as may be deemed necessary or appropriate by PageNet to its
performance of its obligations under this Agreement.
3. Participation of other PageNet designated employees with particular skills
on an as-needed basis, as may be deemed necessary or appropriate by PageNet to
its performance of its obligations under this Agreement.
4. Training, both in the United States of America and Brazil, of key PNB
employees, as shall be agreed to by PNB and PageNet.
5. PageNet will provide PNB, on an exclusive basis in the Territory, such
technology, software, new product development, systems design, etc. as PageNet
determines shall be necessary and appropriate, subject to the provisions of the
Agreement.
6. Interface with vendors to seek favorable prices and services, comparable to
those obtained by PageNet for itself.
7. Provide, at PNB's request, marketing, advertising and public relations
material on a pass-through basis (i.e. PNB will not pay any fee for use of such
materials but will pay for incremental costs, such as translation).
8. PageNet will use its information systems expertise to select an appropriate
billing and information system for PNB and PageNet's information systems
personnel will assist in implementation of such billing and information systems.
9. PNB will have access to all VoiceNow-Registered Trademark- technology and
other personal communications services product developments and other paging
technologies to which PageNet has access.
10. Appropriate persons from the PNB management team shall be invited to all
PageNet company-wide meetings of their counterparts in the United States
operations.
11. Such other services as shall be agreed to in writing by PNB and PageNet
from time to time.
23
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Exhibit B
Marks
PAGENET
VOICENOW
Trade Names
PAGING NETWORK
<PAGE>
OPERATING AGREEMENT AND OTHER COVENANTS
BETWEEN:
I. MULTIPONTO TELECOMUNICACOES LTDA., a civil limited liability company
organized and existing under the laws of the Federative Republic of
Brazil, with head offices in the City of Rio de Janeiro, State of Rio de
Janeiro, at Av. Presidente Wilson, 231, 28th floor (part), registered as
taxpayer under CGC number. 086.982.675 /0001-07, herein represented by its
duly empowered attorney-in-fact Mr. EDUARDO PENIDO MONTEIRO, Brazilian,
married, engineer, resident and domiciled in the City of Rio de Janeiro,
State of Rio de Janeiro, with identity card number 1029543 issued by
SSP-BA, registered as taxpayer under CPF number 094323965-68, hereinafter
referred to simply as "PERMISSION HOLDER";
AND
II. PAGING NETWORK DO BRASIL S.A., a corporation, organized and existing under
the laws of the Federative Republic of Brazil, with head offices in the
City of Sao Paulo, State of Sao Paulo, at Rua Alexandre Dumas, number
1711, registered as taxpayer under CGC/MF No. 01.126.946/0001-61, herein
represented by its Officers Mr. Thomas Crane Trynin, American citizen,
single, business administrator, bearer of identity card No. V192319-I and
CPF No. 214308398-05 and Mr. Marco Antonio Fregenal, Brazilian citizen,
married, business administrator, bearer of identity card No. 35355458-5
and CPF 214170768-49, hereinafter referred to simply as "OPERATOR";
WHEREAS:
1. Among the governmental directives applicable to the Communications
Sector, stands out the need for diversification of the
telecommunications services, for improvement of their quality and
expansion of such services, at the level of a greater participation
of the private sector, to the benefit of the final user;
2. The PERMISSION HOLDER is the holder of Permissions granted by the
Ministry of Communications for the exploitation of Paging Services
("Servico Especial de Radiochamada") (the "Services"), for the
purpose of
<PAGE>
being rendered to third parties, for the term of fifteen (15) years,
renewable for an equal period, in accordance with the provisions of
Ordinances issued by the Minister of Communications Numbers 497,
498, 499, 500, 501, 502, 503 and 504, all dated as of July 18, 1994,
and published in the Official Gazette of July 22, 1994, except for
Ordinance No. 502 which was published in the Official Gazette of
Jully 25, 1994, which are attached hereto as Exhibit I (the
"Permissions");
3. Having in view the amplification of the rendering of the services in
the Brazilian territory the PERMISSION HOLDER has requested the
Ministry of Communications the transformation of the Permissions
into Permissions to National Restricted Exploitation (solely
National Restricted Permissions, and together with the Permissions,
also "Permissions") according to Ordinance No. 579/94, of August 2,
1994;
4. The PERMISSION HOLDER wishes to broaden its activity in the market,
providing an efficient and competitive service to the Subscribers
(as hereinafter defined) and, therefore, wishes to have the
cooperation of an entity with technical capability and with the
necessary financial resources, in the resale and operation of the
Services;
5. The OPERATOR is a company with capital to invest in the
installation, operation and provision of the Services, as well as
know-how and technical capability to operate and provide the
respective resale to the Subscribers, so as to cooperate with the
PERMISSION HOLDER in providing an efficient and competitive service
to the Subscribers;
6. The provisions of the Specific Telecommunications Rule ("Norma
Especifica de Telecomunicacoes" - NET) No. 05/DNPV, approved by
Ordinance No. 257/91, of October 23, 1991, which expressly foresees
in its item 27.3 that the holders of permissions of Paging Services
may utilize other entities as resellers of their Services, by means
of mutual operating agreements;
7. The parties wish to formalize the above referred agreement,
regulating their respective rights and obligations with respect to
the resale and operation of the Services,
the parties have agreed to enter into this Operating Agreement and Other
Covenants (the "Agreement"), in accordance with the clauses and conditions
specified below:
Clause One: DEFINITIONS AND INTERPRETATION
2
<PAGE>
The following terms shall have the following meanings for all purposes of this
Agreement and such meanings shall be equally applicable to both the singular and
the plural forms of the terms defined:
1.1. "Paging Services" or "Servico Especial de Radiochamada" shall mean
the special telecommunications service with the purpose of
transmitting specially codified call signals, addressed to
Subscribers of the service, through the systems of tone and
transmission of information by sound, numeric and alpha numeric
displays.
1.2. "Permissions" shall mean the Ordinances which granted permission for
the exploitation of Paging Services Numbers 497, 498, 499, 500, 501,
502, 503 and 504, published in the Official Gazette of July 22,
1994, except for Ordinance No. 502 which was published in the
Official Gazette of July 25, 1994, which are attached hereto as
Exhibit I and are an integral part of this instrument, as if the
contents thereof were transcribed in full herein, as well as all and
any Ordinances that may be published in the Official Gazette
granting Permissions to National Restricted Exploitation, or other
modalities of exploitation.
1.3. "Services" shall mean the Paging Services ("Servico Especial de
Radiochamada") to be resold by the Operator hereunder.
1.4. "Subscribers" shall mean the users of the Services which have
entered into a Subscription Agreement.
1.5. "Subscription Agreement" shall mean the agreement with respect to
the rendering of Services, entered into between the Subscribers and
the PERMISSION HOLDER prior to the date of this Agreement, as well
as new agreements to be entered into between future Subscribers and
the OPERATOR, by means of the grant of authority hereunder to the
OPERATOR, as well as the procurement and follow-up of requests or
proposals or execution thereof by the OPERATOR.
1.6. "Territory" shall mean the Service areas specified in Ordinances
497, 498, 499, 500, 501, 502, 503 and 504/94, collectively
considered, and comprehends all extensions and modalities of
exploitation that may be permitted or licensed, including but not
limited to, local and national extensions:
1.6.1. Ordinance 497 covers the localities of Sao Paulo, Santo
Andre, Sao Bernardo do Campo, Diadema, Sao Caetano do Sul,
Guarulhos, Osasco, Barueri e Maua, all in the State of Sao
Paulo, having as service area 3,307 Km^2 in the frequency of
931 MHz, channel 931,7625 MHz;
3
<PAGE>
1.6.2. Ordinance 498 covers the localities of Belo Horizonte,
Contagem and Betim, all in the State of Minas Gerais, having
as service area 2.932 Km^2 in the frequency of 931 MHz,
channel 931,7625 MHz;
1.6.3. Ordinance 499 covers the localities of Porto Alegre, Guaiba,
Alvorada, and Canoas, all in the State of Rio Grande do Sul,
having as service area 706 Km^2 in the frequency of 931 MHz,
channel 931,7625 MHz;
1.6.4. Ordinance 500 covers the localities of Recife, Olinda and
Jaboatao, all in the State of Pernambuco, having as service
area 572 Km^2 in the frequency of 931 MHz, channel 931,7625
Mhz;
1.6.5. Ordinance 501 covers the locality of Curitiba, in the State
of Parana, having as service area 580 Km^2 in the frequency
of 931 MHz, channel 931,7625 MHz;
1.6.6. Ordinance 502 covers the Distrito Federal having as service
area 1.098 Km^2 in the frequency of 931 MHz, channel 931,7625
MHz;
1.6.7. Ordinance 503 covers the locality of Salvador, in the State
of Bahia, having as service area 315 Km^2 in the frequency of
931 MHz, channel 931,7625 MHz;
1.6.8. Ordinance 504 covers the localities of Rio de Janeiro,
Niteroi, Sao Joao de Meriti and Nova Iguacu, all in the State
of Rio de Janeiro, having as service area 4.129 Km^2 in the
frequency of 931 MHz, channel 931,7625 MHz.
1.7. "Service Trademark" shall mean the trademark utilized to identify
the business as specified in Exhibt II.
Clause Two: PURPOSE
2.1. The purpose of this private instrument is to regulate the conditions
of the resale of Services by the OPERATOR, as well as the terms of
the mutual Operating Agreement contracted hereby, and, specially,
the obligations of the OPERATOR regarding the utilization of
equipment and stations in accordance with the technical
specifications approved, as well as with respect to the utilization
of authorized equipment, technical characteristics of the Services
and proper utilization of the spectrum inherent to the
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operation, in order to improve and develop Paging Services in the
Territory.
2.2. The PERMISSION HOLDER hereby engages the OPERATOR as the exclusive
reseller of its Services, the OPERATOR being hereby entrusted with
the operation of such Services, it being further agreed that the
PERMISSION HOLDER shall not itself be permitted to directly sell or
operate any such Services, and shall hold the Permissions free and
clear of any lien, claim, charge or encumbrance of any kind.
Clause Three: OBLIGATIONS OF THE OPERATOR
The following are obligations of the OPERATOR:
3.1. To resell the Services by executing Subscription Agreements with the
Subscribers, containing, essencially, the provisions mentioned in
Exhibit III;
3.2. To ensure the operations necessary for the rendering of the Services
to all current and future Subscribers which have entered into a
service agreement and which do so in the future;
3.3. To ensure the above mentioned operation pursuant to standards of
trustworthiness, quality, courtesy and continuity, in accordance
with the technical characteristics inherent to the Service;
3.4. To maintain specialized technical personnel for the assistance to
Services to Subscribers and for the maintenance of the equipment
used;
3.5. To provide the stations on a permanent basis with the necessary
equipment in accordance with high technological standards;
3.6. To use solely certified equipment and in accordance with the
approved technical authorizations and specifications, ensuring its
permanent and adequate maintenance;
3.7. To comply with any requirements made by the National Communications
Secretariat ("Secretaria Nacional de Comunicacoes" - SNC) in
connection with the Permissions, within the scope of its competence,
within the term established by SNC;
3.8 Not to use, order or consent to the use of the equipment or
installation affected to the Services without compliance with the
rules and conditions applicable to it;
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3.9. To allow access to the installations and equipment of any
supervision agent of the SNC, duly identified, carrying out,
respectively, an inspection or verification mission;
3.10. To avoid the occurrence of interference harmful to other
telecommunication or broadcasting services authorized and legally
installed, as a result of the operation of a station or equipment;
3.11. To promptly interrupt the functioning of a station, upon the receipt
of notice from the PERMISSION HOLDER, in compliance with a
determination of the Ministry of Communications necessitating such
interruption;
3.12. Not to create, in the carrying out of its activity, a situation
dangerous to human life or to property;
3.13. To provide the information required by SNC, for the purpose of
verifying how the Service is being operated and the Subscribers
assisted;
3.14. To maintain an updated file of documents regarding the legal
capacity, economic and financial capacity and technical operational
capacity, including with respect to the equipment used in the
operation, which shall be done according to the same terms of such
regulatory requirement applied to the PERMISSION HOLDER;
3.15. To assume full responsibility for the operation of the stations
under its care, as well as for the good and efficient assistance to
the Subscribers, undertaking to instruct its employees and officers
of the obligation hereby undertaken;
3.16. To maintain in strict confidentiality and secret the communications
which take place by means of the equipment, networks or systems
inherent to the contracted operation;
3.17. To be responsible for all costs and charges arising from the resale
and operation of the Services, including expenses with equipment,
installation, maintenance, operation, modernization and financing;
3.18. To assume full responsibility for the reselling of the services and
for obtaining Subscribers, receiving and collecting the payment of
the subscriptions, and giving receipts therefor.
3.19. To assume, in general, full responsibility before the PERMISSION
HOLDER for the acts and activities developed by it, which may result
in
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any charges, encumbrances or damages to PERMISSION HOLDER, pursuant
to clause 7 below.
Clause Four: RIGHTS OF THE OPERATOR
The rights of the OPERATOR are to carry all activities necessary to conduct the
business and operation of the Services, including:
4.1. To contract, sub-contract and take all the measures, operational or
not, which it deems necessary for the fulfillment of its obligations
with respect to the resale and operation of the Service and to the
assistance to Subscribers, the OPERATOR being solely responsible for
the costs and charges resulting from agreements it enters with third
parties;
4.2. To establish the value of the Services to be offered to the
Subscribers regarding the initial sign up payment as well as the
monthly fees;
4.3. To sell advertising space;
4.4. To collect and administer subscription fees, monthly fees and other
income related to the Services;
4.5. To program and carry out in full the marketing policy and the sales
effort with respect to the Services, promoting, advertising and
marketing the Services to the general public;
4.6. To execute and to rescind Subscription Agreements; and
4.7. To develop the clientele of the Service by means of the reference of
Subscribers of its own indication, it being understood that the
OPERATOR shall not be entitled to any additional remuneration in
addition to the global remuneration provided for in Clause 8 below,
by reason of the reference of its own Subscribers herein provided
for.
Clause Five: OBLIGATIONS OF PERMISSION HOLDER
5.1. The PERMISSION HOLDER grants to the OPERATOR, within the scope of
this Agreement, the right to use all existing equipment and
infra-structure inherent to the Service object of the mutual
Operating Agreement contracted hereby, it being expressly understood
that PERMISSION HOLDER shall not be entitled to any remuneration in
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<PAGE>
addition to the global remuneration provided for in Clause 8 below,
by reason of such assignment.
5.2. The PERMISSION HOLDER shall comply with the requirements made by any
competent governmental body or authority, within the term
established by it, immediately notifying the OPERATOR of the action
or information required from it to make such compliance possible.
Notwithstanding the foregoing the OPERATOR undertakes to supply the
PERMISSION HOLDER of any and all information, data, as well as to do
any and all things which may be requested by SNC in connection with
the Permissions.
5.3. The PERMISSION HOLDER shall assume, before SNC, a punctually
compliant and diligent behavior with respect to the legal,
regulatory and specific requirements of the Ordinances by which the
Permissions were granted.
5.4. The PERMISSION HOLDER will comply with all laws, statutes,
governmental regulations and all judicial or administrative tribunal
orders, judgments, writs, injunctions, decrees or similar commands
applicable to the grant of Permissions set forth in paragraph 2 and
3 of the preamble to this Agreement and shall not, by its action or
inaction, adversely and materially affect the status of the
Permissions.
5.5. The PERMISSION HOLDER shall use its best efforts, at the Operator's
expense, to obtain and maintain in full force and effect each
Permission and shall timely file and prosecute all necessary
applications for renewal and, when requested by, and at the expense
of, the Operator, for the expansion, modification or otherwise of
the Permissions. The Permission Holder shall not assign, transfer,
sell, trade, dispose or otherwise encumber the Permissions.
5.6. The PERMISSION HOLDER shall use its best efforts to provide the
Operator with (i) copies of all correspondence with any governmental
body or authority relating to the Permissions and (ii) access to all
files and other documents regarding the legal capacity, economic and
financial capacity and technical operational capacity maintained by
the PERMISSION HOLDER.
5.7. The PERMISSION HOLDER shall, if necessary and at the Operator's sole
risk and expense, join the Operator in any litigation or other
proceeding brought by or against the Operator relating to the
Services or the Permissions, including to prevent any unauthorized
individual or entity from transmitting signals that would interfere
with the Operator's signals.
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5.8. The PERMISSION HOLDER shall supply to the OPERATOR all and any
information, specially notices received from SNC, necessary for the
compliance with the obligations which are incumbent upon the latter,
including the access to documents relating to the Services,
eventually in the possession of the former.
5.9. The PERMISSION HOLDER undertakes neither to interfere in the
OPERATOR'S commercial relationship with Subscribers nor to request
the OPERATOR to rescind any Subscribers' Agreements with respect to
the clientele developed as a result of the commercial and marketing
efforts of the OPERATOR, except in the case of default of the
Subscriber in the fulfillment of its obligations, that can adversely
and materially affect the obligations and responsibilities of the
PERMISSION HOLDER before the government under the applicable rules.
5.10. The PERMISSION HOLDER hereby ackowledges the confidential character
of the list of Subscribers developed as a result of the commercial
and marketing efforts of the OPERATOR, as well as the OPERATOR'S
exclusive ownership of and rights related to such list.
5.11. The PERMISSION HOLDER hereby ackowledges the exclusive rights of the
OPERATOR to the use and exploitation of the Service Trademark, at
the OPERATOR's best will.
Clause Six: RIGHTS OF PERMISSION HOLDER
6.1. The PERMISSION HOLDER reserves the functional power of supervising
the good use of the spectrum inherent to the operation of the
Services;
6.2. The PERMISSION HOLDER shall be promptly assisted and or indemnified
by the OPERATOR, in the case of an administrative or judicial
proceeding filed against it or in the case of any penalty or
indemnity collected from it, provided that in any case such
proceeding, penalty or indemnity results from the default of the
OPERATOR in the fulfillment of its obligations herein provided for;
6.3. The payment of the expenses and Claims as defined below incurred
with any penalties and indemnities resulting from a default of the
OPERATOR shall be covered by the OPERATOR which for this purpose
shall timely provide the PERMISSION HOLDER with the necessary
amounts, upon request of the same.
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6.4. In the event the PERMISSION HOLDER advances the above referred
amounts, it shall be reimbursed up to three business days after its
advice to the OPERATOR, for the actual amount disbursed;
6.5. It is expressly understood that the PERMISSION HOLDER has no
obligation to make any such advance; and
6.6. The PERMISSION HOLDER also has the right to be reimbursed by the
OPERATOR for the reasonable expenses incurred by it, in connection
with the acts performed at the request of or in the interest of the
OPERATOR, arising from the provisions of this Agreement, provided
they are duly evidenced by means of a detailed report and a
supporting documentation.
Clause Seven: INDEMNITY
7.1. The OPERATOR shall indemnify, reimburse and hold harmless the
PERMISSION HOLDER, its officers, directors, agents, employees and/or
attorneys-in-fact, from and against any and all claims, damages,
losses, liabilities, demands, suits, judgments, causes of action,
legal proceedings, whether civil or criminal, penalties, fines and
other sanctions (herein jointly referred to as "Claims"), and any
reasonable attorney's fees in connection therewith, including any of
the foregoing arising or imposed as a result of this Agreement,
which may in any way arise or potentially arise or be related to the
OPERATOR'S acts or omissions and or the operation of the Paging
Services, including vis a vis the relationship of the OPERATOR and
the Subscribers.
7.2. Once payment is made to the party to be indemnified under the
provision of this Clause, the OPERATOR shall be surrogated in all of
the rights that the indemnified party might have against third
parties, including the manufacturer of the equipment, if applicable.
7.3. The obligation to indemnify provided for herein does not apply to
any claims for which the PERMISSION HOLDER, its officers, directors,
shareholders, agents, employees and/or attorneys-in-fact have
contributed with willful intent or fault.
7.4. The PERMISSION HOLDER shall indemnify the OPERATOR its officers,
directors, agents, employees and/or attorneys-in-fact, in the event
the Permissions are revoked or suspended, or in the event the resale
and operation now agreed become impossible by reason of gross
negligence of the PERMISSION HOLDER.
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7.5. In order to defend and preserve the Permissions, the OPERATOR shall
determine the measures to be followed by the PERMISSION HOLDER, who
shall act in accordance with the OPERATOR's determinations, to the
extent such measures comply with all applicable laws and
regulations.
Clause Eight: OPERATING INCOME, REMUNERATION
8.1. The OPERATOR shall be entitled to the operating income generated by
the resale and operation of the Services, especially income
generated in connection with the contracts executed by the OPERATOR
with the subscribers, but also including any income generated by the
exploitation of ancilliary actvities, the PERMISSION HOLDER hereby
assigning to the OPERATOR any rights it might be entitled to at any
time with respect to such income.
8.2. In view of the assignment above, the PERMISSION HOLDER, in any
agreements it eventually comes to enter into with Subscribers, as a
result of a regulatory requirement, shall notify such Subscribers of
the assignment effected hereby, instructing them to make all
payments directly to the OPERATOR, at the place designed by it.
8.3. The OPERATOR undertakes the responsibility of providing all
necessary documentation regarding the notification and instruction
referred to in item 8.2. above, being the obligation of the
PERMISSION HOLDER limited to signing whatever is necessary and
proposed by the OPERATOR to accomplish item 8.2.
8.4. For the grant of the operation and for the assignment of the rights
arising from the agreements executed with the Subscribers, the
PERMISSION HOLDER is receiving from the OPERATOR's share holders
subscription bonds to purchase 2,5% (two and a half percent) of the
common stock of the OPERATOR (pre-management dilution).
Clause Nine: TAXES
9.1. The OPERATOR undertakes to pay all taxes which are directly or
indirectly levied upon the operation and resale of the Services, as
well as for the payment of any fees related thereto.
9.2. The OPERATOR hereby undertakes to reimburse the PERMISSION HOLDER
for all taxes and fees arising directly from the activities carried
out by the OPERATOR, undertaking full responsibility for any
penalties
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and/or late charges caused by it, no matter when this occurs,
including beyond the term of this Agreement, except for income tax
levied on the PERMISSION HOLDER other than income tax levied upon an
indemnification paid by the OPERATOR to the PERMISSION HOLDER,
according to Clause 7.
9.3. The OPERATOR shall be responsible for any infringements and for any
fiscal violations arising from the execution and performance of this
Agreement.
9.4. During the period this Agreement is in effect, in the event one of
the parties acquires a fiscal exemption for the development of its
activity, the other shall fulfill, as applicable, the accessory
conditions necessary for such exemption.
Clause Ten: CONFIDENTIALITY
10.1. It is hereby agreed that any and all information already supplied or
which comes to be supplied by one party to the other as a result of
this Agreement, specially those regarding the strategic-economic
plan of the operation now contracted, are confidential, and each
party shall and shall cause its representatives, agents, employees,
servants and consultants, to keep any information provided to it by
the other party in strict confidentiality, refraining from divulging
such information in whole or in part, without the previous written
consent of the other party.
10.2. The parties agree as of now that they shall not be responsible for
the violation of the confidentiality obligation provided for in this
clause in the event of a legal or judicial determination which
forces them to disclose to third parties information acquired within
the scope of this instrument, as well as information which becomes
public without their interference.
Clause Eleven: TERM
11.1. This Agreement shall come into effect on the date of its execution
and shall remain in effect with respect to the parties, for the term
of fifteen (15) years, automatically renewable for successive
fifteen (15) year periods, unless no later than 1 (one) year prior
to the end of any term
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notice is given by either party that the Agreement will not be
renewed, up to the maximum term equivalent to the term of
effectiveness of the Permissions or its renewal.
11.2. The parties may rescind this Agreement by mutual consent, provided
the continuity of the services and the operation of the activities
is ensured.
Clause Twelve: MUTUAL COOPERATION
The parties, within the strict compliance with their obligations and within the
scope of the present instrument, shall cooperate with one another before the
Ministry of Communications and other bodies of the Federal, State and Municipal
Public Administrations.
Clause Thirteen: ASSIGNMENT AND TRANSFER
13.1. The direct assignment or transfer of rights and obligations of the
OPERATOR arising from this Agreement can only be performed without
any consent from the PERMISSION HOLDER in addition to the consent
already expressed herein, if to a company which is also an operator,
provided it is affiliated with the OPERATOR, and further provided
that such assignee or transferee specifically assumes such
obligations.
13.2. For purposes of this clause, "affiliated company" shall mean with
respect to the OPERATOR, any and all associated companies as defined
in article 243, first paragraph of the Law 6404/76 (Brazilian
Corporation Law) or any company which, directly or indirectly,
controls, is controlled by or is under common control with the
OPERATOR at the time of the transfer and remains as an affiliated
company throughout the term this Agreement is in effect.
13.3. Notwithstanding the provisions of Clause 13.1. this Agreement and
the rights and obligations of the OPERATOR arising hereunder may be
assigned to any company that is acquiring all or substantially all
of the assets of the OPERATOR with the consent of the PERMISSION
HOLDER, which consent shall not be unreasonably withheld or delayed.
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Clause Fourteen: REPRESENTATIONS AND WARRANTIES OF THE PARTIES
14.1. Except as otherwise provided in this Section, each party represents
and warrants to the other, as to itself that:
(i) such party is a duly organized, validly existing and in good
standing under the laws of Brazil;
(ii) that the execution and delivery by such party of this
Agreement, the consummation by such party of the transactions
contemplated herein and compliance with the terms and
provisions hereof are within such party's corporate powers,
and do not and will not result in a violation of such party's
charter or by-laws as currently in effect;
(iii) this Agreement has been duly authorized, executed and
delivered by such party and is a legal, valid and binding
obligation of such party, enforceable against such party in
accordance with its terms, except as its enforceability may be
limited by bankruptcy, insolvency, reorganization and other
laws of general application affecting the enforcement of
creditor's rights in general;
(iv) according to the law, rules and regulations currently in
force, and the current interpretation thereto, no consent,
approval or authorization of any governmental authority is
required in connection with the execution, conclusion or is
actually enforcement of this Agreement;
(v) the PERMISSION HOLDER represents and warrants that the
Permissions were duly and validly issued in accordance with
the applicable legislation and are in full force and effect,
and that all of the conditions provided for in such
Permissions and in the applicable regulations have been
complied with in full, including but not limited to the
compliance with the term for the start up of operations, as
well as the technical characteristics of the Service provided
for in the Certificate of Project Approval;
(vi) the PERMISSION HOLDER represents and warrants that the
Permissions are free and clear of any liens and encumbrances
of any nature and that it has no knowledge of the existence of
any claim or proceeding, judicial or administrative, aiming at
modifying, suspending, revocating or terminating the
Permissions;
(vii) the PERMISSION HOLDER represents and warrants that its tax
obligations have been fulfilled up to the present date, all
income tax returns required by the tax authorities having been
duly filed; and
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(viii) the PERMISSION HOLDER represents and warrants that it made
the payment of the fees due in connection with receipt the
license for the functioning of the stations of the Service, of
the telecommunications supervision fee corresponding to the
stations to be installed, for purposes of receiving the
licenses for the functioning of the stations, as well as the
supervision fee with respect to the current year.
Clause Fifteen: JURISDICTION
15.1. This Agreement and all questions arising in connection with its
interpretation and legal relations between the parties in connection
herewith shall be governed and construed in accordance with the
substantive law of Brazil.
15.2. All disputes and differences arising from or in connection with this
Agreement, or in relations between the parties with respect to the
subject matter hereof, shall be finally settled by binding
arbitration in accordance with the Rules for Conciliation and
Arbitration of the International Chamber of Commerce (ICC) by three
arbitrators appointed in accordance with said Rules. The place of
arbitration shall be New York, New York, and the arbitration
proceedings shall be conducted in English.
15.3. If for any reason, notwithstanding the international character of
this Agreement and the diverse nationalities of the shareholders in
the companies parties to the same, the preceding clause 15.2. should
not be applied or be held invalid by any court in Brazil or in the
United States of America, the parties specifically agree that any
dispute or controversy relating to this Agreement or otherwise
described in clause 15.2. shall be decided solely and exclusively by
the competent courts of the State of New York, United States of
America.
Clause Sixteen: REFORMATION
16.1. If any competent governmental body or authority should amend or
clarify the law, rules, regulations or policies, or if any court
should interpret any law, regulation or policy in a manner that
would materially adversely affect the rights or obligations of the
parties under this Agreement, then the parties hereto shall promptly
negotiate using their best efforts and in good faith to reform and
amend this Agreement so as to effectuate as nearly as reasonably
possible the intention of the parties expressed in this Agreement.
No party shall take any action that contributes to such
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amendment, clarification or interpretation without the prior written
consent of the other party. Only in the event the parties are unable
to reach the agreement with respect to the appropriate action to be
taken shall the offending provision(s) be stricken from this
Agreement and the remainder of the Agreement shall be enforced to
the greatest extent permitted by law.
16.2. In what specially regards the provision of Subscribers Agreements,
the parties hereto commit themselves to use their best efforts to
maintain permanently updated information concerning the most recent
regulamentary standards or otherwise recommended by the Ministry of
Communications, to which the Operator shall, as it deems necessary,
consult the Ministry of Communications. It is incumbent to the
Operator to update and develop the proposals of model or standards
considered to be the most adequate to the business conditions,
always observing the above mentioned regulamentary or ministerial
criterias.
16.3. As a condition to the best performance of its obligations and to
assume its continuous representation before the Ministry of
Communications the PERMISSION HOLDER shall grant a power-of-attorney
to persons chosen by mutual agreement with the OPERATOR, conferring
upon them the necessary powers.
Clause Seventeen: GENERAL PROVISIONS
17.1. This Agreement can only be amended with the express consent of both
parties, by means of a written instrument executed by both parties.
17.2. So as to avoid eventual conflicts of interest, the PERMISSION HOLDER
shall not directly assign or negotiate away any interest in, or
negotiate any matters related to, this Agreement, or the
Permissions.
17.3. All publicity and marketing material prepared by the OPERATOR or the
PERMISSION HOLDER within the scope of this Agreement shall be the
property of the OPERATOR.
17.4. The PERMISSION HOLDER and the OPERATOR reciprocally undertake to
inform one another, of any and all operational or technical measure,
or any other action, especially before the Public Administration,
which may adversely affect the activities of either of them, within
the scope of the rights and obligations arising from this Agreement.
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17.5. All communications under this Agreement shall be in writing and
shall be delivered by hand, internationally recognized air courier
or facsimile transmission, charges prepaid:
(i) if to the OPERATOR, at Rua Alexandre Dumas, 1711, facsimile
number (011) 521 1814, marked for the attention of Mr. Thomas
Trynin or Marco Fregenal, or at such other address as the
OPERATOR may have furnished in writing to the PERMISSION
HOLDER;
(ii) if to the PERMISSION HOLDER, at Av. Presidente Wilson, 231,
28th floor (part), Rio de Janeiro, R.J., facsimile number
(021) 240-9575, marked for the attention of Mr. Daniel Valente
Dantas, or at such other address as the PERMISSION HOLDER may
have furnished in writing to the OPERATOR.
17.6. No party to this Agreement shall, by virtue of having entered into
this Agreement, be deemed to be the legal representative or agent of
any other party, and no party shall have the right or authority to
approve, create, or incur any liability or any obligation of any
kind, express or implied, against or in name of or on behalf of any
other party, except to the extent otherwise expressly provided in
this Agreement.
17.7. Specifically concerning the reciprocal commercial positions of the
Parties, it is their intention, in accordance with Ordinance number
257/91, of October 23, issued by the Ministry of Communications,
that the OPERATOR is not an agent of the PERMISSION HOLDER, but a
reseller of the Services.
17.8. This Agreement constitutes the entire understanding of the parties
hereto relating to the subject matter hereof and supersedes all
prior agreements or understandings with respect to the subject
matter hereof among such parties.
17.9. The authoritative text of this Agreement shall be the English text.
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In witness whereof, the parties have caused this Agreement to be duly executed
in 03 (three) counterparts of equal content and form, in the presence of the two
witnesses below.
Sao Paulo, December 11th, 1996
/s/ Eduardo Penido Monteiro
-------------------------------------------
MULTIPONTO TELECOMUNICACOES LTDA.
Eduardo Penido Monteiro
attorney-in-fact
/s/ Thomas Crane Trynin
/s/ Marco Antonio Fregenal
-------------------------------------------
PAGING NETWORK DO BRASIL S.A.
Thomas Crane Trynin Marco Antonio Fregenal
Officer Officer
WITNESSES:
1. /s/ Roberto Duque Estrada
--------------------------
Roberto Duque Estrada
OAB/RJ 80.668
CPF/MF 016.468.087-03
2. /s/ Maria Gabriela Campos da Silva
-----------------------------------
Maria Gabriela Campos da Silva
OAB/RJ 84.606-E
CPF/MF 016.706.607-29
<PAGE>
AGREEMENT OF PROMISE OF ASSIGNMENT AND TRANSFER
OF PERMISSIONS
BY MEANS OF THIS PRIVATE INSTRUMENT:
I. MULTIPONTO TELECOMUNICACOES LTDA., a civil limited liability company
organized and existing under the laws of the Federative Republic of
Brazil, with head offices in the City of Rio de Janeiro, State of
Rio de Janeiro, at Av. Presidente Wilson, 231, 28th floor (part),
registered as taxpayers under CGC No. 086.982.675 /0001-07, herein
represented by its duly empowered attorney-in-fact Mr. EDUARDO
PENIDO MONTEIRO, Brazilian, married, engineer, resident and
domiciled in the City of Rio de Janeiro, State of Rio de Janeiro,
with identity card number 1029543 issued by SSP-BA, registered as
taxpayer under CPF number 094323965-68, hereinafter referred to
simply as "PROMISING TRANSFEROR";
AND
II. PAGING NETWORK DO BRASIL S.A., a corporation, organized and existing
under the laws of the Federative Republic of Brazil, with head
offices in the City of Sao Paulo, State of Sao Paulo, at Rua
Alexandre Dumas, number 1711, registered as taxpayer under CGC/MF
No. 01.126.946/0001-61, herein represented by its Officers Mr.
Thomas Crane Trynin, American citizen, single, business
administrator, bearer of identity card No. V192319-I and CPF No.
214308398-05 and Mr. Marco Antonio Fregenal, Brazilian citizen,
married, business administrator, bearer of identity card No.
35355458-5 and CPF 214170768-49; hereinafter referred to simply as
"PROMISING TRANSFEREE";
WHEREAS:
1. The PROMISING TRANSFEROR is the holder of permissions granted by the
Ministry of Communications for the exploitation of Paging Services
("Servico Especial de Radiochamada") ("the Paging Services"), in
accordance with Ordinances issued by the Ministry of Communication
Number 497, 498, 499, 500, 501, 502, 503 and 504, all dated as of
July 18, 1994 and published in the Official Gazette of July 22, 1994
except for
<PAGE>
Ordinance No. 502 published in the Official Gazette of July 25, 1994
(the "Permissions"), which attached hereto as Exhibit I, are an
integral part hereof as if they had been herein transcribed in full;
2. Having in view the amplification of the rendering of the services in
the Brazilian territory the PERMISSION HOLDER has requested the
Ministry of Communications the transformation of the Permissions
into Permissions to National Restricted Exploitation (solely
National Restricted Permissions, and together with the Permissions,
also "Permissions") according to Ordinance No. 579/94, of August 2,
1994;
3. The PROMISING TRANSFEROR has entered into an agreement for the
resale of its Paging Services and mutual operating agreement with
the PROMISING TRANSFEREE (The "Operating Agreement");
4. The PROMISING TRANSFEREE has made investments in the installation,
operation and provision of the Paging Services, and has been
developing commercial and marketing efforts with its operation and
the resale;
5. The PROMISING TRANSFEREE has expressed its wish to acquire the
Permissions and the PROMISING TRANSFEROR agrees to transfer them to
the PROMISING TRANSFEREE;
6. The PROMISING TRANSFEREE desires to purchase said Permissions, to
which the PROMISING TRANSFEROR agrees;
7. The PROMISING TRANSFEROR and the PROMISING TRANSFEREE acknowledge
the legal demand for obtaining the prior authorization of the
Ministry of Communications in order to have the Permissions
transferred,
NOW, THEREFORE:
The Parties have agreed to enter in this Agreement of Promise of Assignment and
Transfer of Permissions with respect to Paging Services (the "Agreement"), in
accordance with the clauses and conditions specified below:
Clause One: DESCRIPTION OF THE PERMISSIONS
The Permissions are all of those described in Exhibit I hereto, which initialed
by the parties become an integral part of this Agreement, including any and all
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inherent rights of exploitation, namely, but not limited to, those arising from
distinct extensions or modalities of exploitation at any time granted to the
PROMISING TRANSFEROR by all and any Permissions to National Restricted
Exploitation.
Clause Two: PURPOSE
The PROMISING TRANSFEROR hereby promises to transfer to the PROMISING TRANSFEREE
and the latter promises to acquire the Permissions attached hereto as Exhibit I,
which shall be considered to have been transcribed in full herein, including any
and all inherent rights of exploitation, namely, but not limited to, those
arising from distinct modalities of exploitation at any time granted to the
PROMISING TRANSFEROR by all and any Permissions to National Restricted
Exploitation, or other modalities of exploitation.
First Paragraph: The definitive transfer of title to the Permissions of
the PROMISING TRANSFEROR to the PROMISING TRANSFEREE shall be made by
means of the execution of one or more definitive transfer agreements
relating to each of the Permissions individually, in groups or jointly, at
the option of the PROMISING TRANSFEREE.
Second Paragraph: For purposes of the definitive transfer of title to the
Permissions by the PROMISING TRANSFEREE, as provided in the First
Paragraph above, it is incumbent upon it to present to the PROMISING
TRANSFEROR the text of the definitive transfer agreement or agreements,
depending on whether it opts for the joint transfer of the Permissions, or
for their transfer individually or in groups.
Third Paragraph: For purposes of the provisions of the preceding
paragraph, the PROMISING TRANSFEROR grants on the date hereof an
irrevocable power-of-attorney to persons chosen by mutual agreement
between the PROMISING TRANSFEROR and the PROMISING TRANSFEREE, conferring
upon them the necessary powers to carry out the transfer.
Fourth Paragraph: It is understood that the transfer or transfers of the
Permissions include the transfer to the PROMISING TRANSFEREE of any
equipment, cables, transmitters, receivers and other infrastructure, and
all user's rights related to such infrastructure then owned or entitled to
the PROMISING TRANSFEROR and affected to the service.
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Fifth Paragraph: With the transfer of the Permissions, the parties
consider automatically assigned and transferred to the PROMISING
TRANSFEREE all the PROMISING TRANSFEROR's rights arising from any and all
subscriber agreements.
Clause Three: THE DEFINITIVE TRANSFER AGREEMENT(S)
The definitive agreement(s) for the transfer of title to the Permissions shall
be granted by the PROMISING TRANSFEROR in favor of PROMISING TRANSFEREE or in
favor of whom it may indicate, it being recognized by the PROMISING TRANSFEROR,
as of now, that the PROMISING TRANSFEREE has the right to be substituted in its
contractual position in this Agreement one or more times, without the PROMISING
TRANSFEROR's consent, pursuant to its option for the joint, isolated or grouped
transfer of the Permissions, being able, for this purpose, to indicate one or
several interested parties, as the case may be, subject to any applicable legal
and regulatory requirements.
Clause Four: TERM FOR THE EXECUTION OF THE DEFINITIVE AGREEMENT(S)
The definitive agreement(s) for the transfer of title to the Permissions shall
be executed by the PROMISING TRANSFEROR and PROMISING TRANSFEREE, as soon as the
former has obtained from the Ministry of Communications the competent
authorization in accordance with items 6.11 and 6.11.1 of the General
Telecommunications Rule ("Norma Geral de Telecomunicacoes") approved by
Ordinance No. 232/91 of October 23 and item II.9, of the Specific Conditions of
the Specific Telecommunications Rule ("Norma Especifica de Telecomunicacoes"),
approved by Ordinance No. 257/91 of October 23, i.e. once the three (3) year
period counted from the date of issuance of the functioning license (or such
shorter period as may then be applicable) and the above referred express
authorization is obtained.
First Paragraph: The term referred to in the previous item shall be,
however, anticipated upon the earlier of the following situations:
(i) in accordance with the precise terms of an eventual legislative or
administrative change, regarding the terms of the transfer of the
Permissions;
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(ii) when any express authorization has been obtained for the direct
assignment and transfer; or
(iii) when any alternative solution, in accordance with the Second and
Third Paragraphs below, has been allowed.
Second Paragraph: The PROMISING TRANSFEROR shall use its best efforts so
as to obtain the previous administrative authorization(s) required in
connection with the execution of the definitive transfer agreement,
cooperating, in a diligent and active manner, in all bureaucratic
proceedings which may be necessary or convenient to accomplish such end.
The PROMISING TRANSFEROR also agrees, if necessary, to look for
alternative solutions to make such transfer possible, provided such
alternative solutions are not excessively burdensome.
Third Paragraph: The PROMISING TRANSFEREE shall cooperate, in a diligent
and active manner, for the accomplishment of occasional bureaucratic
requirements and, if necessary, to search for the alternative solutions in
order to allow such transfer, being provided that said solutions are not
excessively burdensome.
Fourth Paragraph: For purposes of the provisions of the preceding
paragraphs, the PROMISING TRANSFEROR grants, on the date hereof, an
irrevocable power-of-attorney to persons chosen by mutual agreement
between PROMISING TRANSFEROR and the PROMISING TRANSFEREE, conferring upon
them the necessary powers to effectuate the transfer of the rights.
Clause Five: REPRESENTATIONS AND WARRANTIES OF THE PROMISING TRANSFEROR
First Paragraph: The PROMISING TRANSFEROR is a limited liability company
duly organized, validly existing and in good standing under the laws of
the Federative Republic of Brazil and has full corporate power and
authority to carry on its business as it is now being conducted and to own
all of its properties and assets. The PROMISING TRANSFEROR is duly
qualified to do business and is in good standing in each jurisdiction in
which the ownership of its properties or the conduct of its business
requires such qualification.
Second Paragraph: The PROMISING TRANSFEROR has all necessary corporate
power and authority and has taken all corporate action necessary to enter
into this Agreement, to consummate the transactions contemplated on its
part
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hereby and to perform its obligations hereunder. The execution, delivery
and performance of this Agreement and the consummation of the transactions
described herein by the PROMISING TRANSFEROR have been duly authorized by
all requisite corporate action. This Agreement has been duly executed and
delivered by the PROMISING TRANSFEROR and, assuming the due execution and
delivery thereof by the PROMISING TRANSFEREE, is a valid and binding
obligation of the PROMISING TRANSFEROR, enforceable against it in
accordance with its terms.
Third Paragraph: As of the date of this Agreement, the PROMISING
TRANSFEROR has good title to all of the Permissions, free and clear of any
and all liens, charges, pledges, mortgages, security interests or other
encumbrances of any kind, except for governmental restrictions on the
transfer thereof.
Fourth Paragraph: The business of the PROMISING TRANSFEROR has been
operated in material compliance with all applicable laws, statutes, rules,
regulations, ordinances, codes, orders, licenses, permits or
authorizations, as such now apply to such business, and to the knowledge
of the PROMISING TRANSFEROR no notification has been received alleging any
violation of any of the foregoing.
Fifth Paragraph: Neither the execution, delivery nor performance of this
Agreement or any of the transactions contemplated hereby will (i) violate
or conflict with any provision of the organizational documents of the
PROMISING TRANSFEROR, (ii) result in a breach of or a default under any
material provision of any contract, agreement, lease, commitment, license,
franchise, permit, authorization or concession to which the PROMISING
TRANSFEROR is a party or bound or to which any property or asset of the
PROMISING TRANSFEROR is subject or an event which with notice, lapse of
time, or both, would result in any such breach or default, or (iii) result
in violation by the PROMISING TRANSFEROR of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree, or award, or
an event which with notice, lapse of time, or both, would result in any
such violation, which breach, default or violation would have a material
adverse effect on the ability of the PROMISING TRANSFEROR to consummate
the transactions contemplated hereby.
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Clause Six: REPRESENTATIONS AND WARRANTIES OF THE PROMISING TRANSFEREE
First Paragraph: The PROMISING TRANSFEREE is a corporation (S.A.) duly
organized, validly existing and in good standing under the laws of the
Federative Republic of Brazil and has full corporate power and authority
to carry on its business as it is now being conducted and to own all of
its properties and assets. The PROMISING TRANSFEREE is duly qualified to
do business and is in good standing in each jurisdiction in which the
ownership of its properties or the conduct of its business requires such
qualification.
Second Paragraph: The PROMISING TRANSFEREE has all necessary corporate
power and authority and has taken all corporate action necessary to enter
into this Agreement, to consummate the transactions contemplated on its
part hereby and to perform its obligations hereunder. The execution,
delivery and performance or this Agreement and the consummation of the
transactions described herein by the PROMISING TRANSFEREE have been duly
authorized by all requisite corporate action. This Agreement has been duly
executed and delivered by the PROMISING TRANSFEREE and, assuming the due
execution and delivery thereof by the PROMISING TRANSFEROR, is a valid and
binding obligation of the PROMISING TRANSFEREE, enforceable against it in
accordance with its terms.
Third Paragraph: The business of the PROMISING TRANSFEREE has been
operated in material compliance with all applicable laws, statutes, rules,
regulations, ordinances, codes, orders, licenses, permits or
authorizations, as such now apply to such business, and to the knowledge
of the PROMISING TRANSFEREE no notification has been received alleging any
violation of any of the foregoing.
Fourth Paragraph: Neither the execution, delivery nor performance of this
Agreement or any of the transactions contemplated hereby will (i) violate
or conflict with any provision of the organizational documents of the
PROMISING TRANSFEREE, (ii) result in a breach of or a default under any
material provision of any contract, agreement, lease, commitment, license,
franchise, permit, authorization or concession to which the PROMISING
TRANSFEREE is a party or bound or to which any property or asset of the
PROMISING TRANSFEREE is subject or an event which with notice, lapse of
time,
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or both, would result in any such breach or default, or (iii) result in
violation by the PROMISING TRANSFEREE of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree, or award, or
an event which with notice, lapse of time, or both, would result in any
such violation, which breach, default or violation would have a material
adverse effect on the ability of the PROMISING TRANSFEREE to consummate
the transactions contemplated hereby.
Clause Seven: MUTUAL COVENANTS OF THE PARTIES
First Paragraph: From the date hereof until the date upon which the
definitive agreement(s) for the transfer of the Permissions are executed,
the PROMISING TRANSFEROR shall:
(a) not take any action that would result in the rescission of the grant
of the Permissions to the PROMISING TRANSFEREE, or any action
inconsistent with the consummation of the transactions contemplated
hereby;
(b) take all action necessary to maintain good title to the Permissions,
including using its best efforts to preserve generally the present
relationships with persons or governmental agencies instrumental in
the granting of the Permissions; or
(c) not sell, transfer or otherwise dispose of any of the Permissions or
permit any lien, charge, pledge, mortgage, security interest or
other encumbrance of any kind to exist thereon.
Second Paragraph: From the date hereof until the date upon which the
definitive agreement(s) for the transfer of the Permissions are executed,
the PROMISING TRANSFEREE shall not take any action inconsistent with the
consummation of the transactions contemplated hereby.
Clause Eight: CONSIDERATION
As consideration for the transfer of all the Permissions, now promised,
the PROMISING TRANSFEROR acknowledges receipt from PROMISING TRANSFEREE,
of (i) subscription bonds ("SB") to purchase 2.5% (two and a half percent)
of the common stock (the "Common Stock") of PROMISING TRANSFEREE
(pre-management dilution), and also (ii) the right to subscribe, up to the
limit of 2.000 shares of PROMISING TRANSFEREE's preferred stock.
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Sole Paragraph: The failure of the PROMISING TRANSFEROR to complete the
assignment and transfer now agreed, once the regulatory term has elapsed
and the approval of the competent authorities is obtained, and provided
that the breach was not the result of the action or inaction of a
government or regulatory authority, such as the Ministry of Communications
of Brazil, shall give rise to the forfeit of its equity interest in the
PROMISING TRANSFEREE.
Clause Nine: JURISDICTION
9.1. This Agreement and all questions arising in connection with its
interpretation and legal relations between the parties in connection
herewith shall be governed and construed in accordance with the
substantive law of Brazil.
9.2. All disputes and differences arising from or in connection with this
Agreement, or in relations between the parties with respect to the
subject matter hereof, shall be finally settled by binding
arbitration in accordance with the Rules for Conciliation and
Arbitration of the International Chamber of Commerce (ICC) by three
arbitrators appointed in accordance with said Rules. The place of
arbitration shall be New York, New York, and the arbitration
proceedings shall be conducted in English.
9.3. If for any reason, notwithstanding the international character of
this Agreement and the diverse nationalities of the shareholders in
the companies parties to the same, the preceding clause 9.2. should
not be applied or be held invalid by any court in Brazil or in the
United States of America, the parties specifically agree that any
dispute or controversy relating to this Agreement or otherwise
described in clause 9.2. shall be decided solely and exclusively by
the competent courts of the State of New York, United States of
America.
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In witness whereof, the parties have caused this Agreement to be duly executed
in three (3) counterparts of equal content and form, in the presence of the two
witnesses below.
Sao Paulo, December 11th, 1996
/s/ Eduardo Penido Monteiro
------------------------------------------
MULTIPONTO TELECOMUNICACOES LTDA.
Eduardo Penido Monteiro
attorney-in-fact
/s/ Thomas Crane Trynin
/s/ Marco Antonio Fregenal
------------------------------------------
PAGING NETWORK DO BRASIL S.A.
Thomas Crane Trynin Marco Antonio Fregenal
Officer Officer
WITNESSES:
1. /s/ Roberto Duque Estrada
--------------------------
Roberto Duque Estrada
OAB/RJ 80.668
CPF/MF 016.468.087-03
2. /s/ Maria Gabriela Campos da Silva
-----------------------------------
Maria Gabriela Campos da Silva
OAB/RJ 84.606-E
CPF/MF 016.706.607-29
<PAGE>
OPERATING AGREEMENT AND OTHER COVENANTS
BETWEEN:
I. TVA SISTEMA DE TELEVISAO S.A., a corporation organized and existing under
the laws of the Federative Republic of Brazil, with head offices in the
City of Sao Paulo, State of Sao Paulo, at Rua do Rocio, 313, Vila Olimpia,
registered as taxpayer under CGC No. 71.613.400/0001-10, herein
represented by its duly empowered legal representative, hereinafter
referred to simply as "PERMISSION HOLDER";
AND
II. PAGING NETWORK DO BRASIL S.A., a corporation, organized and existing under
the laws of the Federative Republic of Brazil, with head offices in the
City of Sao Paulo, State of Sao Paulo, at Rua Alexandre Dumas, number
1711, registered as taxpayer under CGC/MF No. 01.126.946/0001-61, herein
represented by its Officers Mr. Thomas Crane Trynin, American citizen,
single, business administrator, bearer of identity card No. V192319-I and
CPF No. 214308398-05 and Mr. Marco Antonio Fregenal, Brazilian citizen,
married, business - administrator, bearer of identity card No. 35355458-5
and CPF 214170768-49 hereinafter referred to simply as "OPERATOR";
WHEREAS:
1. Among the governmental directives applicable to the Communications
Sector, stands out the need for diversification of the
telecommunications services, for improvement of their quality and
expansion of such services, at the level of a greater participation
of the private sector, to the benefit of the final user;
2. The PERMISSION HOLDER is the holder of Permissions granted by the
Ministry of Communications for the exploitation of Paging Services
("Servico Especial de Radiochamada") (the "Services"), for the
purpose of being rendered to third parties, for the term of fifteen
(15) years, renewable for an equal period, in accordance with the
provisions of Ordinances issued by the Minister of Communications
Number 1202, 1205, dated as of
<PAGE>
December, 22nd, 1994, and published in the Official Gazette of
December, 30th; 1203, 1204, 1206, dated as of December, 22nd, 1994,
and published in the Official Gazette of December, 29th; 1264 and
1265, dated as of December, 26th, 1994, published in the Official
Gazette of December, 29th, which are attached hereto as Exhibit I
(the "Permissions");
3. Having in view the amplification of the rendering of the services in
the Brazilian territory the PERMISSION HOLDER has requested the
Ministry of Communications the transformation of the Permissions
into Permissions to National Restricted Exploitation (solely
National Restricted Permissions, and together with the Permissions,
also "Permissions") according to Ordinance No. 579/94, of August 2,
1994;
4. The PERMISSION HOLDER wishes to broaden its activity in the market,
providing an efficient and competitive service to the Subscribers
(as hereinafter defined) and, therefore, wishes to have the
cooperation of an entity with technical capability and with the
necessary financial resources, in the resale and operation of the
Services ;
5. The OPERATOR is a company with capital to invest in the
installation, operation and provision of the Services, as well as
know-how and technical capability to operate and provide the
respective resale to the Subscribers, so as to cooperate with the
PERMISSION HOLDER in providing an efficient and competitive service
to the Subscribers;
6. The provisions of the Specific Telecommunications Rule ("Norma
Especifica de Telecomunicacoes" - NET) No. 05/DNPV, approved by
Ordinance No. 257/91, of October 23, 1991, which expressly foresees
in its item 27.3 that the holders of permissions of Paging Services
may utilize other entities as resellers of their Services, by means
of mutual operating agreements;
7. The parties wish to formalize the above referred agreement,
regulating their respective rights and obligations with respect to
the resale and operation of the Services,
the parties have agreed to enter into this Operating Agreement and Other
Covenants (the "Agreement"), in accordance with the clauses and conditions
specified below:
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Clause One: DEFINITIONS AND INTERPRETATION
The following terms shall have the following meanings for all purposes of
this Agreement and such meanings shall be equally applicable to both the
singular and the plural forms of the terms defined:
1.1. "Paging Services" or "Servico Especial de Radiochamada" shall mean
the special telecommunications service with the purpose of
transmitting specially codified call signals, addressed to
Subscribers of the service, through the systems of tone and
transmission of information by sound, numeric and alpha numeric
displays.
1.2. "Permissions" shall mean the Ordinances which granted permission for
the exploitation of Paging Services No. 1202, 1205, dated as of
December, 22nd, 1994, and published in the Official Gazette of
December, 30th; 1203, 1204, 1206, dated as of December, 22nd, 1994,
and published in the Official Gazette of December, 29th; 1264 and
1265, dated as of December, 26th, 1994, published in the Official
Gazette of December, 29th, which are attached hereto as Exhibit I
and are an integral part of this instrument, as if the contents
thereof were transcribed in full herein, as well as all and any
Ordinances that may be published in the Official Gazette granting
Permissions to National Restricted Exploitation, or other extensions
of modalities of exploitation;
1.3. "Services" shall mean the Paging Services ("Servico Especial de
Radiochamada") to be resold by the Operator hereunder.
1.4. "Subscribers" shall mean the users of the Services which have
entered into a Subscription Agreement.
1.5. "Subscription Agreement" shall mean the agreement with respect to
the rendering of Services, entered into between the Subscribers and
the PERMISSION HOLDER prior to the date of this Agreement, as well
as new agreements to be entered into between future Subscribers and
the OPERATOR, by means the grant of authority hereunder to the
OPERATOR, as well as the procurement and follow-up of requests or
proposals or execution thereof by the OPERATOR.
1.6. "Territory" shall mean the Service areas specified in Ordinances
1202, 1203, 1204, 1205, 1206, 1264 and 1265, collectively
considered, and comprehends all extensions and modalities of
exploitation that may be permitted or licensed, including but not
limited to, local and national extensions.
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1.6.1. Ordinance 1202 covers the localities of Aruja, Barueri,
Carapicuiba, Cotia, Diadema, Embu, Embu-Guacu, Ferraz de
Vasconcelos, Guarulhos, Itapecerica da Serra, Itapevi,
Itaquaquecetuba, Jandira, Maua, Mogi das Cruzes, Osasco, Poa,
Santo Andre, Sao Bernardo do Campo, Sao Caetano do Sul, Sao
Paulo e Suzano, all in the State of Sao Paulo, having as
service area 3000 Km2 in the frequency of 931 MHz, channel
931,6625 MHz;
1.6.2. Ordinance 1203 covers the locality of Goias, in the State of
Goiania, having as service area 1200 Km2 in the frequency of
931 MHz, channel 931,6625 MHz;
1.6.3. Ordinance 1204 covers the locality of Distrito Federal,
having as service area 1200 Km2 in the frequency of 931 MHz,
channel 931,6625 MHz;
1.6.4. Ordinance 1205 covers the localities of Porto Alegre and
Canoas, all in the State of Rio Grande do Sul, having as
service area 1200 Km2 in the frequency of 931 MHz, channel
931,6625 MHz;
1.6.5. Ordinance 1206 covers the localitiy of Belem, in the State of
Para having as service area 1200 Km2 in the frequency of 931
MHz, channel 931,6625 MHz;
1.6.6. Ordinance 1264 covers the localities of Curitiba and Sao Jose
dos Pinhais, all in the State of Parana, having as service
area 1200 Km2 in the frequency of 931 MHz, channel 931,6625
MHz;
1.6.7. Ordinance 1265 covers the localities of Rio de Janeiro,
Niteroi, Sao Goncalo, all in the State of Rio Grande do Sul,
having as service area 1200 Km2 in the frequency of 931 MHz,
channel 931,6625 MHz.
1.7. "Service Trademark" shall mean the trademark utilized to identify
the business as specified in Exhibit II.
Clause Two: PURPOSE
2.1. The purpose of this private instrument is to regulate the conditions
of the resale of Services by the OPERATOR, as well as the terms of
the mutual Operating Agreement contracted hereby, and, specially,
the obligations of the OPERATOR regarding the utilization of
equipment and stations in
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accordance with the technical specifications approved, as well as
with respect to the utilization of authorized equipment, technical
characteristics of the Services and proper utilization of the
spectrum inherent to the operation, in order to improve and develop
Paging Services in the Territory.
2.2. The PERMISSION HOLDER hereby engages the OPERATOR as the exclusive
reseller of its Services, the OPERATOR being hereby entrusted with
the operation of such Services, it being further agreed that the
PERMISSION HOLDER shall not itself be permitted to directly sell or
operate any such Services, and shall hold the Permissions free and
clear of any lien, claim, charge or encumbrance of any kind.
Clause Three: OBLIGATIONS OF THE OPERATOR
The following are obligations of the OPERATOR:
3.1. To resell the Services by executing Subscription Agreements with the
Subscribers, containing, essencially, the provisions mentioned in
Exhibit III;
3.2. To ensure the operations necessary for the rendering of the Services
to all current and future Subscribers which have entered into a
service agreement and which do so in the future;
3.3. To ensure the above mentioned operation pursuant to standards of
trustworthiness, quality, courtesy and continuity, in accordance
with the technical characteristics inherent to the Service;
3.4. To maintain specialized technical personnel for the assistance to
Services and to Subscribers and for the maintenance of the equipment
used;
3.5. To provide the stations on a permanent basis with the necessary
equipment in accordance with high technological standards;
3.6. To use solely certified equipment and in accordance with the
approved technical authorizations and specifications, ensuring its
permanent and adequate maintenance;
3.7. To comply with any requirements made by the National Communications
Secretariat in connection with the Permissions ("Secretaria Nacional
de Comunicacoes" - SNC), within the scope of its competence, within
the term established by SNC;
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3.8 Not to use, order or consent to the use of the equipment or
installation affected to the Services without compliance with the
rules and conditions applicable to it;
3.9. To allow access to the installations and equipment of any
supervision agent of the SNC, duly identified, carrying out,
respectively, an inspection or verification mission;
3.10. To avoid the occurrence of interference harmful to other
telecommunication or broadcasting services authorized and legally
installed, as a result of the operation of a station or equipment;
3.11. To promptly interrupt the functioning of a station, upon the receipt
of notice from the PERMISSION HOLDER, in compliance with a
determination of the Ministry of Communications necessitating such
interruption;
3.12. Not to create, in the carrying out of its activity, a situation
dangerous to human life or to property;
3.13. To provide the information required by SNC, for the purpose of
verifying how the Service is being operated and the Subscribers
assisted;
3.14. To maintain an updated file of documents regarding the legal
capacity,economic and financial capacity and technical operational
capacity, including with respect to the equipment used in the
operation, which shall be done according to the same terms of such
regulatory requirement applied to the PERMISSION HOLDER;
3.15. To assume full responsibility for the operation of the stations
under its care, as well as for the good and efficient assistance to
the Subscribers, undertaking to instruct its employees and officers
of the obligation hereby undertaken;
3.16. To maintain in strict confidentiality and secret the communications
which take place by means of the equipment, networks or systems
inherent to the contracted operation;
3.17. To be responsible for all costs and charges arising from the resale
and operation of the Services, including expenses with equipment,
installation, maintenance, operation, modernization and financing;
3.18. To assume full responsibility for the reselling of the services and
for obtaining Subscribers, receiving and collecting the payment of
the subscriptions, and giving receipts therefor.
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Clause Four: RIGHTS OF THE OPERATOR
The rights of the OPERATOR are to carry all activities necessary to conduct the
business and operation of the Services, including:
4.1. To contract, sub-contract and take all the measures, operational or
not, which it deems necessary for the fulfillment of its obligations
with respect to the resale and operation of the Service and to the
assistance to Subscribers, the OPERATOR being solely responsible for
the costs and charges resulting from agreements it enters with third
parties;
4.2. To establish the value of the Services to be offered to the
Subscribers regarding the initial sign up payment as well as the
monthly fees;
4.3. To sell advertising space;
4.4. To collect and administer subscription fees, monthly fees and other
income related to the Services;
4.5. To program and carry out in full the marketing policy and the sales
effort with respect to the Services, promoting, advertising and
marketing the Services to the general public;
4.6. To execute and to rescind Subscription Agreements; and
4.7. To develop the clientele of the Service by means of the reference of
Subscribers of its own indication, it being understood that the
OPERATOR shall not be entitled to any additional remuneration in
addition to the global remuneration provided for in Clause 8 below,
by reason of the reference of its own Subscribers herein provided
for.
Clause Five: OBLIGATIONS OF PERMISSION HOLDER
5.1. The PERMISSION HOLDER grants to the OPERATOR, within the scope of
this Agreement, the right to use all existing equipment and
infra-structure inherent to the Service object of the mutual
Operating Agreement contracted hereby, it being expressly understood
that PERMISSION HOLDER shall not be entitled to any remuneration in
addition to the global remuneration provided for in Clause 8 below,
by reason of such assignment.
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5.2. The PERMISSION HOLDER shall comply with the requirements made by any
competent governmental body or authority, within the term
established by it, immediately notifying the OPERATOR of the action
or information required from it to make such compliance possible.
5.3. The PERMISSION HOLDER shall assume, before SNC, a punctually
compliant and diligent behavior with respect to the legal,
regulatory and specific requirements of the Ordinances by which the
Permissions were granted.
5.4. The PERMISSION HOLDER will comply with all laws, statutes,
governmental regulations and all judicial or administrative tribunal
orders, judgments, writs, injunctions, decrees or similar commands
applicable to the grant of Permissions set forth in paragraph 2 and
3 of the preamble to this Agreement and shall not, by its action or
inaction, adversely affect the status of the Permissions.
5.5. The PERMISSION HOLDER shall use its best efforts, at the Operator's
expense, to obtain and maintain in full force and effect each
Permission and shall timely file and prosecute all necessary
applications for renewal and, when requested by, and at the expense
of, the Operator, for the expansion, modification or otherwise of
the Permissions. The Permission Holder shall not assign, transfer,
sell, trade, dispose or otherwise encumber the Permissions.
5.6. The PERMISSION HOLDER shall use its best efforts to provide the
Operator with (i) copies of all correspondence with any governmental
body or authority relating to the Permissions and (ii) access to al
files and other documents regarding the legal capacity, economic and
financial capacity and technical operational capacity maintained by
the PERMISSION HOLDER.
5.7. The PERMISSION HOLDER shall, if necessary and at the Operator's
expense, join the Operator in any litigation or other proceeding
brought by or against the Operator relating to the Services or the
Permissions, including to prevent any unauthorized individual or
entity from transmitting signals that would interfere with the
Operator's signals.
5.8. The PERMISSION HOLDER shall supply to the OPERATOR all and any
information, specially notices received from SNC, necessary for the
compliance with the obligations which are incumbent upon the latter,
including the access to documents relating to the Services,
eventually in the possession of the former.
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5.9. The PERMISSION HOLDER undertakes neither to interfere in the
OPERATOR'S commercial relationship with Subscribers nor to request
the OPERATOR to rescind any Subscribers' Agreements with respect to
the clientele developed as a result of the commercial and marketing
efforts of the OPERATOR, except in the case of default of the
Subscriber in the fulfillment of its obligations, that can adversely
affect the obligations and responsibilities of the PERMISSION HOLDER
before the government under the applicable rules.
5.10. The PERMISSION HOLDER hereby ackowledges the confidential character
of the list of Subscribers developed as a result of the commercial
and marketing efforts of the OPERATOR, as well as the OPERATOR'S
exclusive ownership of and rights related to such list.
5.11. The PERMISSION HOLDER hereby ackowledges the exclusive rights of the
OPERATOR to the use and exploitation of the Service Trademark, at
the OPERATOR's best will.
Clause Six: RIGHTS OF PERMISSION HOLDER
6.1. The PERMISSION HOLDER reserves the functional power of supervising
the good use of the spectrum inherent to the operation of the
Services;
6.2. The PERMISSION HOLDER shall be promptly assisted and or indemnified
by the OPERATOR, in the case of an administrative or judicial
proceeding filed against it or in the case of any penalty or
indemnity collected from it, provided that in any case such
proceeding, penalty or indemnity results from the default of the
OPERATOR in the fulfillment of its obligations herein provided for;
6.3. The payment of the expenses incurred with any penalties and
indemnities resulting from a default of the OPERATOR shall be
covered by the OPERATOR which for this purpose shall timely provide
the PERMISSION HOLDER with the necessary amounts, upon request of
the same.
6.4. In the event the PERMISSION HOLDER advances the above referred
amounts, it shall be reimbursed up to three business days after its
advice to the OPERATOR, for the actual amount disbursed;
6.5. It is expressly understood that the PERMISSION HOLDER has no
obligation to make any such advance; and
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6.6. The PERMISSION HOLDER also has the right to be reimbursed by the
OPERATOR for the reasonable expenses incurred by it, in connection
with the acts performed at the request of or in the interest of the
OPERATOR, arising from the provisions of this Agreement, provided
they are duly evidenced by means of a detailed report and a
supporting documentation.
Clause Seven: INDEMNITY
7.1. The OPERATOR shall indemnify, reimburse and hold harmless PERMISSION
HOLDER, its officers, directors, agents, employees and/or
attorneys-in-fact, from and against any and all claims, damages,
losses, liabilities, demands, suits, judgments, causes of action,
legal proceedings, whether civil or criminal, penalties, fines and
other sanctions (herein jointly referred to as "Claims"), and any
reasonable attorney's fees in connection therewith, including any of
the foregoing arising or imposed, which may in any way arise or be
related to the OPERATOR'S acts or omissions and or the operation of
the Paging Services.
7.2. Once payment is made to the party to be indemnified under the
provision of this Clause, the OPERATOR shall be surrogated in all of
the rights that the indemnified party might have against third
parties, including the manufacturer of the equipment, if applicable.
7.3. The obligation to indemnify provided for herein does not apply to
any claims for which the PERMISSION HOLDER, its officers, directors,
shareholders, agents, employees and/or attorneys-in-fact have
contributed with willful intent or fault.
7.4. The PERMISSION HOLDER shall indemnify the OPERATOR its officers,
directors, agents, employees and/or attorneys-in-fact, in the event
the Permissions are revoked or suspended, or in the event the resale
and operation now agreed become impossible by reason of any action
or inaction of the PERMISSION HOLDER.
7.5. In order to defend and preserve the Permissions, the OPERATOR shall
determine the measures to be followed by the PERMISSION HOLDER, who
shall act in accordance with the OPERATOR's determinations.
7.6. The provisions of item 7.4. above do not include the revocation of
the Permissions by reason of unilateral action by the Ministry of
Communications, where the PERMISSION HOLDER is in full compliance
with all applicable laws and regulations.
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Clause Eight: OPERATING INCOME, REMUNERATION
8.1. The OPERATOR shall be entitled to the operating income generated by
the resale and operation of the Services, especially income
generated in connection with the contracts executed by the OPERATOR
with the subscribers, but also including any income generated by the
exploitation of ancillary activities, the PERMISSION HOLDER hereby
assigning to the OPERATOR any rights it might be entitled to at any
time with respect to such income.
8.2. In view of the assignment above, the PERMISSION HOLDER, in any
agreements it eventually comes to enter into with Subscribers, as a
result of a regulatory requirement, shall notify such Subscribers of
the assignment effected hereby, instructing them to make all
payments directly to the OPERATOR, at the place designed by it.
8.3. The OPERATOR undertakes the responsibility of providing all
necessary documentation regarding the notification and instruction
referred to in item 8.2. above, being the obligation of the
PERMISSION HOLDER limited to signing whatever is necessary and
proposed by the OPERATOR to accomplish item 8.2.
8.4. For the grant of the operation and for the assignment of the rights
arising from the agreements executed with the Subscribers, the
PERMISSION HOLDER is receiving from the OPERATOR's share holders the
right to subscribe, up to the limit of 1.000 shares of OPERATOR'S
common stock.
Clause Nine: TAXES
9.1. The OPERATOR undertakes to pay all taxes which are directly or
indirectly levied upon the operation and resale of the Services, as
well as for the payment of any fees related thereto.
9.2. The OPERATOR hereby undertakes to reimburse the PERMISSION HOLDER
for all taxes and fees arising directly from the activities carried
out by the OPERATOR, except for income tax levied on the PERMISSION
HOLDER, undertaking full responsibility for any penalties and/or
late charges caused by it, no matter when this occurs, including
beyond the term of this Agreement.
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9.3. The OPERATOR shall be responsible for any infringements and for any
fiscal violations arising from the execution and performance of this
Agreement.
9.4. During the period this Agreement is in effect, in the event one of
the parties acquires a fiscal exemption for the development of its
activity, the other shall fulfill, as applicable, the accessory
conditions necessary for such exemption.
Clause Ten: CONFIDENTIALITY
10.1. It is hereby agreed that any and all information already supplied or
which comes to be supplied by one party to the other as a result of
this Agreement, specially those regarding the strategic-economic
plan of the operation now contracted, are confidential, and each
party shall and shall cause its representatives, agents, employees,
servants and consultants, to keep any information provided to it by
the other party in strict confidentiality, refraining from divulging
such information in whole or in part, without the previous written
consent of the other party.
10.2. The parties agree as of now that they shall not be responsible for
the violation of the confidentiality obligation provided for in this
clause in the event of a legal or judicial determination which
forces them to disclose to third parties information acquired within
the scope of this instrument, as well as information which becomes
public without their interference.
Clause Eleven: TERM
11.1. This Agreement shall come into effect on the date of its execution
and shall remain in effect with respect to the parties, for the term
of fifteen (15) years, automatically renewable for successive
fifteen (15) year periods, unless no later than 1 (one) year prior
to the end of any term notice is given by either party that the
Agreement will not be renewed, up to the maximum term equivalent to
the term of effectiveness of the Permissions or its renewal.
11.2. The parties may rescind this Agreement by mutual consent, provided
the continuity of the services and the operation of the activities
is ensured.
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Clause Twelve: MUTUAL COOPERATION
The parties, within the strict compliance with their obligations and within the
scope of the present instrument, shall cooperate with one another before the
Ministry of Communications and other bodies of the Federal, State and Municipal
Public Administrations.
Clause Thirteen: ASSIGNMENT AND TRANSFER
13.1. The direct assignment or transfer of rights and obligations of the
OPERATOR arising from this Agreement can only be performed without
any consent from the PERMISSION HOLDER in addition to the consent
already expressed herein, if to a company which is also an operator,
provided it is affiliated with the OPERATOR, and further provided
that such assignee or transferee specifically assumes such
obligations.
13.2. For purposes of this clause, "affiliated company" shall mean with
respect to the OPERATOR, any and all associated companies as defined
in article 243, first paragraph of the Law 6404/76 or any company
which, directly or indirectly, controls, is controlled by or is
under common control with the OPERATOR at the time of the transfer
and remains as an affiliated company throughout the term this
Agreement is in effect.
13.3. Notwithstanding the provisions of clause 13.1. this Agreement and
the rights and obligations of the OPERATOR arising hereunder may be
assigned to any company that is acquiring all or substantially all
of the assets of the OPERATOR with the consent of the PERMISSION
HOLDER, which consent shall not be unreasonably withheld or delayed.
Clause Fourteen: REPRESENTATIONS AND WARRANTIES OF THE PARTIES
14.1. Except as otherwise provided in this Section, each party represents
and warrants to the other, as to itself that:
(i) such party is a duly organized, validly existing and in good
standing under the laws of Brazil;
(ii) that the execution and delivery by such party of this
Agreement, the consummation by such party of the transactions
contemplated herein and compliance with the terms and
provisions hereof are within such party's corporate powers,
and do not and will not
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result in a violation of such party's charter or by-laws as
currently in effect;
(iii) this Agreement has been duly authorized, executed and
delivered by such party and is a legal, valid and binding
obligation of such party, enforceable against such party in
accordance with its terms, except as its enforceability may be
limited by bankruptcy, insolvency, reorganization and other
laws of general application affecting the enforcement of
creditor's rights in general;
(iv) no consent, approval or authorization of any governmental
authority shall be required in connection with the execution,
conclusion or enforcement of this Agreement;
(v) the PERMISSION HOLDER represents and warrants that the
Permissions were duly and validly issued in accordance with
the applicable legislation and are in full force and effect,
and that all of the conditions provided for in such
Permissions and in the applicable regulations have been
complied with in full, including but not limited to the
compliance with the term for the start up of operations, as
well as the technical characteristics of the Service provided
for in the Certificate of Project Approval;
(vi) the PERMISSION HOLDER represents and warrants that the
Permissions are free and clear of any liens and encumbrances
of any nature and that it has no knowledge of the existence of
any claim or proceeding, judicial or administrative, aiming at
modifying, suspending, revocating or terminating the
Permissions;
(vii) the PERMISSION HOLDER represents and warrants that its tax
obligations have been fulfilled up to the present date, all
income tax returns required by the tax authorities having been
duly filed; and
(viii) the PERMISSION HOLDER represents and warrants that it made
the payment of the fees due in connection with receipt the
license for the functioning of the stations of the Service, of
the telecommunications supervision fee corresponding to the
stations to be installed, for purposes of receiving the
licenses for the functioning of the stations, as well as the
supervision fee with respect to the current year.
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Clause Fifteen: JURISDICTION
15.1. This Agreement and all questions arising in connection with its
interpretation and legal relations between the parties in connection
herewith shall be governed and construed in accordance with the
substantive law of Brazil.
15.2. All disputes and differences arising from or in connection with this
Agreement, or in relations between the parties with respect to the
subject matter hereof, shall be finally settled by binding
arbitration in accordance with the Rules for Conciliation and
Arbitration of the International Chamber of Commerce (ICC) by three
arbitrators appointed in accordance with said Rules. The place of
arbitration shall be New York, New York, and the arbitration
proceedings shall be conducted in English.
15.3. If for any reason, notwithstanding the international character of
this Agreement and the diverse nationalities of the shareholders in
the companies parties to the same, the preceding clause 15.2. should
not be applied or be held invalid by any court in Brazil or in the
United States of America, the parties specifically agree that any
dispute or controversy relating to this Agreement or otherwise
described in clause 15.2. shall be decided solely and exclusively by
the competent courts of the State of New York, United States of
America.
Clause Sixteen: REFORMATION
16.1. If any competent governmental body or authority should amend or
clarify the law, rules, regulations or policies, or if any court
should interpret any law, regulation or policy in a manner that
would materially adversely affect the rights or obligations of the
parties under this Agreement, then the parties hereto shall promptly
negotiate using their best efforts and in good faith to reform and
amend this Agreement so as to effectuate as nearly as reasonably
possible the intention of the parties expressed in this Agreement.
No party shall take any action that contributes to such amendment,
clarification or interpretation without the prior written consent of
the other party. Only in the event the parties are unable to reach
the agreement with respect to the appropriate action to be taken
shall the offending provision(s) be stricken from this Agreement and
the remainder of the Agreement shall be enforced to the greatest
extent permitted by law.
16.2. In what specially regards the provision of Subscribers Agreements,
the parties hereto commit themselves to use their best efforts to
maintain
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permanently updated information concerning the most recent
regulamentary standards or otherwise recommended by the Ministry of
Communications, to which the Operator shall, as it deems necessary,
consult the Ministry of Communications. It is incumbent to the
Operator to update and develop the proposals of model or standards
considered to be the most adequate to the business conditions,
always observing the above mentioned regulamentary or ministerial
criterias.
16.3. As a condition to the best performance of its obligations and to
assume its continuous representation before the Ministry of
Communications the PERMISSION HOLDER shall grant a power-of-attorney
to persons chosen by mutual agreement with the OPERATOR, conferring
upon them the necessary powers.
Clause Seventeen: GENERAL PROVISIONS
17.1. This Agreement can only be amended with the express consent of both
parties, by means of a written instrument executed by both parties.
17.2. So as to avoid eventual conflicts of interest, the PERMISSION HOLDER
shall not directly assign or negotiate away any interest in, or
negotiate any matters related to, this Agreement, or the
Permissions.
17.3. All publicity and marketing material prepared by the OPERATOR or the
PERMISSION HOLDER within the scope of this Agreement shall be the
property of the OPERATOR.
17.4. The PERMISSION HOLDER and the OPERATOR reciprocally undertake to
inform one another, of any and all operational or technical measure,
or any other action, especially before the Public Administration,
which may adversely affect the activities of either of them, within
the scope of the rights and obligations arising from this Agreement.
17.5. All communications under this Agreement shall be in writing and
shall be delivered by hand, internationally recognized air courier
or facsimile transmission, charges prepaid:
(i) if to the OPERATOR, at Rua Alexandre Dumas, 1711, facsimile
number (011) 521 1814 marked for the attention of Mr. Thomas
Trynin or Marco Fregenal, or at such other address as the
OPERATOR may have furnished in writing to the PERMISSION
HOLDER;
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(ii) if to the PERMISSION HOLDER, at Rua do Rocio, 313, Vila
Olimpia, Sao Paulo., facsimile number (011) 822 9335, marked
for the attention of Mr. Douglas Duran and Mr. Angelo Longuini
Neto, or at such other address as the PERMISSION HOLDER may
have furnished in writing to the OPERATOR.
17.6. No party to this Agreement shall, by virtue of having entered into
this Agreement, be deemed to be the legal representative or agent of
any other party, and no party shall have the right or authority to
approve, create, or incur any liability or any obligation of any
kind, express or implied, against or in name of or on behalf of any
other party, except to the extent otherwise expressly provided in
this Agreement.
17.7. Specifically concerning the reciprocal commercial positions of the
Parties, it is their intention, in accordance with Ordinance number
257/91, of October 23, issued by the Ministry of Communications,
that the OPERATOR is not an agent of the PERMISSION HOLDER, but a
reseller of the Services.
17.8. This Agreement constitutes the entire understanding of the parties
hereto relating to the subject matter hereof and supersedes all
prior agreements or understandings with respect to the subject
matter hereof among such parties.
17.9. The authoritative text of this Agreement shall be the English text.
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In witness whereof, the parties have caused this Agreement to be duly executed
in 03 (three) counterparts of equal content and form, in the presence of the two
witnesses below.
Sao Paulo, December 11th, 1996
/s/ Admilson Ferreria
/s/ Marcelo Vaz Bonini
---------------------------------------------
TVA SISTEMA DE TELEVISAO S.A.
Admilson Ferreria
Marcelo Vaz Bonini
Legal Representative
/s/ Thomas Crane Trynin
/s/ Marco Antonio Fregenal
---------------------------------------------
PAGING NETWORK DO BRASIL S.A.
Thomas Crane Trynin Marco Antonio Fregenal
Officer Officer
WITNESSES:
1. /s/ Roberto Duque Estrada
------------------------------
Roberto Duque Estrada
OAB/RJ 80.668
CPF/MF 016.468.087-03
2. /s/ Maria Gabriela Campos da Silva
-----------------------------------
Maria Gabriela Campos da Silva
OAB/RJ 84.606-E
CPF/MF 016.706.607-29
<PAGE>
AGREEMENT OF PROMISE OF ASSIGNMENT AND TRANSFER
OF PERMISSIONS
BY MEANS OF THIS PRIVATE INSTRUMENT:
I. TVA SISTEMA DE TELEVISAO S.A., a corporation organized and existing under
the laws of the Federative Republic of Brazil, with head offices in the
City of Sao Paulo, State of Sao Paulo, at Rua do Rocio, 313, Vila Olimpia,
registered as taxpayer under CGC No. 71.613.400/0001-10, herein
represented by its duly empowered legal representative, hereinafter
referred to simply as "PROMISING TRANSFEROR";
AND
II. PAGING NETWORK DO BRASIL S.A., a corporation, organized and existing under
the laws of the Federative Republic of Brazil, with head offices in the
City of Sao Paulo, State of Sao Paulo, at Rua Alexandre Dumas, number
1711, registered as taxpayer under CGC/MF No. 01.126.946/0001-61, herein
represented by its Officers Mr. Thomas Crane Trynin, American citizen,
single, business administrator, bearer of identity card No. V192319-I and
CPF No. 214308398-05 and Mr. Marco Antonio Fregenal, Brazilian citizen,
married, business administrator, bearer of identity card No. 35355458-5
and CPF 214170768-49 hereinafter referred to simply as "PROMISING
TRANSFEREE";
WHEREAS:
1. The PERMISSION HOLDER is the holder of permissions granted by the
Ministry of Communications for the exploitation of Paging Services
("Servico Especial de Radiochamada") (the "Paging Services"), in
accordance with Ordinances issued by the Ministry of Communications
Number 1202, 1205, dated as of December, 22, 1994, and published in
the Official Gazette of December, 30; 1203, 1204, 1206, dated as of
December, 22, 1994, and published in the Official Gazette of
December, 29; 1264 and 1265, dated as of December, 26, 1994,
published in the Official Gazette of December, 29 (the
"Permissions"), which attached hereto as Exhibit I, are an integral
part hereof as if they had been herein transcribed in full;
2. Having in view the amplification of the rendering of the services in
the Brazilian territory the PERMISSION HOLDER has requested the
Ministry of Communications the transformation of the Permissions
into Permissions to
<PAGE>
National restricted Exploitation (solely National Restricted
Permissions, and together with the Permissions, also "Permissions")
according to Ordinance No. 579/94, of August 2, 1994;
3. The PROMISING TRANSFEROR has entered into an agreement for the
resale of its Paging Services and mutual operating agreement with
the PROMISING TRANSFEREE (The "Operating Agreement");
4. The PROMISING TRANSFEREE has made investments in the installation,
operation and provision of the Paging Services, and has been
developing commercial and marketing efforts with its operation and
the resale;
5. The PROMISING TRANSFEREE has expressed its wish to acquire the
Permissions and the PROMISING TRANSFEROR agrees to transfer them to
the PROMISING TRANSFEREE;
6. The PROMISING TRANSFEREE desires to eventually purchase said
Permissions, to which the PROMISING TRANSFEROR agrees;
7. The PROMISING TRANSFEROR and the PROMISING TRANSFEREE acknowledge
the legal demand for obtaining the prior authorization of the
Ministry of Communications in order to have the Permissions
transferred,
NOW, THEREFORE:
The Parties have agreed to enter in this Agreement of Promise of Assignment and
Transfer of Permissions with respect to Paging Services ( the "Agreement"), in
accordance with the clauses and conditions specified below:
Clause One: DESCRIPTION OF THE PERMISSIONS
The Permissions are all of those described in Exhibit I hereto, which initialed
by the parties become an integral part of this Agreement, including any and all
inherent rights of exploitation, namely, but not limited to, those arising from
distinct extensions or modalities of exploitation at any time granted to the
PROMISING TRANSFEROR by all and any Permissions to National Restrictted
Exploitation.
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Clause Two: PURPOSE
The PROMISING TRANSFEROR hereby promises to transfer to the PROMISING TRANSFEREE
and the latter promises to acquire the Permissions attached hereto as Exhibit I,
which shall be considered to have been transcribed in full herein, including any
and all inherent rights of exploitation, namely, but not limited to, those
arising from distinct extensions or modalities of exploitation at any time
granted to the PROMISING TRANSFEROR by all and any Permissions to National
Restricted Exploitation, or other modalities of exploitation.
First Paragraph: The definitive transfer of title to the Permissions of
the PROMISING Transferor to the PROMISING TRANSFEREE shall be made by
means of the execution of one or more definitive transfer agreements
relating to each of the Permissions individually, in groups or jointly, at
the option of the PROMISING TRANSFEREE.
Second Paragraph: For purposes of the exercise of the option by the
PROMISING TRANSFEREE, as provided in the First Paragraph above, it is
incumbent upon it to present to the PROMISING TRANSFEROR the text of the
definitive transfer agreement or agreements, depending on whether it opts
for the joint transfer of the Permissions, or for their transfer
individually or in groups.
Third Paragraph: For purposes of the provisions of the preceding
paragraph, the PROMISING TRANSFEROR grants on the date hereof an
irrevocable power-of-attorney to persons chosen by mutual agreement
between the PROMISING TRANSFEROR and the PROMISING TRANSFEREE, conferring
upon them the necessary powers to carry out the transfer.
Fourth Paragraph: With the transfer of the Permissions, the parties
consider automatically assigned and transferred to the PROMISING
TRANSFEREE all the PROMISING TRANSFEROR's rights arising from any and all
subscriber agreements.
Clause Three: THE DEFINITIVE TRANSFER AGREEMENT(S)
The definitive agreement(s) for the transfer of title to the Permissions shall
be granted by the PROMISING TRANSFEROR in favor of PROMISING TRANSFEREE or in
favor of whom it may indicate, it being recognized by the PROMISING TRANSFEROR,
as of now, that the PROMISING TRANSFEREE has the right to be substituted in its
contractual position in this Agreement one or more times, without the PROMISING
TRANSFEROR's consent, pursuant to its option for the joint, isolated or grouped
transfer of the Permissions, being able, for this purpose, to indicate one or
several interested parties, as the case may be, subject to any applicable legal
and regulatory requirements.
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Clause Four: TERM FOR THE EXECUTION OF THE DEFINITIVE AGREEMENT(S)
The definitive agreement(s) for the transfer of title to the Permissions shall
be executed by the PROMISING TRANSFEROR and PROMISING TRANSFEREE, as soon as the
former has obtained from the Ministry of Communications the competent
authorization in accordance with items 6.11 and 6.11.1 of the General
Telecommunications Rule ("Norma Geral de Telecomunicacoes") approved by
Ordinance No. 232/91 of October 23 and item II.9, of the Specific Conditions of
the Specific Telecommunications Rule ("Norma Especifica de Telecomunicacoes"),
approved by Ordinance No. 257/91 of October 23, i.e. once the three (3) year
period counted from the date of issuance of the functioning license (or such
shorter period as may then be applicable) and the above referred express
authorization is obtained.
First Paragraph: The term referred to in the previous item shall be,
however, anticipated upon the earlier of the following situations:
(i) in accordance with the precise terms of an eventual legislative or
administrative change, regarding the terms of the transfer of the
Permissions;
(ii) when any express authorization has been obtained for the direct
assignment and transfer; or
(iii) when any alternative solution, in accordance with the Third
Paragraph below, has been allowed.
Second Paragraph: The PROMISING TRANSFEROR shall use its best efforts so
as to obtain the previous administrative authorization(s) required in
connection with the execution of the definitive transfer agreement,
cooperating, in a diligent and active manner, in all bureaucratic
proceedings which may be necessary or convenient to accomplish such end.
The PROMISING TRANSFEROR also agrees, if necessary, to look for
alternative solutions to make such transfer possible, provided such
alternative solutions are not excessively burdensome.
Third Paragraph: The PROMISING TRANSFEREE shall cooperate, in a diligent
and active manner, for the accomplishment of occasional bureaucratic
requirements and, if necessary, to search for the alternative solutions in
order to allow such transfer, being provided that said solutions are not
excessively burdensome.
Fourth Paragraph: For purposes of the provisions of the preceding paragraphs,
the PROMISING TRANSFEROR grants, on the date hereof, an irrevocable
power-of-attorney to persons chosen by mutual agreement between PROMISING
TRANSFEROR and the
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PROMISING TRANSFEREE, conferring upon them the necessary powers to effectuate
the transfer of the rights.
Clause Five: REPRESENTATIONS AND WARRANTIES OF THE PROMISING TRANSFEROR
First Paragraph: The PROMISING TRANSFEROR is a corporation (S.A.) duly
organized, validly existing and in good standing under the laws of the
(Federative Republic of Brazil) and has full corporate power and authority
to carry on its business as it is now being conducted and to own all of
its properties and assets. The PROMISING TRANSFEROR is duly qualified to
do business and is in good standing in each jurisdiction in which the
ownership of its properties or the conduct of its business requires such
qualification.
Second Paragraph: The PROMISING TRANSFEROR has all necessary corporate
power and authority and has taken all corporate action necessary to enter
into this Agreement, to consummate the transactions contemplated on its
part hereby and to perform its obligations hereunder. The execution,
delivery and performance of this Agreement and the consummation of the
transactions described herein by the PROMISING TRANSFEROR have been duly
authorized by all requisite corporate action. This Agreement has been duly
executed and delivered by the PROMISING TRANSFEROR and, assuming the due
execution and delivery thereof by the PROMISING TRANSFEREE, is a valid and
binding obligation of the PROMISING TRANSFEROR.
Third Paragraph: As of the date of this Agreement, the PROMISING
TRANSFEROR has good title to all of the Permissions, free and clear of any
and all liens, charges, pledges, mortgages, security interests or other
encumbrances of any kind, except for governmental restrictions on the
transfer thereof.
Fourth Paragraph: The business of the PROMISING TRANSFEROR has been
operated in material compliance with all applicable laws, statutes, rules,
regulations, ordinances, codes, orders, licenses, permits or
authorizations, as such now apply to such business, and to the knowledge
of the PROMISING TRANSFEROR no notification has been received alleging any
violation of any of the foregoing.
Fifth Paragraph: Neither the execution, delivery nor performance of this
Agreement or any of the transactions contemplated hereby will (i) violate
or conflict with any provision of the organizational documents of the
PROMISING TRANSFEROR, (ii) result in a breach of or a default under any
provision of any contract, agreement, lease, commitment, license,
franchise, permit, authorization or concession to which the PROMISING
TRANSFEROR is a party or bound or to
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which any property or asset of the PROMISING TRANSFEROR is subject or an
event which with notice, lapse of time, or both, would result in any such
breach or default, or (iii) result in violation by the PROMISING
TRANSFEROR of any statute, rule, regulation, ordinance, code, order,
judgment, writ, injunction, decree, or award, or an event which with
notice, lapse of time, or both, would result in any such violation, which
breach, default or violation would have a material adverse effect on the
ability of the PROMISING TRANSFEROR to consummate the transactions
contemplated hereby, provided the authorizations referred to in Clause
Four are obtained.
Clause Six: REPRESENTATIONS AND WARRANTIES OF THE PROMISING TRANSFEREE
First Paragraph: The PROMISING TRANSFEREE is a corporation (S.A) duly
organized, validly existing and in good standing under the laws of the
Federative Republic of Brazil and has full corporate power and authority
to carry on its business as it is now being conducted and to own all of
its properties and assets. The PROMISING TRANSFEREE is duly qualified to
do business and is in good standing in each jurisdiction in which the
ownership of its properties or the conduct of its business requires such
qualification.
Second Paragraph: The PROMISING TRANSFEREE has all necessary corporate
power and authority and has taken all corporate action necessary to enter
into this Agreement, to consummate the transactions contemplated on its
part hereby and to perform its obligations hereunder. The execution,
delivery and performance or this Agreement and the consummation of the
transactions described herein by the PROMISING TRANSFEREE have been duly
authorized by all requisite corporate action. This Agreement has been duly
executed and delivered by the PROMISING TRANSFEREE and, assuming the due
execution and delivery thereof by the PROMISING TRANSFEROR, is a valid and
binding obligation of the PROMISING TRANSFEREE, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratoriums or other similar laws
now or hereafter in effect relating to creditors, rights generally and by
general principles of equity (whether considered in an action at law or in
equity) and the discretion of the court before which any proceeding
therefor may be brought.
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Clause Seven: MUTUAL COVENANTS OF THE PARTIES
First Paragraph: From the date hereof until the date upon which the
definitive agreement(s) for the transfer of the Permissions are executed,
the PROMISING TRANSFEROR shall:
(a) not take any action that would result in the rescission of the grant
of the Permissions to the PROMISING TRANSFEREE, or any action
inconsistent with the consummation of the transactions contemplated
hereby;
(b) comply with any reasonable requests from the PROMISING TRANSFEREE in
order to maintain good title to the Permissions and the Rights,
including using its best efforts to preserve generally the present
relationships with persons or governmental agencies instrumental in
the granting of the Permissions; or
(c) not sell, transfer or otherwise dispose of any of the Permissions or
permit any lien, charge, pledge, mortgage, security interest or
other encumbrance of any kind to exist thereon.
Second Paragraph: From the date hereof until the date upon which the
definitive agreement(s) for the transfer of the Permissions are executed,
the PROMISING TRANSFEREE shall not take any action inconsistent with the
consummation of the transactions contemplated hereby.
Clause Eight: CONSIDERATION
As consideration for the transfer of all the Permissions, now promised, the
PROMISING TRANSFEROR acknowledges receipt from the PROMISING TRANSFEREE, of the
right to subscribe, up to the limit of 1.000 shares of PROMISING TRANSFEREE'S
common stock.
Sole Paragraph: The failure of the PROMISING TRANSFEROR to complete the
assignment and transfer now agreed, once the regulatory term has elapsed
and the approval of the competent authorities is obtained, and provided
that the breach was not the result of the action or inaction of a
government or regulatory authority, such as the Ministry of Communications
of Brazil, shall give rise to the forfeit of its equity interest in the
PROMISING TRANSFEREE.
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Clause Nine: JURISDICTION
9.1. This Agreement and all questions arising in connection with its
interpretation and legal relations between the parties in connection
herewith shall be governed and construed in accordance with the
substantive law of Brazil.
9.2. All disputes and differences arising from or in connection with this
Agreement, or in relations between the parties with respect to the
subject matter hereof, shall be finally settled by binding
arbitration in accordance with the Rules for Conciliation and
Arbitration of the International Chamber of Commerce (ICC) by three
arbitrators appointed in accordance with said Rules. The place of
arbitration shall be New York, New York, and the arbitration
proceedings shall be conducted in English.
9.3. If for any reason, notwithstanding the international character of
this Agreement and the diverse nationalities of the shareholders in
the companies parties to the same, the preceding clause 9.2. should
not be applied or be held invalid by any court in Brazil or in the
United States of America, the parties specifically agree that any
dispute or controversy relating to this Agreement or otherwise
described in clause 9.2. shall be decided solely and exclusively by
the competent courts of the State of New York, United States of
America.
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In witness whereof, the parties have caused this Agreement to be duly executed
in three (3) counterparts of equal content and form, in the presence of the two
witnesses below.
Sao Paulo, December 11th, 1996
/s/ Admilson Ferreria
/s/ Marcelo Vaz Bonini
---------------------------------------------
TVA SISTEMA DE TELEVISAO S.A.
Admilson Ferreria
Marcelo Vaz Bonini
Legal Representative
/s/ Thomas Crane Trynin
/s/ Marco Antonio Fregenal
---------------------------------------------
PAGING NETWORK DO BRASIL S.A.
Thomas Crane Trynin Marco Antonio Fregenal
Officer Officer
WITNESSES:
1. /s/ Roberto Duque Estrada
-----------------------------------
Roberto Duque Estrada
OAB/RJ 80.668
CPF/MF 016.468.087-03
2. /s/ Maria Gabriela Campos da Silva
-----------------------------------
Maria Gabriela Campos da Silva
OAB/RJ 84.606-E
CPF/MF 016.706.607-29
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Exhibit 10.14
OPERATING AGREEMENT AND OTHER COVENANTS
BETWEEN:
I. SAN FRANCISCO COMUNICACOES LTDA., a commercial limited liability company
organized and existing under the laws of the Federative Republic of
Brazil, with head offices in the City of Rio de Janeiro, State of Rio de
Janeiro, at Rua Jardim Botanico, 635, office No. 403, registered as
taxpayer under CGC/MF No. 42.582.569/0001-52, herein represented by its
duly empowered attourney-in-fact Mr. JOAQUIM VIEIRA DOS SANTOS, Portuguese
citizen, married, businessman, resident and domiciled in the City of Rio
de Janeiro, State of Rio de Janeiro, at Rua Uruguai, 288, apartment No.
202, Tower 02, bearer of identity number RNE W175237/9 and, and bearer of
CPF 019899447/87, hereinafter referred to simply as "PERMISSION HOLDER";
AND
II. PAGING NETWORK DO BRASIL S.A., a corporation, organized and existing under
the laws of the Federative Republic of Brazil, with head offices in the
City of Sao Paulo, State of Sao Paulo, at Rua Alexandre Dumas, number
1711, registered as taxpayer under CGC/MF No. 01.126.946/0001-61, herein
represented by its Officers Mr. Thomas Crane Trynin, American citizen,
single, business administrator, bearer of identity card No. V192319-I and
CPF No. 214308398-05 and Mr. Marco Antonio Fregenal, Brazilian citizen,
married, business administrator, bearer of identity card No. 35355458-5
and CPF 214170768-49, hereinafter referred to simply as "OPERATOR";
WHEREAS:
1. Among the governmental directives applicable to the Communications
Sector, stands out the need for diversification of the
telecommunications services, for improvement of their quality and
expansion of such services, at the level of a greater participation
of the private sector, to the benefit of the final user;
<PAGE>
2. The PERMISSION HOLDER is the holder of Permissions granted by the
Ministry of Communications for the exploitation of Paging Services
("Servico Especial de Radiochamada") (the "Services"), for the
purpose of being rendered to third parties, for the term of fifteen
(15) years, renewable for an equal period, in accordance with the
provisions of Ordinances ssued by the Minister of Communications
Numbers 505, 506, 507, 508, 509, all dated as of 07.18.94 and
published in the Official Gazette of 07.28.94, except for 506 which
was published in the Official Gazette of 08.04.94 (the
"Permissions"), which are attached hereto as Exhibit I (the
"Permissions");
3. The PERMISSION HOLDER wishes to broaden its activity in the market,
providing an efficient and competitive service to the Subscribers
(as hereinafter defined) and, therefore, wishes to have the
cooperation of an entity with technical capability and with the
necessary financial resources, in the resale and operation of the
Services ;
4. The OPERATOR is a company with capital to invest in the
installation, operation and provision of the Services, as well as
know-how and technical capability to operate and provide the
respective resale to the Subscribers, so as to cooperate with the
PERMISSION HOLDER in providing an efficient and competitive service
to the Subscribers;
5. The provisions of the Specific Telecommunications Rule ("Norma
Especifica de Telecomunicacoes" - NET) No. 05/DNPV, approved by
Ordinance No. 257/91, of October 23, 1991, which expressly foresees
in its item 27.3 that the holders of permissions of Paging Services
may utilize other entities as resellers of their Services, by means
of mutual operating agreements;
6. The parties wish to formalize the above referred agreement,
regulating their respective rights and obligations with respect to
the resale and operation of the Services,
the parties have agreed to enter into this Operating Agreement and Other
Covenants (the "Agreement"), in accordance with the clauses and conditions
specified below:
Clause One: DEFINITIONS AND INTERPRETATION
The following terms shall have the following meanings for all purposes of
this Agreement and such meanings shall be equally applicable to both the
singular and the plural forms of the terms defined:
1.1. "Paging Services" or "Servico Especial de Radiochamada" shall mean
the special telecommunications service with the purpose of
transmitting
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specially codified call signals, addressed to subscribers of the
service, through the systems of tone and transmission of information
by sound, numeric and alpha numeric displays.
1.2. "Permissions" shall mean the Ordinances which granted permission for
the exploitation of Paging Services No. 505, 506, 507, 508 and 509,
all dated of July 18, 1994, and published in the Official Gazette of
July 28, 1994, except for Ordinance 506, published in the Official
Gazette of August 4, 1994, which are attached hereto as Exhibit I
and are an integral part of this instrument, as if the contents
thereof were transcribed in full herein, as well as all and any
Ordinances that may be published in the Official Gazette granting
Permissions to National Restricted Exploitation, or other extensions
of modalities of exploitation.
1.3. "Services" shall mean the Paging Services ("Servico Especial de
Radiochamada") to be resold by the Operator hereunder.
1.4. "Subscribers" shall mean the users of the Services which have
entered into a subscription agreement.
1.5. "Subscription Agreement" shall mean the agreement with respect to
the rendering of Services, entered into between the Subscribers and
the PERMISSION HOLDER prior to the date of this Agreement, as well
as new agreements to be entered into between future Subscribers and
the OPERATOR, by means of the grant of authority hereunder to the
OPERATOR, as well as the procurement and follow-up of requests or
proposals or execution thereof by the OPERATOR.
1.6. "Territory" shall mean the Service areas specified in Ordinances of
grant of permission 505, 506, 507, 508 and 509/94, collectively
considered, and comprehends all extensions and modalities of
exploitation that may be permitted or licensed, including but not
limited to, local and national extensions:
1.6.1. Ordinance 505 covers the localities of Porto Alegre, Guaiba,
Alvorada and Canoas, all in the State of Rio Grande do Sul,
having as service area 706 Km2 in the frequency of 931 MHz,
channel 931.8125 MHz;
1.6.2. Ordinance Number 506 covers the localities of Sao Paulo,
Santo Andre, Sao Bernardo do Campo, Diadema, Sao Caetano do
Sul, Guarulhos, Osasco, Barueri and Maua, all in the State of
Sao Paulo, having as service area 3.495 Km2 in the frequency
of 931 MHz, channel 931.8125 MHz;
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1.6.3. Ordinance Number 507 covers the localities of Belo Horizonte,
Contagem and Betim, all in the State of Minas Gerais, having
as service area 430 Km2 in the frequency of 931 MHz, channel
931.8125 MHz;
1.6.4. Ordinance Number 508 covers the localities of Rio de Janeiro,
Niteroi, Sao Joao do Meriti and Nova Iguacu, all in the State
of Rio de Janeiro, having as service area 5.611 Km2 in the
frequency of 931 MHz, channel 931.8125 MHz;
1.6.5. Ordinance Number 509 covers the locality of Curitiba, in the
State of Parana, having as service area 380 Km2 in the
frequency of 931 MHz, channel 931.8125 MHz.
1.7. "Service Trademark" shall mean the trademark utilized to identify the
business as specified in Exhibit II.
Clause Two: PURPOSE
2.1. The purpose of this private instrument is to regulate the conditions
of the resale of Services by the OPERATOR, as well as the terms of
the mutual Operating Agreement contracted hereby, and, specially,
the obligations of the OPERATOR regarding the utilization of
equipment and stations in accordance with the technical
specifications approved, as well as with respect to the utilization
of authorized equipment, technical characteristics of the Services
and proper utilization of the spectrum inherent to the operation, in
order to improve and develop Paging Services in the Territory.
2.2. The PERMISSION HOLDER hereby engages the OPERATOR as the exclusive
reseller of its Services, the OPERATOR being hereby entrusted with
the operation of such Services, it being further agreed that the
PERMISSION HOLDER shall not itself be permitted to directly sell or
operate any such Services, and shall hold the Permissions free and
clear of any lien, claim, charge or encumbrance of any kind.
Clause Three: OBLIGATIONS OF THE OPERATOR
The following are obligations of the OPERATOR:
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3.1. To resell the Services by executing Subscription Agreements with the
Subscribers, containing, essencially, the provisions mentioned in
Exhibit III;
3.2. To ensure the operations necessary for the rendering of the Services
to all current and future Subscribers which have entered into a
service agreement and which do so in the future;
3.3. To ensure the above mentioned operation pursuant to standards of
trustworthiness, quality, courtesy and continuity, in accordance
with the technical characteristics inherent to the Service;
3.4. To maintain specialized technical personnel for the assistance to
Services and to Subscribers and for the maintenance of the equipment
used;
3.5. To provide the stations on a permanent basis with the necessary
equipment in accordance with high technological standards;
3.6. To use solely certified equipment and in accordance with the
approved technical authorizations and specifications, ensuring its
permanent and adequate maintenance;
3.7. To comply with any requirements made by the National Communications
Secretariat in connection with the Permissions ("Secretaria Nacional
de Comunicacoes" - SNC), within the scope of its competence, within
the term established by SNC;
3.8 Not to use, order or consent to the use of the equipment or
installation affected to the Services without compliance with the
rules and conditions applicable to it;
3.9. To allow access to the installations and equipment of any
supervision agent of the SNC, duly identified, carrying out,
respectively, an inspection or verification mission;
3.10. To avoid the occurrence of interference harmful to other
telecommunication or broadcasting services authorized and legally
installed, as a result of the operation of a station or equipment;
3.11. To promptly interrupt the functioning of a station, upon the receipt
of notice from the PERMISSION HOLDER, in compliance with a
determination of the Ministry of Communications necessitating such
interruption;
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3.12. Not to create, in the carrying out of its activity, a situation
dangerous to human life or to property;
3.13. To provide the information required by SNC, for the purpose of
verifying how the Service is being operated and the Subscribers
assisted;
3.14. To maintain an updated file of documents regarding the legal
capacity, economic and financial capacity and technical operational
capacity, including with respect to the equipment used in the
operation, which shall be done according to the same terms of such
regulatory requirement applied to the PERMISSION HOLDER;
3.15. To assume full responsibility for the operation of the stations
under its care, as well as for the good and efficient assistance to
the Subscribers, undertaking to instruct its employees and officers
of the obligation hereby undertaken;
3.16. To maintain in strict confidentiality and secret the communications
which take place by means of the equipment, networks or systems
inherent to the contracted operation;
3.17. To be responsible for all costs and charges arising from the resale
and operation of the Services, including expenses with equipment,
installation, maintenance, operation, modernization and financing;
3.18. To assume full responsibility for the reselling of the services and
for obtaining Subscribers, receiving and collecting the payment of
the subscriptions, and giving receipts therefor.
3.19. The OPERATOR shall use its best efforts to provide the Operator with
(i) copies of all correspondence with any governmental body or
authority relating to the Permissions and (ii) access to al files
and other documents regarding the legal capacity, economic and
financial capacity and technical operational capacity maintained by
the OPERATOR.
3.20. To assume, in general, full responsibility before the PERMISSION
HOLDER for the acts and activities developed by it, which may result
in any charges, encumbrances or damages to PERMISSION HOLDER,
pursuant to clause 7 below.
Clause Four: RIGHTS OF THE OPERATOR
The rights of the OPERATOR are to carry all activities necessary to conduct the
business and operation of the Services, including:
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4.1. To contract, sub-contract and take all the measures, operational or
not, which it deems necessary for the fulfillment of its obligations
with respect to the resale and operation of the Service and to the
assistance to Subscribers, the OPERATOR being solely responsible for
the costs and charges resulting from agreements it enters with third
parties;
4.2. To establish the value of the Services to be offered to the
Subscribers regarding the initial sign up payment as well as the
monthly fees;
4.3. To sell advertising space;
4.4. To collect and administer subscription fees, monthly fees and other
income related to the Services;
4.5. To program and carry out in full the marketing policy and the sales
effort with respect to the Services, promoting, advertising and
marketing the Services to the general public;
4.6. To execute and to rescind Subscription Agreements; and
4.7. To develop the clientele of the Service by means of the reference of
Subscribers of its own indication, it being understood that the
OPERATOR shall not be entitled to any additional remuneration in
addition to the global remuneration provided for in Clause 8 below,
by reason of the reference of its own Subscribers herein provided
for.
Clause Five: OBLIGATIONS OF PERMISSION HOLDER
5.1. The PERMISSION HOLDER grants to the OPERATOR, within the scope of
this Agreement, the right to use all existing equipment and
infra-structure inherent to the Service object of the mutual
Operating Agreement contracted hereby, it being expressly understood
that PERMISSION HOLDER shall not be entitled to any remuneration in
addition to the global remuneration provided for in Clause 8 below,
by reason of such assignment.
5.2. The PERMISSION HOLDER shall comply with the requirements made by any
competent governmental body or authority, within the term
established by it, immediately notifying the OPERATOR of the action
or information required from it to make such compliance possible.
5.3. The PERMISSION HOLDER shall assume, before SNC, a punctually
compliant and diligent behavior with respect to the legal,
regulatory and
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specific requirements of the Ordinances by which the Permissions
were granted.
5.4. The PERMISSION HOLDER will comply with all laws, statutes,
governmental regulations and all judicial or administrative tribunal
orders, judgments, writs, injunctions, decrees or similar commands
applicable to the grant of Permissions set forth in paragraph 2 and
3 of the preamble to this Agreement and shall not, by its action or
inaction, adversely affect the status of the Permissions. The rise
of liability caused by the inaction of the Permission Holder
provided in this clause, depends on unjustified non compliance with
written determinations of the Operator.
5.5. The PERMISSION HOLDER shall use its best efforts, at the Operator's
expense, to obtain and maintain in full force and effect each
Permission and shall timely file and prosecute all necessary
applications for renewal and, when requested by, and at the expense
of, the Operator, for the expansion, modification or otherwise of
the Permissions. The Permission Holder shall not assign, transfer,
sell, trade, dispose or otherwise encumber the Permissions.
5.6. The PERMISSION HOLDER shall use its best efforts to provide the
Operator with (i) copies of all correspondence with any governmental
body or authority relating to the Permissions and (ii) access to al
files and other documents regarding the legal capacity, economic and
financial capacity and technical operational capacity maintained by
the PERMISSION HOLDER.
5.7. The PERMISSION HOLDER shall, if necessary and at the Operator's
expense, join the Operator in any litigation or other proceeding
brought by or against the Operator relating to the Services or the
Permissions, including to prevent any unauthorized individual or
entity from transmitting signals that would interfere with the
Operator's signals.
5.8. The PERMISSION HOLDER shall supply to the OPERATOR all and any
information, specially notices received from SNC, necessary for the
compliance with the obligations which are incumbent upon the latter,
including the access to documents relating to the Services,
eventually in the possession of the former.
5.9. The PERMISSION HOLDER undertakes neither to interfere in the
OPERATOR'S commercial relationship with Subscribers nor to request
the OPERATOR to rescind any Subscribers' Agreements with respect to
the clientele developed as a result of the commercial and marketing
efforts of the OPERATOR, except in the case of default of the
Subscriber in the
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fulfillment of its obligations, that can adversely affect the
obligations and responsibilities of the PERMISSION HOLDER before the
government under the applicable rules.
5.10. The PERMISSION HOLDER hereby ackowledges the confidential character
of the list of Subscribers developed as a result of the commercial
and marketing efforts of the OPERATOR, as well as the OPERATOR'S
exclusive ownership of and rights related to such list.
5.11. The PERMISSION HOLDER hereby ackowledges the exclusive rights of the
OPERATOR to the use and exploitation of the Service Trademark, at
the OPERATOR's best will.
Clause Six: RIGHTS OF PERMISSION HOLDER
6.1. The PERMISSION HOLDER reserves the functional power of supervising
the good use of the spectrum inherent to the operation of the
Services.
6.2. The PERMISSION HOLDER shall be promptly assisted and or indemnified
by the OPERATOR, in the case of an administrative or judicial
proceeding filed against it or in the case of any penalty or
indemnity collected from it, provided that in any case such
proceeding, penalty or indemnity results from the default of the
OPERATOR in the fulfillment of its obligations herein provided for.
6.3. The payment of the expenses incurred with any penalties and
indemnities resulting from a default of the OPERATOR shall be
covered by the OPERATOR which for this purpose shall timely provide
the PERMISSION HOLDER with the necessary amounts, upon request of
the same.
6.4. In the event the PERMISSION HOLDER advances the above referred
amounts, it shall be reimbursed up to three business days after its
advice to the OPERATOR, for the actual amount disbursed.
6.5. It is expressly understood that the PERMISSION HOLDER has no
obligation to make any such advance; and
6.6. The PERMISSION HOLDER also has the right to be reimbursed by the
OPERATOR for the reasonable expenses incurred by it, in connection
with the acts performed at the request of or in the interest of the
OPERATOR, arising from the provisions of this Agreement, provided
they are duly evidenced by means of a detailed report and a
supporting documentation.
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Clause Seven: INDEMNITY
7.1. The OPERATOR shall indemnify, reimburse and hold harmless PERMISSION
HOLDER, its officers, directors, agents, employees and/or
attorneys-in-fact, from and against any and all claims, damages,
losses, liabilities, demands, suits, judgments, causes of action,
legal proceedings, whether civil or criminal, penalties, fines and
other sanctions (herein jointly referred to as "Claims"), and any
reasonable attorney's fees in connection therewith, including any of
the foregoing arising or imposed, which may in any way arise or be
related to the OPERATOR'S acts or omissions and or the operation of
the Paging Services.
7.2. Once payment is made to the party to be indemnified under the
provision of this Clause, the OPERATOR shall be surrogated in all of
the rights that the indemnified party might have against third
parties, including the manufacturer of the equipment, if applicable.
7.3. The obligation to indemnify provided for herein does not apply to
any claims for which the PERMISSION HOLDER, its officers, directors,
shareholders, agents, employees and/or attorneys-in-fact have
contributed with willful intent or fault.
7.4. The PERMISSION HOLDER shall indemnify the OPERATOR its officers,
directors, agents, employees and/or attorneys-in-fact, in the event
the Permissions are revoked or suspended, or in the event the resale
and operation now agreed become impossible by reason of any action
or inaction of the PERMISSION HOLDER.
7.5. In order to defend and preserve the Permissions, the OPERATOR shall
determine the measures to be followed by the PERMISSION HOLDER, who
shall act in accordance with the OPERATOR's determinations. The
PERMISSION HOLDER shall not be held liable under clause 7.4. if its
inaction is caused by the lack of proper instruction by the
OPERATOR.
7.6. The provisions of item 7.4. above do not include the revocation of
the Permissions by reason of unilateral action by the Ministry of
Communications, where the PERMISSION HOLDER is in full compliance
with all applicable laws and regulations.
Clause Eight: OPERATING INCOME, REMUNERATION
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8.1. The OPERATOR shall be entitled to the operating income generated by
the resale and operation of the Services, especially income
generated in connection with the contracts executed by the OPERATOR
with the subscribers, but also including any income generated by the
exploitation of ancilliary actvities, the PERMISSION HOLDER hereby
assigning to the OPERATOR any rights it might be entitled to at any
time with respect to such income.
8.2. In view of the assignment above, the PERMISSION HOLDER, in any
agreements it eventually comes to enter into with Subscribers, as a
result of a regulatory requirement, shall notify such Subscribers of
the assignment effected hereby, instructing them to make all
payments directly to the OPERATOR, at the place designed by it.
8.3. The OPERATOR undertakes the responsability of providing all
necessary documentation regarding the notification and instruction
referred to in item 8.2. above, being the obligation of the
PERMISSION HOLDER limited to signing whatever is necessary and
proposed by the OPERATOR to accomplish item 8.2.
8.4. As its only compensation under this Agreement the PERMISSION HOLDER
accepts, on a risk basis, the potential increase of value of its
assets and rights arising from technological, organizational,
operational and managing goodwill developed by the OPERATOR under
this Agreement.
Clause Nine: TAXES
9.1. The OPERATOR undertakes to pay all taxes which are directly or
indirectly levied upon the operation and resale of the Services, as
well as for the payment of any fees related thereto.
9.2. The OPERATOR hereby undertakes to reimburse the PERMISSION HOLDER
for all taxes and fees arising directly from the activities carried
out by the OPERATOR, undertaking full responsibility for any
penalties and/or late charges caused by it, no matter when this
occurs, including beyond the term of this Agreement, except for
income tax levied on the PERMISSION HOLDER other than income tax,
social tax, as well as those taxes that may substitute them, levied
upon the amounts the Operator shall receive, or upon the amounts to
it attributed as consequence of this Agreement.
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9.3. The OPERATOR shall be responsible for any infringements and for any
fiscal violations arising from the execution and performance of this
Agreement.
9.4. During the period this Agreement is in effect, in the event one of
the parties acquires a fiscal exemption for the development of its
activity, the other shall fulfill, as applicable, the accessory
conditions necessary for such exemption.
Clause Ten: CONFIDENTIALITY
10.1. It is hereby agreed that any and all information already supplied or
which comes to be supplied by one party to the other as a result of
this Agreement, specially those regarding the strategic-economic
plan of the operation now contracted, are confidential, and each
party shall and shall cause its representatives, agents, employees,
servants and consultants, to keep any information provided to it by
the other party in strict confidentiality, refraining from divulging
such information in whole or in part, without the previous written
consent of the other party.
10.2. The parties agree as of now that they shall not be responsible for
the violation of the confidentiality obligation provided for in this
clause in the event of a legal or judicial determination which
forces them to disclose to third parties information acquired within
the scope of this instrument, as well as information which becomes
public without their interference.
Clause Eleven: TERM
11.1. This Agreement shall come into effect on the date of its execution
and shall remain in effect with respect to the parties, for the term
of fifteen (15) years, automatically renewable for successive
fifteen (15) year periods, unless no later than 1 (one) year prior
to the end of any term notice is given by either party that the
Agreement will not be renewed, up to the maximum term equivalent to
the term of effectiveness of the Permissions or its renewal.
12
<PAGE>
11.2. The parties may rescind this Agreement by mutual consent, provided
the continuity of the services and the operation of the activities
is ensured.
Clause Twelve: MUTUAL COOPERATION
The parties, within the strict compliance with their obligations and within the
scope of the present instrument, shall cooperate with one another before the
Ministry of Communications and other bodies of the Federal, State and Municipal
Public Administrations.
Clause Thirteen: ASSIGNMENT AND TRANSFER
13.1. The direct assignment or transfer of rights and obligations of the
OPERATOR arising from this Agreement can only be performed without
any consent from the PERMISSION HOLDER in addition to the consent
already expressed herein, if to a company which is also an operator,
provided it is affiliated with the OPERATOR, and further provided
that such assignee or transferee specifically assumes such
obligations.
13.2. For purposes of this clause, "affiliated company" shall mean with
respect to the OPERATOR, any and all associated companies as defined
in article 243, first paragraph of the Law 6404/76 or any company
which, directly or indirectly, controls, is controlled by or is
under common control with the OPERATOR at the time of the transfer
and remains as an affiliated company throughout the term this
Agreement is in effect.
13.3. Notwithstanding the provisions of Clause 13.1. this Agreement and
the rights and obligations of the OPERATOR arising hereunder may be
assigned to any company that is acquiring all or substantially all
of the assets of the OPERATOR with the consent of the PERMISSION
HOLDER, which consent shall not be unreasonably withheld or delayed.
Clause Fourteen: REPRESENTATIONS AND WARRANTIES OF THE PARTIES
14.1. Except as otherwise provided in this Section, each party represents
and warrants to the other, as to itself that:
13
<PAGE>
(i) such party is a duly organized, validly existing and in good
standing under the laws of Brazil;
(ii) that the execution and delivery by such party of this
Agreement, the consummation by such party of the transactions
contemplated herein and compliance with the terms and
provisions hereof are within such party's corporate powers,
and do not and will not result in a violation of such party's
charter or by-laws as currently in effect;
(iii) this Agreement has been duly authorized, executed and
delivered by such party and is a legal, valid and binding
obligation of such party, enforceable against such party in
accordance with its terms, except as its enforceability may be
limited by bankruptcy, insolvency, reorganization and other
laws of general application affecting the enforcement of
creditor's rights in general;
(iv) no consent, approval or authorization of any governmental
authority shall be required in connection with the execution,
conclusion or enforcement of this Agreement;
(v) the PERMISSION HOLDER represents and warrants that the
Permissions were duly and validly issued in accordance with
the applicable legislation and are in full force and effect,
and that all of the conditions provided for in such
Permissions and in the applicable regulations have been
complied with in full, including but not limited to the
compliance with the term for the start up of operations, as
well as the technical characteristics of the Service provided
for in the Certificate of Project Approval;
(vi) the PERMISSION HOLDER represents and warrants that the
Permissions are free and clear of any liens and encumbrances
of any nature and that it has no knowledge of the existence of
any claim or proceeding, judicial or administrative, aiming at
modifying, suspending, revocating or terminating the
Permissions;
(vii) the PERMISSION HOLDER represents and warrants that its tax
obligations have been fulfilled up to the present date, all
income tax returns required by the tax authorities having been
duly filed; and
(viii) the PERMISSION HOLDER represents and warrants that it made
the payment of the fees due in connection with receipt the
license for the functioning of the stations of the Service, of
the telecommunications supervision fee corresponding to the
stations to be installed, for purposes of receiving the
licenses for the
14
<PAGE>
functioning of the stations, as well as the supervision fee
with respect to the current year.
Clause Fifteen: JURISDICTION
15.1. This Agreement and all questions arising in connection with its
interpretation and legal relations between the parties in connection
herewith shall be governed and construed in accordance with the
substantive law of Brazil.
15.2. All disputes and differences arising from or in connection with this
Agreement, or in relations between the parties with respect to the
subject matter hereof, shall be finally settled by binding
arbitration in accordance with the Rules for Conciliation and
Arbitration of the International Chamber of Commerce (ICC) by three
arbitrators appointed in accordance with said Rules. The place of
arbitration shall be New York, New York, and the arbitration
proceedings shall be conducted in English.
15.3. If for any reason, notwithstanding the international character of
this Agreement and the diverse nationalities of the shareholders in
the companies parties to the same, the preceding clause 15.2. should
not be applied or be held invalid by any court in Brazil or in the
United States of America, the parties specifically agree that any
dispute or controversy relating to this Agreement or otherwise
described in clause 15.2. shall be decided solely and exclusively by
the competent courts of the State of New York, United States of
America.
Clause Sixteen: REFORMATION
16.1. If any competent governmental body or authority should amend or
clarify the law, rules, regulations or policies, or if any court
should interpret any law, regulation or policy in a manner that
would materially adversely affect the rights or obligations of the
parties under this Agreement, then the parties hereto shall promptly
negotiate using their best efforts and in good faith to reform and
amend this Agreement so as to effectuate as nearly as reasonably
possible the intention of the parties expressed in this Agreement.
No party shall take any action that contributes to such amendment,
clarification or interpretation without the prior written consent of
the other party. Only in the event the parties are unable to reach
the agreement with respect to the appropriate action to be taken
shall the
15
<PAGE>
offending provision(s) be stricken from this Agreement and the
remainder of the Agreement shall be enforced to the greatest extent
permitted by law.
16.2. In what specially regards the provision of Subscribers Agreements,
the parties hereto commit themselves to use their best efforts to
maintain permanently updated information concerning the most recent
regulamentary standards or otherwise recommended by the Ministry of
Communications, to which the Operator shall, as it deems necessary,
consult the Ministry of Communications. It is incumbent to the
Operator to update and develop the proposals of model or standards
considered to be the most adequate to the business conditions,
always observing the above mentioned regulamentary or ministerial
criterias.
16.3. As a condition to the best performance of its obligations and to
assume its continuous representation before the Ministry of
Communications the PERMISSION HOLDER shall grant a power-of-attorney
to persons chosen by mutual agreement with the OPERATOR, conferring
upon them the necessary powers. The attorneys-in-fact shall always
send a copy of all documents signed on behalf of the PERMISSION
HOLDER to the latter for its knowledge of updated events, amendments
and activities.
Clause Seventeen: GENERAL PROVISIONS
17.1. This Agreement can only be amended with the express consent of both
parties, by means of a written instrument executed by both parties.
17.2. So as to avoid eventual conflicts of interest, the PERMISSION HOLDER
shall not directly assign or negotiate away any interest in, or
negotiate any matters related to, this Agreement, or the
Permissions.
17.3. All publicity and marketing material prepared by the OPERATOR or the
PERMISSION HOLDER within the scope of this Agreement shall be the
property of the OPERATOR.
17.4. The PERMISSION HOLDER and the OPERATOR reciprocally undertake to
inform one another, of any and all operational or technical measure,
or any other action, especially before the Public Administration,
which may adversely affect the activities of either of them, within
the scope of the rights and obligations arising from this Agreement.
17.5. All communications under this Agreement shall be in writing and
shall be delivered by hand, internationally recognized air courier
or facsimile transmission, charges prepaid:
16
<PAGE>
(i) if to the OPERATOR, at Rua Alexandre Dumas, 1711, Sao Paulo,
SP., facsimile number (011) 521 1814, marked for the attention
of Mr. Thomas Trynin or Marco Fregenal, or at such other
address as the OPERATOR may have furnished in writing to the
PERMISSION HOLDER;
(ii) if to the PERMISSION HOLDER, at Rua do Carmo, 11, 20th floor,
Rio de Janeiro, RJ, facsimile number (021) 232-0673, marked
for the attention of Mr. Joao Mauricio de Araujo Pinho, with a
copy to Mr. Joaquim Vieira dos Santos at Rua Uruguai, 288,
apartment No. 202, on Tower 2, Rio de Janeiro, RJ or at such
other address as the PERMISSION HOLDER may have furnished in
writing to the OPERATOR.
17.6. No party to this Agreement shall, by virtue of having entered into
this Agreement, be deemed to be the legal representative or agent of
any other party, and no party shall have the right or authority to
approve, create, or incur any liability or any obligation of any
kind, express or implied, against or in name of or on behalf of any
other party, except to the extent otherwise expressly provided in
this Agreement.
17.7. Specifically concerning the reciprocal commercial positions of the
Parties, it is their intention, in accordance with Ordinance number
257/91, of October 23, issued by the Ministry of Communications,
that the OPERATOR is not an agent of the PERMISSION HOLDER, but a
reseller of the Services.
17.8. This Agreement constitutes the entire understanding of the parties
hereto relating to the subject matter hereof and supersedes all
prior agreements or understandings with respect to the subject
matter hereof among such parties.
17.9. The authoritative text of this Agreement shall be the English text.
17
<PAGE>
In witness whereof, the parties have caused this Agreement to be duly executed
in 3 (three) counterparts of equal content and form, in the presence of the two
witnesses below.
Sao Paulo, December 11th, 1996
/s/ Joaquim VIEIRA Dos Santos
---------------------------------------------
SAN FRANCISCO COMUNICACOES LTDA.
JOAQUIM VIEIRA DOS SANTOS
Attorney-in-fact
/s/ Thomas Crane Trynin
/s/ Marco Antonio Fregenal
---------------------------------------------
PAGING NETWORK DO BRASIL S.A.
Thomas Crane Trynin Marco Antonio Fregenal
Officer Officer
WITNESSES:
1. /s/ Roberto Duque Estrada
-----------------------------------
Roberto Duque Estrada
OAB/RJ 80.668
CPF/MF 016.468.087-03
2. /s/ Maria Gabriela Campos da Silva
-----------------------------------
Maria Gabriela Campos da Silva
OAB/RJ 84.606-E
CPF/MF 016.706.607-29
18
<PAGE>
AGREEMENT OF PROMISE OF ASSIGNMENT AND TRANSFER
OF PERMISSIONS
BY MEANS OF THIS PRIVATE INSTRUMENT:
I. SAN FRANCISCO COMUNICAC'ES LTDA., a commercial limited liability company
organized and existing under the laws of the Federative Republic of
Brazil, with head offices in the City of Rio de Janeiro, State of Rio de
Janeiro, at Rua Jardim Botanico, 635, office No. 403, registered as
taxpayer under CGC No. 42.582.569/0001-52, herein represented by its duly
empowered attorney-in-fact Mr. JOAQUIM VIEIRA DOS SANTOS, Portuguese
citizen, married, businessman, resident and domiciled in the City of Rio
de Janeiro, State of Rio de Janeiro, at Rua Uruguai, 288, apartment No.
202, Tower 02, bearer of identity card number RNE W175237/9 and, bearer of
CPF 019899447/87, hereinafter referred to simply as "PROMISING
TRANSFEROR";
AND
II. PAGING NETWORK DO BRASIL S.A., a corporation, organized and existing under
the laws of the Federative Republic of Brazil, with head offices in the
City of Sao Paulo, State of Sao Paulo, at Rua Alexandre Dumas, number
1711, registered as taxpayer under CGC/MF No. 01.126.946/0001-61, herein
represented by its Officers Mr. Thomas Crane Trynin, American citizen,
single, business administrator, bearer of identity card No. V192319-I and
CPF No. 214308398-05 and Mr. Marco Antonio Fregenal, Brazilian citizen,
married, business administrator, bearer of identity card No. 35355458-5
and CPF 214170768-49 hereinafter referred to simply as "PROMISING
TRANSFEREE";
WHEREAS:
1. The PROMISING TRANSFEROR is the holder of permissions granted by the
Ministry of Communications for the exploitation of Paging Services
("Servico Especial de Radiochamada") ("the Paging Services"), in
accordance with Ordinances issued by the Ministry of Communications
Number 505, 506, 507, 508, 509, all dated as of July, 18, 1994 and
published in the Official Gazette of July, 28, 1994, except for
Ordinance 506 which was published in the Official Gazette as of
August, 04, 1994
<PAGE>
(the "Permissions"), which attached hereto as Exhibit I, are an
integral part hereof as if they had been herein transcribed in full;
2. The PROMISING TRANSFEROR has entered into an agreement for the
resale of its Paging Services and mutual operating agreement with
the PROMISING TRANSFEREE (The "Operating Agreement");
3. The PROMISING TRANSFEREE has made investments in the installation,
operation and provision of the Paging Services, and has been
developing commercial and marketing efforts with its operation and
the resale;
4. The PROMISING TRANSFEREE has expressed its wish to acquire the
Permissions and the PROMISING TRANSFEROR agrees to transfer them to
the PROMISING TRANSFEREE;
5. The PROMISING TRANSFEREE desires to eventually purchase said
Permissions, to which the PROMISING TRANSFEROR agrees;
6. The PROMISING TRANSFEROR and the PROMISING TRANSFEREE acknowledge
the legal demand for obtaining the prior authorization of the
Ministry of Communications in order to have the Permissions
transferred;
NOW, THEREFORE:
The Parties have agreed to enter in this Agreement of Promise of Assignment and
Transfer of Permissions with respect to Paging Services (the "Agreement"), in
accordance with the clauses and conditions specified below:
Clause One: DESCRIPTION OF THE PERMISSIONS
The Permissions are all of those described in Exhibit I hereto, which initialed
by the parties become an integral part of this Agreement, as well as all and any
new Permissions, namely those that may be granted as a result of a
transformation of the extension or modallity of the exploitation of the
Services, including any and all inherent rights.
2
<PAGE>
Clause Two: PURPOSE
The PROMISING TRANSFEROR hereby promises to transfer to the PROMISING TRANSFEREE
and the latter promises to acquire the Permissions attached hereto as Exhibit I,
which shall be considered to have been transcribed in full herein, as well as
all and any new Permissions, namely those that may be granted as a result of a
transformation of the extension or modallity of the exploitation of the
Services, including any and all inherent rights.
First Paragraph: The definitive transfer of title to the Permissions of
the PROMISING TRANSFEROR to the PROMISING TRANSFEREE shall be made by
means of the execution of one or more definitive transfer agreements
relating to each of the Permissions individually, in groups or jointly, at
the option of the PROMISING TRANSFEREE.
Second Paragraph: For purposes of the exercise of the option by the
PROMISING TRANSFEREE, as provided in the First Paragraph above, it is
incumbent upon it to present to the PROMISING TRANSFEROR the text of the
definitive transfer agreement or agreements, depending on whether it opts
for the joint transfer of the Permissions, or for their transfer
individually or in groups.
Third Paragraph: For purposes of the provisions of the preceding
paragraph, the PROMISING TRANSFEROR grants on the date hereof an
irrevocable power-of-attorney to persons chosen by mutual agreement
between the PROMISING TRANSFEROR and the PROMISING TRANSFEREE, conferring
upon them the necessary powers to carry out the transfer.
Fourth Paragraph: It is understood that the transfer or transfers of the
Permissions include the transfer to the PROMISING TRANSFEREE of any
equipment, cables, transmitters, receivers and other infrastructure, and
all user's rights related to such infrastructure then owned or entitled to
the PROMISING TRANSFEROR and affected to the service.
Fifth Paragraph: With the transfer of the Permissions, the parties
consider automatically assigned and transferred to the PROMISING
TRANSFEREE all the PROMISING TRANSFEROR's rights arising from any and all
subscriber agreements.
3
<PAGE>
Clause Three: THE DEFINITIVE TRANSFER AGREEMENT(S)
The definitive agreement(s) for the transfer of title to the Permissions shall
be granted by the PROMISING TRANSFEROR in favor of PROMISING TRANSFEREE or in
favor of whom it may indicate, it being recognized by the PROMISING TRANSFEROR,
as of now, that the PROMISING TRANSFEREE has the right to be substituted in its
contractual position in this Agreement one or more times, without the PROMISING
TRANSFEROR's consent, pursuant to its option for the joint, isolated or grouped
transfer of the Permissions, being able, for this purpose, to indicate one or
several interested parties, as the case may be, subject to any applicable legal
and regulatory requirements.
Clause Four: TERM FOR THE EXECUTION OF THE DEFINITIVE AGREEMENT(S)
The definitive agreement(s) for the transfer of title to the Permissions shall
be executed by the PROMISING TRANSFEROR and PROMISING TRANSFEREE, as soon as the
former has obtained from the Ministry of Communications the competent
authorization in accordance with items 6.11 and 6.11.1 of the General
Telecommunications Rule ("Norma Geral de Telecomunicacoes") approved by
Ordinance No. 232/91 of October 23 and item II.9, of the Specific Conditions of
the Specific Telecommunications Rule ("Norma Especifica de Telecomunicacoes"),
approved by Ordinance No. 257/91 of October 23, i.e. once the three (3) year
period counted from the date of issuance of the functioning license (or such
shorter period as may then be applicable) and the above referred express
authorization is obtained.
First Paragraph: The term referred to in the previous item shall be,
however, anticipated upon the earlier of the following situations:
(i) in accordance with the precise terms of an eventual legislative or
administrative change, regarding the terms of the transfer of the
Permissions;
(ii) when any express authorization has been obtained for the direct
assignment and transfer; or
(iii) when any alternative solution, in accordance with the Second and
Third Paragraphs below, has been allowed.
4
<PAGE>
Second Paragraph: The PROMISING TRANSFEROR shall use its best efforts so
as to obtain the previous administrative authorization(s) required in
connection with the execution of the definitive transfer agreement,
cooperating, in a diligent and active manner, in all bureaucratic
proceedings which may be necessary or convenient to accomplish such end.
The PROMISING TRANSFEROR also agrees, if necessary, to look for
alternative solutions to make such transfer possible, provided such
alternative solutions are not excessively burdensome. The PROMISING
TRANSFEREE will direct the PROMISING TRANSFEROR for all measures to be
taken as per this paragraph.
Third Paragraph: The PROMISING TRANSFEREE shall cooperate, in a diligent
and active manner, for the accomplishment of occasional bureaucratic
requirements and, if necessary, to search for the alternative solutions in
order to allow such transfer, being provided that said solutions are not
excessively burdensome.
Fourth Paragraph: For purposes of the provisions of the preceding
paragraphs, the PROMISING TRANSFEROR grants, on the date hereof, an
irrevocable power-of-attorney to persons chosen by mutual agreement
between PROMISING TRANSFEROR and the PROMISING TRANSFEREE, conferring upon
them the necessary powers to effectuate the transfer of the rights.
Clause Five: REPRESENTATIONS AND WARRANTIES OF THE PROMISING TRANSFEROR
First Paragraph: The PROMISING TRANSFEROR is a limited liability company
duly organized, validly existing and in good standing under the laws of
the Federative Republic of Brazil and has full corporate power and
authority to carry on its business as it is now being conducted and to own
all of its properties and assets. The PROMISING TRANSFEROR is duly
qualified to do business and is in good standing in each jurisdiction in
which the ownership of its properties or the conduct of its business
requires such qualification.
Second Paragraph: The PROMISING TRANSFEROR has all necessary corporate
power and authority and has taken all corporate action necessary to enter
into this Agreement, to consummate the transactions contemplated on its
part hereby and to perform its obligations hereunder. The execution,
delivery and performance of this Agreement and the consummation of the
transactions described herein by the PROMISING TRANSFEROR have been duly
authorized by all requisite corporate action. This Agreement has been duly
executed and
5
<PAGE>
delivered by the PROMISING TRANSFEROR and, assuming the due execution and
delivery thereof by the PROMISING TRANSFEREE, is a valid and binding
obligation of the PROMISING TRANSFEROR, enforceable against it in
accordance with its terms.
Third Paragraph: As of the date of this Agreement, the PROMISING
TRANSFEROR has good title to all of the Permissions, free and clear of any
and all liens, charges, pledges, mortgages, security interests or other
encumbrances of any kind, except for governmental restrictions on the
transfer thereof.
Fourth Paragraph: The business of the PROMISING TRANSFEROR has been
operated in material compliance with all applicable laws, statutes, rules,
regulations, ordinances, codes, orders, licenses, permits or
authorizations, as such now apply to such business, and to the knowledge
of the PROMISING TRANSFEROR no notification has been received alleging any
violation of any of the foregoing.
Fifth Paragraph: Neither the execution, delivery nor performance of this
Agreement or any of the transactions contemplated hereby will (i) violate
or conflict with any provision of the organizational documents of the
PROMISING TRANSFEROR, (ii) result in a breach of or a default under any
provision of any contract, agreement, lease, commitment, license,
franchise, permit, authorization or concession to which the PROMISING
TRANSFEROR is a party or bound or to which any property or asset of the
PROMISING TRANSFEROR is subject or an event which with notice, lapse of
time, or both, would result in any such breach or default, or (iii) result
in violation by the PROMISING TRANSFEROR of any statute, rule, regulation,
ordinance, code, order, judgment, writ, injunction, decree, or award, or
an event which with notice, lapse of time, or both, would result in any
such violation, which breach, default or violation would have a material
adverse effect on the ability of the PROMISING TRANSFEROR to consummate
the transactions contemplated hereby.
Clause Six: REPRESENTATIONS AND WARRANTIES OF THE PROMISING TRANSFEREE
First Paragraph: The PROMISING TRANSFEREE is a corporation (S.A.) duly
organized, validly existing and in good standing under the laws of the
Federative Republic of Brazil and has full corporate power and authority
to carry on its business as it is now being conducted and to own all of
its properties and assets. The PROMISING TRANSFEREE is duly qualified to
do business and is in good
6
<PAGE>
standing in each jurisdiction in which the ownership of its properties or
the conduct of its business requires such qualification.
Second Paragraph: The PROMISING TRANSFEREE has all necessary corporate
power and authority and has taken all corporate action necessary to enter
into this Agreement, to consummate the transactions contemplated on its
part hereby and to perform its obligations hereunder. The execution,
delivery and performance or this Agreement and the consummation of the
transactions described herein by the PROMISING TRANSFEREE have been duly
authorized by all requisite corporate action. This Agreement has been duly
executed and delivered by the PROMISING TRANSFEREE and, assuming the due
execution and delivery thereof by the PROMISING TRANSFEROR, is a valid and
binding obligation of the PROMISING TRANSFEREE, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratoriums or other similar laws
now or hereafter in effect relating to creditors, rights generally and by
general principles of equity (whether considered in an action at law or in
equity) and the discretion of the court before which any proceeding
therefor may be brought.
Clause Seven: MUTUAL COVENANTS OF THE PARTIES
First Paragraph: From the date hereof until the date upon which the
definitive agreement(s) for the transfer of the Permissions are executed,
the PROMISING TRANSFEROR shall:
(a) not take any action that would result in the rescission of the grant
of the Permissions to the PROMISING TRANSFEREE, or any action
inconsistent with the consummation of the transactions contemplated
hereby;
(b) take all action necessary to maintain good title to the Permissions
and the Rights, including using its best efforts to preserve
generally the present relationships with persons or governmental
agencies instrumental in the granting of the Permissions;
instructions for such actions shall be given by the PROMISING
TRANSFEREE to the PROMISING TRANSFEROR; or
(c) not sell, transfer or otherwise dispose of any of the Permissions or
Rights or permit any lien, charge, pledge, mortgage, security
interest or other encumbrance of any kind to exist thereon.
7
<PAGE>
Second Paragraph: From the date hereof until the date upon which the
definitive agreement(s) for the transfer of the Permissions are executed,
the PROMISING TRANSFEREE shall not take any action inconsistent with the
consummation of the transactions contemplated hereby.
Clause Eight: CONSIDERATION
8.1. As consideration for the transfer of all the Permissions, now
promised, the PROMISING TRANSFEROR shall be entitled to the increase
of value of its assets and rights arising from technological,
organizational, operational and managing goodwill developed by the
PROMISING TRANSFEREE, in accordance with the Operating Agreement.
8.2. The increase of value to which the PROMISING TRANSFEROR shall be
entitled is that verified from the date hereof until the date upon
which all the Permissions have been transferred to the PROMISING
TRANSFEREE, by means of a direct or indirect mechanism of transfer.
8.3. The failure of the Promising Transferee to complete the assignment
and transfer now agreed, once the regulatory term has elapsed and
the approval of the competent authorities is obtained, and provided
that the breach was not a result of the action or inaction of the
government or of a regulatory authority, such as the Ministry of
Communications of Brazil, but of the PROMISING TRANSFEROR fault,
shall give rise to the forfeit of its right to such increase of
value of its assets and rights.
Clause Nine: JURISDICTION
9.1. This Agreement and all questions arising in connection with its
interpretation and legal relations between the parties in connection
herewith shall be governed and construed in accordance with the
substantive law of Brazil.
9.2. All disputes and differences arising from or in connection with this
Agreement, or in relations between the parties with respect to the
subject matter hereof, shall be finally settled by binding
arbitration in accordance with the Rules for Conciliation and
Arbitration of the International Chamber of Commerce (ICC) by three
arbitrators
8
<PAGE>
appointed in accordance with said Rules. The place of arbitration
shall be New York, New York, and the arbitration proceedings shall
be conducted in English.
9.3. If for any reason, notwithstanding the international character of
this Agreement and the diverse nationalities of the shareholders in
the companies parties to the same, the preceding clause 9.2. should
not be applied or be held invalid by any court in Brazil or in the
United States of America, the parties specifically agree that any
dispute or controversy relating to this Agreement or otherwise
described in clause 9.2. shall be decided solely and exclusively by
the competent courts of the State of New York, United States of
America.
9
<PAGE>
In witness whereof, the parties have caused this Agreement to be duly executed
in three (3) counterparts of equal content and form, in the presence of the two
witnesses below.
Sao Paulo, December 11th, 1996
/s/ Joaquim Vieira dos Santos
------------------------------------------
SAN FRANCISCO COMUNICACOES LTDA.
Joaquim Vieira dos Santos
Attorney-in-fact
/s/ Thomas Crane Trynin
/s/ Marco Antonio Fregenal
------------------------------------------
PAGING NETWORK DO BRASIL S.A.
Thomas Crane Trynin Marco Antonio Fregenal
Officer Officer
WITNESSES:
1. /s/ Roberto Duque Estrada
-----------------------------------
Roberto Duque Estrada
OAB/RJ 80.668
CPF/MF 016.468.087-03
2. /s/ Maria Gabriela Campos da Silva
-----------------------------------
Maria Gabriela Campos da Silva
OAB/RJ 84.606-E
CPF/MF 016.706.607-29
10
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the heading "Selected
Consolidated Financial Data" and under the caption "Experts" and to the use of
our report dated February 27, 1997, in the Registration Statement (Form F-4) and
related Prospectus of Paging Network do Brasil S.A. for the registration of
$125,000,000 13 1/2% Senior Notes due 2005.
Ernst & Young LLP
Auditores Independents S.C.
Sao Paulo, Brazil
June 20, 1997
<PAGE>
Exhibit 25.1
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)__________
----------------------------------------
THE CHASE MANHATTAN BANK
(Exact name of trustee as specified in its charter)
New York 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
PAGING NETWORK DO BRASIL S.A.
(Exact name of obligor as specified in its charter)
The Federative Republic of Brazil N/A
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
Rua Alexandre Dumas, 1,711
Chacara Santo Antonio
Sao Paulo, 04717-004 Brazil
(Telephone: 55-11-538-3800)
(Address, Zip code and telephone number of registrants
principal executive offices)
-------------------------
13 1/2% Senior Notes due 2005
(Title of Indenture securities)
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
<PAGE>
- 2 -
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of Eligibility.
1. A copy of the Articles of Association of the Trustee as now in effect,
including the Organization Certificate and the Certificates of Amendment dated
February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985 and December 2, 1991 (see Exhibit 1 to Form T-1 filed in
connection with Registration Statement No. 33-50010, which is incorporated by
reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference).
3. None, authorization to exercise corporate trust powers being contained
in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to Form
T-1 filed in connection with Registration Statement No. 33-84460, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act (see
Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, The Chase Manhattan Bank, a corporation organized and existing under
the laws of the State of New York, has duly caused this statement of eligibility
to be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of New York and State of New York, on the 20th day of June, 1997.
THE CHASE MANHATTAN BANK
By /s/ Kevin Binnie
--------------------------------------
Vice President
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
The Chase Manhattan Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31,1997, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Millions
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin .............................................. $ 11,721
Interest-bearing balances ...................................... 3,473
Securities:
Held to maturity securities ...................................... 2,965
Available for sale securities .................................... 35,903
Federal Funds sold and securities purchased under
agreements to resell ........................................... 24,025
Loans and lease financing receivables:
Loans and leases, net of unearned income $123,957
Less: Allowance for loan and lease losses 2,853
Less: Allocated transfer risk reserve 13
--------
Loans and leases, net of unearned income,
allowance, and reserve ......................................... 121,091
Trading Assets ................................................... 54,340
Premises and fixed assets (including capitalized
leases) ........................................................ 2,875
Other real estate owned .......................................... 302
Investments in unconsolidated subsidiaries and
associated companies ........................................... 139
Customers' liability to this bank on acceptances
outstanding ................................................... 2,270
Intangible assets ................................................ 1,535
Other assets ..................................................... 10,283
--------
TOTAL ASSETS ..................................................... $270,922
========
-4-
<PAGE>
LIABILITIES
Deposits
In domestic offices ............................................ $ 84,776
Noninterest-bearing .................................. $ 32,492
Interest-bearing ..................................... 52 284
--------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's ...................................................... 69,171
Noninterest-bearing .................................. $ 4,181
Interest-bearing ..................................... 64,990
Federal funds purchased and securities sold under agree-
ments to repurchase .............................................. 32,885
Demand notes issued to the U.S. Treasury ......................... 1,000
Trading liabilities .............................................. 42,538
Other Borrowed money (includes mortgage indebtedness
and obligations under calitalized leases):
With a remaining maturity of one year or less .................. 4,431
With a remaining maturity of more than one year ................ 466
Bank's liability on acceptances executed and outstanding ......... 2,270
Subordinated notes and debentures ................................ 5,911
Other liabilities ................................................ 11,575
TOTAL LIABILITIES ................................................ 255,023
--------
EQUITY CAPITAL
Perpetual Preferred stock and related surplus .................... 0
Common stock ..................................................... 1,211
Surplus (exclude all surplus related to preferred stock) ......... 10,283
Undivided profits and capital reserves ........................... 4,941
Net unrealized holding gains (Losses)
on available-for-sale securities ................................. (552)
Cumulative foreign currency translation adjustments .............. 16
TOTAL EQUITY CAPITAL ............................................. 15,899
--------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL ....................................... $270,922
========
I, Joseph L. Sclafani, E.V.P. & Controller of the above-named
bank, do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the
appropriate Federal regulatory authority and is true to the best
of my knowledge and belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness of this
Report of Condition and declare that it has been examined by us,
and to the best of our knowledge and belief has been prepared in
conformance with the instructions issued by the appropriate
Federal regulatory authority and is true and correct.
WALTER V. SHIPLEY )
THOMAS G. LABRECQUE ) DIRECTORS
WILLIAM B. HARRISON, JR. )
-5-
<PAGE>
Exhibit 99.1
(LETTERHEAD) CENTRAL BANK OF BRAZIL
FOREIGN CAPITAL DEPARTMENT
PRIOR AUTHORIZATION
AUTHORIZATION nr. 10-1-97/00233
FINAL DATE FOR ENTRY OF FOREIGN CURRENCY: 06.22.97
The Central Bank of Brazil authorizes, in the terms of the legislation in force,
the operation specified below, according to request of 05.07.97.
1. DEBTOR
PAGING NETWORK DO BRASIL S.A.
Rua Alexandre Dumas 1711
04717-004 - Sao Paulo (SP)
Phone: (011) 523-5522
Facsimile: (011) 521-1814
C.G.C.: 01.126.946/0001-61
LINE OF BUSINESS (IBGE CLASSIFICATION): 72.90-7
LEGAL NATURE: 41
2. CREDITOR
MERRILL LYNCH & CO (placing agent) 791223
New York - USA
BEAR STERNS & CO (placing agent) 911444
New York - USA
LEGAL NATURE: 61
GOLDMAN SACH & CO (placing agent) 500078
New York - USA
THE CHASE TRUST BANK (placing agent) 905789
Tokyo - Japan
LEGAL NATURE: 63
3. GUARANTOR(S)
None
<PAGE>
4. CHARACTERISTICS OF THE OPERATION
Loan in currency, by means of SENIOR SECURED NOTES issued in the international
market under Public Placement. Agency Ruling ("Circular") nr. 2.384 of 11.26.93.
Objective: Working capital.
5. AMOUNT:
US$ 200,000,000.00 (two hundred million North-American Dollars)
6. INTEREST
Up to 14.5% a.p.r. , applicable on the debt balance of the principal as of the
date of entry of the foreign currency in the Country.
7. ADDITIONAL CHARGES
a) Discount on Issuance:
2% maximum on the amount entered, in reason of the price of issuance
of the notes correspond to at least 98% of the face value;
b) Commission on Issuance:
limited to 3,5% on the amount entered;
c) Premium for redemption at final due date (8 years):
up to 5% on the amortized amount;
d) General Expenses:
those reasonable, limited to a maximum amount of US$ 1.000,000.00 (
one million North-American Dollars) for the total amount of the operation
(US$ 200 million), including those incurred in reais and in foreign
currency.
8. INCOME TAX AND IOF(Tax on Financial Operation)
A) INCOME TAX (PAYMENT ON FINAL MATURITY DATE - 8 YEARS): responsibility
of debtor, applicable on interest and additional charges, including the
Discount on Issuance, reduced to zero for taxable events occurring in the
calendar year of 1997 (Provisional Measure nr. 1.563-4 of 04.24.97). The
benefit of the Income Tax reduction shall only be valid if the Certificate
Attesting to Non-Debit - "Certidao Negativa de Debito -CND, issued by the
National Interest of Social Security ("INSS"), evidencing the nonexistence
of debits with the Social Security, in the terms of Law nr. 8112 of
04.24.97, is presented at the time of the registration request of this
operation.
B) IOF (Administrative Ruling "Portaria" MF nr. 85 of 04.24.97): zero.
<PAGE>
9. ENTERING DATE OF FUNDS:
Estimated for: 06.06.97
Observations:
1)The indicated entering date must be confirmed or a new entering date
established at least 5 (five) business days prior to the estimated entering
date. The correspondence can be sent through facsimile at (061) 414-2927 to
FIRCE/DIAUT;
2) In the event the date is not confirmed or, if confirmed, the settlement of
the foreign exchange operation does not take place, this prior authorization
shall be automatically canceled, through SISBACEN;
3) the closing of the exchange operation shall be immediately imparted to the
debtor through facsimile nr. (061) 226-3441 to the attention of
FIRCE/DIDEX/SUDEM.
10. PAYMENT TERMS
10.1. PRINCIPAL:
in one lump-sum payment, 96 (ninety six months) after the entering date of
the foreign currency in the Country;
10.2. INTEREST
due semi-annually;
OBS: the interest regarding the first 3 (three) years shall be paid,
mandatorily, with the funds deposited in the escrow account held abroad;
10.3. ADDITIONAL CHARGES:
a) Discount on Issuance:
simultaneously with the entering of the foreign currency;
b) commission on issuance:
simultaneously with the entering of the foreign currency;
c) premium for redemption at final due date:
together with the principal amortized on the 96th month from the
entering date of the foreign currency in the Country;
d) General Expenses:
after the issuance of the Registration Certificate, through proof,
in reais, except for those incurred abroad that can only be paid in
foreign currency.
11. ESCROW ACCOUNT
11.1- FINANCIAL INSTITUTION:
THE CHASE MANHATTAN BANK
450 West 33rd. Street
New York - USA
11.2 ACCOUNT HOLDER:
PAGING NETWORK DO BRASIL S.A.
<PAGE>
11.3 ACCOUNT NUMBER:
NYC/CUST/021000021
C/24586
11.4- OPERATIONAL STRUCTURE
deposit of up to US$ 87 million in the name of PAGING NETWORK DO BRASIL S.A. and
for benefit of The Chase Manhattan Bank, for the exclusive purpose of paying
interest coupon on the operation authorized hereby, due in the first six
semesters after the foreign currency entered the Country.
11.5. FOREIGN EXCHANGE STRUCTURE TO BE ADOPTED IN THE PAYMENT OF EACH INTEREST
PORTION:
11.5.1- contract type 03, in the same amount as the contract type 04 indicated
in 11.5.2 below, registered under the nature-fact 55000 - Short Term Brazilian
Capital - Availability Abroad;
11.5.2- contract type 04 in the amount of the interest due maturing on the 1st,
2nd, 3rd, 4th, 5th and 6th semester, from the date the foreign currency entered
the Country, registered under nature-fact 35721 - Income from Capital - Interest
on Securities - Notes;
11.5.3- contract type 03, in the amount of the balance remaining in the account
at the end of the 6th semester, after the signing of the contract mentioned in
11.5.1 above, registered under nature-fact 35824 - Income from Capital -
Interest on Special Transactions - Others;
OBS: the contracts mentioned in 11.5.1 and 11.5.2 shall be signed simultaneously
and for prompt settlement, without the entering or remittance of foreign
currency.
12. NOTES:
A) For the entering of foreign currency in the Country, the provisions set
forth in Article 2 of Circular nr. 2.491 of 10.19.94 apply to this
authorization.
B) Nature of the Operation: 70425.
C) Remittances abroad under this authorization are forbidden, except for
the Discount on Issuance, Commission on Issuance and the amount regarding
the escrow account (see brackets 10. PAYMENT TERMS and 11.4 ESCROW ACCOUNT
ABROAD - OPERATIONAL STRUCTURE).
D) This operation shall obey the following special foreign exchange
structure:
D.1- Foreign Exchange contract type 03 corresponding to the entering
of 100% (a hundred percent) of the foreign currency;
<PAGE>
D.2- Foreign Exchange contract type 04 corresponding to the payment
of the Discount on Issuance and the Commission on Issuance;
D.3- Foreign Exchange contract type 04 in the amount of US$ 87
million, to be deposited in the Escrow Account mentioned in bracket 11 of
this Authorization, registered under nature-fact 55000 - Short Term
Brazilian Capital - Availability Abroad;
D.4- The settlement of the foreign exchange contract types 03 and 04
shall be carried out in the following manner:
Type 03:
- though the actual entering of the foreign currency for the portion
corresponding to, at least, 98% of the face value, deducting the
remittance for the escrow account and the Commission on Issuance;
Type 04:
- without financial movement for the portions that do not correspond
to the actual entering of foreign currency (Remittance for escrow account,
Discount on Issuance and Commission on Issuance).
E) Once the final due date for the entering of the foreign currency has
passed, this authorization shall be returned to this Central Bank for
cancellation.
F) the notes regarding the present loan shall be issued in the currency
specified in this authorization;
G) the registration request shall be presented in 30 (thirty) days after
the foreign exchange closing date and shall contain the dates for the
payment of the loan portions (day, month and year) as well as evidencing
the date the foreign currency entered the Country.
H) origin of the funds; new entering.
I) This authorization shall be granted based on the statements and
documents presented by the promissor agent and drawer. Under Article 62 of
Decree 55.762 the Central Bank of Brazil can verify the veracity of these
information. The charging or payment of any note, in national or foreign
currency, of burden or charges that are not expressly approved by the
Central Bank, or still, the falsehood of the statements or of the
documents shall render this authorization automatically without effect.
J) the exercise of the Call Option in the 4th, 5th, 6th or 7th year after
the entering of the foreign currency in the Country shall depend on prior
approval of this Central Bank through the issuance of an amendment to the
Registration Certificate, after evidence of Income Tax payment (see
bracket 8. INCOME TAX AND IOF).
<PAGE>
Brasilia (DF), May 23, 1997
(signed) Jose Ildeu de Castro Alves Haroldo Sergio Alves Pereira
COORDINATOR ANALYST
PT: 9700705950
ANNEX 1 1page(s)
<PAGE>
(LETTERHEAD) CENTRAL BANK OF BRAZIL
FOREIGN CAPITAL DEPARTMENT
(stamped: Haroldo Sergio Alves Pereira - Analyst)
AUTHORIZATION NR. 10-1-97/00233-ANNEX 1 PAGE 01
Foreign Exchange Operation - Bank: -City: Number:
Amount: Equiv. in R$
I.R. (Income Tax) - Nr. of Form - Date |_| Amount
Nature of the Remittance Period
- -Technical Assistance from |_| to |_|
- -Royalties |_| to |_|
- -Others (specify) |_| to |_|
Place and Date: , | | .
Intervening Bank and
Authorized Signature-
- --------------------------------------------------------------------------------
Foreign Exchange Operation - Bank: -City: Number:
Amount: Equiv. in R$
I.R. (Income Tax) - Nr. of Form - Date |_| Amount
Nature of the Remittance Period
- -Technical Assistance from |_| to |_|
- -Royalties |_| to |_|
- -Others (specify) |_| to |_|
Place and Date: , | | .
Intervening Bank and
Authorized Signature-
- --------------------------------------------------------------------------------
Foreign Exchange Operation - Bank: -City: Number:
Amount: Equiv. in R$
I.R. (Income Tax) - Nr. of Form - Date |_| Amount
Nature of the Remittance Period
- -Technical Assistance from |_| to |_|
- -Royalties |_| to |_|
- -Others (specify) |_| to |_|
<PAGE>
Place and Date: , | | .
Intervening Bank and
Authorized Signature-
- --------------------------------------------------------------------------------
Foreign Exchange Operation - Bank: -City: Number:
Amount: Equiv. in R$
I.R. (Income Tax) - Nr. of Form - Date |_| Amount
Nature of the Remittance Period
- -Technical Assistance from |_| to |_|
- -Royalties |_| to |_|
- -Others (specify) |_| to |_|
Place and Date: , | | .
Intervening Bank and
Authorized Signature-
- --------------------------------------------------------------------------------
<PAGE>
(LETTERHEAD) CENTRAL BANK OF BRAZIL
DECAM/DIAUT/SUFIN - 97/340 Brasilia (DF), May 20th, 1997
Pt. 9700731221
To
PAGING NETWORK DO BRASIL S.A.
Rua Alexandre Dumas, 1.711 - Ed. Birman 11
Fax: 011-521-1814
CEP 04717-004
SAO PAULO (SP)
Dear Sirs:
In response to your letter of 05.07.97, we inform you that this Central Bank has
no objections to the use of the bank account at The Chase Manhattan Bank, New
York-USA, opened as an escrow account exclusively for the purpose of meeting the
obligations regarding the operation of issuance of notes abroad authorized by
the official communication FIRCE/DIAUT/SUAUT-I-97/313 of 04.08.97.
Cordially,
FOREIGN EXCHANGE DEPARTMENT
Authorization Division
Registration and Financial Operations Subdivision
(signed) Walter Bressan Vladimir de Oliveira da Matta
Division Chief Coordinator, Interim
