<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended June 30, 1997
Commission File No. 0-17316
MOBILE TELECOMMUNICATION TECHNOLOGIES CORP.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 64-0518209
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
200 South Lamar Street, Mtel Centre, Jackson, Mississippi 39201
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(Address of principal executive offices) (Zip Code)
(601) 944-1300
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the latest practicable date.
54,567,751 shares of Common Stock,
par value $.01 per share, as of
August 1, 1997
<PAGE>
MOBILE TELECOMMUNICATION TECHNOLOGIES CORP.
QUARTERLY REPORT ON FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets -- June 30, 1997 and December 31, 1996.
Consolidated Statements of Operations -- Six Months Ended June 30, 1997
and 1996, and Three Months Ended June 30, 1997 and 1996.
Consolidated Statements of Cash Flows -- Six Months Ended June 30, 1997
and 1996, and Three Months Ended June 30, 1997 and 1996.
Notes to Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
-----------------
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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MOBILE TELECOMMUNICATION TECHNOLOGIES CORP.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
------------- -------------
<S> <C> <C>
ASSETS:
CURRENT ASSETS
Cash and cash equivalents $ 17,971,586 $ 25,744,724
Accounts receivable, net of allowances for losses 47,335,210 64,797,525
Assets held for sale 7,693,927 8,000,000
Other current assets 5,438,810 3,725,376
------------- -------------
TOTAL CURRENT ASSETS 78,439,533 102,267,625
------------- -------------
MESSAGING NETWORKS
Property and equipment, net 294,740,686 288,870,518
Certificates of authority and license cost, net 151,484,510 153,070,879
Network construction and development costs, net 74,580,181 80,173,364
------------- -------------
TOTAL MESSAGING NETWORKS 520,805,377 522,114,761
------------- -------------
GOODWILL, net 107,418,819 83,949,489
INVESTMENT IN UNCONSOLIDATED INTERNATIONAL VENTURES 20,122,531 29,641,441
OTHER ASSETS
Securities restricted for debt service 15,849,354 32,546,458
Other 27,999,704 32,740,100
------------- -------------
TOTAL OTHER ASSETS 43,849,058 65,286,558
------------- -------------
$ 770,635,318 $ 803,259,874
============= =============
LIABILITIES AND STOCKHOLDERS' INVESTMENT:
CURRENT LIABILITIES
Current maturities of long-term debt $ 1,025,885 $ 31,263
Accounts payable and accrued liabilities 88,280,986 78,351,642
------------- -------------
TOTAL CURRENT LIABILITIES 89,306,871 78,382,905
------------- -------------
LONG-TERM DEBT 403,981,795 402,491,222
MINORITY INTEREST 28,745,049 20,990,363
STOCKHOLDERS' INVESTMENT
Preferred Stock, par value $.01 per share; 25,000,000 shares
authorized; 3,750,000 shares of $2.25 Cumulative Convertible
Exchangeable Preferred Stock outstanding in 1997 and 1996;
57,500 shares of 7.5% Cumulative Convertible Accruing PIK
Preferred Stock outstanding in 1997 and 1996 38,075 38,075
Common Stock, par value $.01 per share; 100,000,000 shares
authorized; shares outstanding: 54,478,751 in 544,788 544,042
1997 and 54,404,188 in 1996
Additional paid-in-capital 618,678,246 618,212,220
Accumulated deficit (368,045,142) (316,800,646)
Cumulative translation adjustment (2,614,364) (598,307)
------------- -------------
TOTAL STOCKHOLDERS' INVESTMENT 248,601,603 301,395,384
------------- -------------
$ 770,635,318 $ 803,259,874
============= =============
</TABLE>
See notes to consolidated financial statements.
3
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MOBILE TELECOMMUNICATION TECHNOLOGIES CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------------------- -----------------------------
June 30, June 30,
1997 1996 1997 1996
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Revenues $ 189,529,744 $ 168,795,795 $ 94,908,078 $ 88,211,699
Expenses:
Operating 60,611,680 55,847,350 29,927,694 26,965,793
Selling, general and administrative 108,151,615 112,924,793 54,111,477 56,837,250
Depreciation and amortization 41,813,182 44,671,494 21,226,458 22,920,251
------------- ------------ ------------- -------------
210,576,477 213,443,637 105,265,629 106,723,294
------------- ------------ ------------- -------------
Operating income (loss) (21,046,733) (44,647,842) (10,357,551) (18,511,595)
Interest income 2,409,010 2,882,724 1,235,833 1,446,414
Interest expense (28,359,864) (20,403,375) (12,761,662) (10,413,613)
Gain (loss) on sale of assets 7,837,485 6,188,629 678,926 (460,779)
Other income (expense) (2,221,390) 33,872 (44,445) 3,724
------------- ------------ ------------- -------------
Income (loss) before income taxes
and equity (losses) (41,381,492) (55,945,992) (21,248,899) (27,935,849)
Provision for income taxes 2,418,869 1,329,286 1,183,952 708,463
Equity in (losses) of investments (777,857) (195,344) (708,723) (252,552)
------------- ------------ ------------- -------------
Net income (loss) ($44,578,218) ($57,470,622) ($23,141,574) ($28,896,864)
Preferred dividend requirement 6,541,930 5,137,619 3,281,754 3,028,244
------------- ------------ ------------ -------------
Net income (loss) available to common
stockholders ($51,120,148) ($62,608,241) ($26,423,328) ($31,925,108)
============= ============ ============ =============
Net income (loss) per common share ($0.94) ($1.15) ($0.49) ($0.59)
============= ============ ============ =============
</TABLE>
See notes to consolidated financial statements.
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MOBILE TELECOMMUNICATION TECHNOLOGIES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
---------------------------- -----------------------------
June 30, June 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($44,578,218) ($57,470,622) ($23,141,574) ($28,896,864)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization 41,813,182 44,671,494 21,226,458 22,920,251
Provision for losses on accounts
receivable 11,125,658 9,088,508 4,448,909 4,634,599
Amortization of debt issuance
costs 1,192,318 1,000,567 601,823 440,526
Foreign currency transaction
(gain) loss (185,240) (20,176) 98,972 3,731
(Gain) loss on sale of assets (7,837,485) (6,188,629) (678,926) 460,779
Income (losses) attributable to
minority interests 2,343,422 (13,696) (117,735) (7,455)
Equity in losses from investments 777,857 195,344 708,723 252,552
Change in assets and liabilities:
(Increase) decrease in accounts
receivable 8,069,946 (34,700,118) 10,256,363 (19,575,432)
Decrease in assets held for sale 306,073 - 263,146 -
(Increase) decrease in other
current assets 15,210,984 (161,204) 16,196,745 10,983,105
(Decrease) in accounts payable
and accrued liabilities (4,017,901) (2,658,366) (8,421,509) (34,463,572)
------------- ------------- ------------- -------------
Net Cash Provided By (Used In)
Operating Activities 24,220,596 (46,256,898) 21,441,395 (43,247,780)
------------- ------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of assets 33,553,627 13,764,044 13,901,058 4,782,167
Capital expenditures, net (41,074,988) (69,184,015) (22,695,631) (28,096,869)
(Increase) in investment in
unconsolidated international ventures (1,016,220) (6,795,161) (412,748) (4,688,428)
Acquisition of Argentinean paging
company (16,000,000) - (16,000,000) -
Decrease in other assets 1,810,619 11,744,377 1,852,349 4,999,878
------------- ------------- ------------- -------------
Net Cash (Used In) Investing Activities (22,726,962) (50,470,755) (23,354,972) (23,003,252)
------------- ------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings - 45,000,000 - 15,000,000
Principal payments on long-term debt (5,514,805) (624,985) (363,686) (491,538)
Payment of dividends on preferred
stock (4,218,750) (4,218,750) (2,109,375) (2,109,375)
Sale of stock and exercise of options 466,783 58,150,364 204,265 57,978,823
------------- ------------- ------------- -------------
Net Cash Provided By (Used In)
Financing Activities (9,266,772) 98,306,629 (2,268,796) 70,377,910
------------- ------------- ------------- -------------
Net increase (decrease) in cash and
cash equivalents (7,773,138) 1,578,976 (4,182,373) 4,126,878
Cash and cash equivalents-beginning
of period 25,744,724 9,612,734 22,153,959 7,064,832
------------- ------------- ------------- -------------
Cash and cash equivalents-end of
period $ 17,971,586 $ 11,191,710 $ 17,971,586 $ 11,191,710
============= ============= ============= =============
</TABLE>
See notes to consolidated financial statements.
5
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MOBILE TELECOMMUNICATION TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Mobile Telecommunication Technologies Corp. ("Mtel" or the "Company") is
a leading provider of nationwide messaging services in the United States.
Mtel's principal operations include one-way messaging services in the United
States, advanced messaging services on the narrowband personal communication
services ("PCS") network and international one-way messaging operations. Mtel's
wholly-owned subsidiary, SkyTel Corp. ("SkyTel"), operates a one-way nationwide
messaging system whereby subscribers can be reached in thousands of towns and
cities in the United States by means of two dedicated 931 MHz frequencies
licensed by the Federal Communications Commission ("FCC"), a ground-based
transmitter system, leased satellite facilities and proprietary network
software.
In September 1995, the Company launched commercial operation of the first
nationwide wireless messaging network in the United States that utilizes
frequency licensed by the FCC for narrowband PCS. This network enables
subscribers to send and receive messages without the need to know the location
of the sender or receiver at the time of transmission, and utilizes a
proprietary system architecture designed and developed by Mtel.
Mtel, through its subsidiaries and joint ventures, operates one-way
wireless messaging systems in various countries outside the United States,
primarily in the Latin America region. Mtel also provides its subscribers with
access to an international messaging network that utilizes Mtel's proprietary
technology and interconnects the systems operated by its subsidiaries and joint
ventures with systems in the United States, Canada, Singapore and other
countries.
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For the second quarter of 1997, one-way messaging operations, the
Company's principal operating segment, reported revenues of $82.8 million,
operating income of $21.7 million and net income of $20.8 million. Advanced
messaging operations reported revenues of $4.0 million, an operating loss of
$26.6 million and a net loss of $37.3 million for the second quarter of 1997.
Mtel's international operations reported revenues of $7.0 million, an operating
loss of $4.9 million and a net loss of $6.5 million for the quarter ended June
30, 1997. For purposes of reporting operating income (loss) for the Company's
business segments, certain indirect operating and selling, general and
administrative expenses are allocated among the business segments based on
various financial and operational factors which reflect usage of services.
See Note 2 of Notes to Consolidated Financial Statements in Mtel's Annual
Report on Form 10-K for the year ended December 31, 1996 for a discussion of
certain risks and uncertainties involving the Company's ability to generate
future positive operating cash flows and operating income.
2. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Mtel and
its majority-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
The Company's consolidated financial statements for the three and six
month periods ending June 30, 1997 and 1996 have not been audited by independent
public accountants. However, in the opinion of management, these financial
statements include all adjustments (which include only
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normal recurring adjustments) necessary for a fair presentation. The results for
these periods are not necessarily indicative of the results for the year ending
December 31, 1997.
3. EARNINGS (LOSS) PER SHARE
Loss per share for the three and six month periods ending June 30, 1997
and 1996 is calculated by dividing the net loss (after deducting preferred stock
dividends) by the weighted average number of shares of common stock outstanding
during the period with no effect given to common stock equivalents arising from
stock options, convertible subordinated debt and convertible preferred stock
because such effect would be antidilutive. The weighted average number of
shares of common stock outstanding in the second quarter of 1997 and the first
six months of 1997 was 54,473,783 and 54,459,398, respectively. The weighted
average number of shares of common stock outstanding in the second quarter of
1996 and the first six months of 1996 was 54,304,107 and 54,226,860,
respectively.
4. ACQUISITION OF ARGENTINA PAGING COMPANY
On June 27, 1997, Mtel Latin America, Inc. ("Mtel Latam"), the holding
company for the Company's Latin American operations and investments which is 80%
owned by Mtel International Inc., purchased 100% of the outstanding shares of
RadioMensaje S.A.C., a paging company in Argentina ("RadioMensaje"), for an
aggregate purchase price (in U.S. dollars) of $32.0 million, consisting of $16.0
million in cash and $16.0 million in debt securities. Approximately $8.0
million principal amount of debt securities was issued by Mtel Latam. These
notes bear interest at a rate of 10% per annum during the first three months,
increasing 1/2 of 1% per annum each month thereafter
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until maturity on June 27, 1998. The remaining $8.0 million principal amount of
debt securities was issued by Mtel Argentina S.A., a wholly-owned subsidiary of
Mtel Latam. These notes bear interest at a rate of 8% per annum and are payable
in semi-annual installments of principal and interest on each December 30 and
June 30 commencing December 30, 1997 and continuing through June 30, 2001. The
cash portion of the purchase price was funded directly by Mtel Latam,
independent of Mtel.
5. SALE OF TELEPHONE ANSWERING SERVICE OPERATIONS
On April 22, 1997, the Company completed the sale of its American
Communications Exchange ("ACX") telephone answering service operations effective
as of March 31, 1997 for approximately $4.2 million. As a result, the
consolidated results of the Company for the second quarter of 1997 do not
include any income or expenses related to these operations. Proceeds from the
sale equaled the net book value of these operations, therefore, no gain or loss
was recorded on the transaction. The Company had previously determined that ACX
was a non-strategic business.
6. STOCKHOLDER LITIGATION
On February 20, 1997, litigation was filed in the United States District
Court for the District of Columbia against the Company, its wholly-owned
subsidiary SkyTel, and seven current and former officers and directors. The
complaint alleges certain violations of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), during the period January 19, 1995 through
February 22, 1996. The plaintiffs are seeking unspecified damages and to have
the case certified as a class action. The defendants have filed motions to
dismiss the complaint and intend to vigorously defend in this litigation.
9
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7. PIONEER'S PREFERENCE
The Company's initial nationwide narrowband PCS license was granted by
the FCC pursuant to a Pioneer's Preference and such grant was conditioned by the
FCC upon the payment by Mtel of a license fee in the amount of approximately
$33.0 million. See Note 4 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996. The
FCC's payment condition was, however, reversed and remanded to the FCC by the
United States Court of Appeals for the District of Columbia Circuit. In June
1997, the FCC commenced the remand proceeding pursuant to the order of the
United States Court of Appeals for the District of Columbia Circuit to consider
the issue of Mtel's reliance upon earlier determinations by the FCC that Mtel
would not be required to pay for the Pioneer's Preference license. The
Company's filings with the FCC also raised the issue of whether the FCC's action
of imposing a payment condition was consistent with other contemporaneous
licensing decisions and the legality of the FCC's use of its authority under
Section 4(i) of the Communication Act of 1934, as amended, to charge auction-
based fees for the Pioneer's Preference license. Payment for the license will
not be required to be made unless and until this litigation is definitively
resolved adversely to Mtel. The narrowband PCS network does not currently
operate on the frequency covered by this license.
8. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid by Mtel was $26.8 million and $20.5 million during the six
months ended June 30, 1997 and 1996, respectively, and was $20.7 million and
$19.2 million during the three months ended June 30, 1997 and 1996,
respectively. No federal income taxes were paid during these periods.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the consolidated financial condition
and results of operations of Mtel for the three and six month periods ended June
30, 1997 and 1996 and certain factors that will affect Mtel's financial
condition. See Note 2 of Notes to Consolidated Financial Statements in Mtel's
Annual Report on Form 10-K for the year ended December 31, 1996 for a discussion
of certain risks and uncertainties involving the Company's ability to generate
future positive operating cash flows and operating income.
Certain statements set forth in Management's Discussion and Analysis of
Financial Condition and Results of Operations, which are not historical facts,
are forward-looking statements under the Private Securities Litigation Reform
Act of 1995 that are subject to risks and uncertainties that could cause actual
results to differ materially from those set forth in the forward-looking
statements. Among the factors that could cause actual future results to differ
materially are competitive pressures, the timing and technique used in marketing
by third-party distributors and the market acceptance of certain services.
RESULTS OF OPERATIONS
REVENUES
Revenues on a consolidated basis increased 12% in the six months ended
June 30, 1997 as compared to the six months ended June 30, 1996 primarily due to
the 9% increase in one-way messaging revenues. Revenues from advanced messaging
operations increased 66% and international revenues increased 55% in the first
half of 1997 as compared to the first half of 1996. Revenues on a
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consolidated basis increased 8% in the second quarter of 1997 as compared to the
second quarter of 1996, primarily due to the 5% increase in one-way messaging
revenues in the second quarter of 1997. As of June 30, 1997, the Company had
1,124,500 one-way messaging units in service in the United States, an increase
of 8% over the 1,037,500 one-way messaging units in service as of June 30, 1996.
In addition, Mtel had 68,600 advanced messaging units in service as of June 30,
1997, an increase of 185% over the 24,100 advanced messaging units in service as
of June 30, 1996.
Average revenue per one-way unit in service decreased approximately 6% in
the second quarter of 1997 ($24.74) as compared to the second quarter of 1996
($26.43) and decreased slightly in the second quarter of 1997 ($24.74) as
compared to the first quarter of 1997 ($25.03). These decreases are primarily
due to the product mix of units placed in service through SkyTel's distribution
channels. The Company expects to continue to experience a slight decline in
average revenue per one-way messaging unit in service in the future.
Net unit additions in the second quarter of 1997 continued to be
adversely impacted by disconnect rates in the reseller distribution channel.
However, total net unit additions placed in service by the reseller channel were
positive in the second quarter of 1997 for the first time in five quarters. The
Company believes that the availability of new product offerings on the
narrowband PCS network, including SkyWord Plus(TM) service that was introduced
at the end of April 1997, will result in increased net unit additions from the
reseller distribution channel in the second half of 1997, although this will be
dependent in part on the marketing efforts of resellers and the commercial
acceptability of these new product offerings.
During the second half of 1997, the Company will emphasize the
distribution of SkyWord Plus as well as two-way interactive messaging services.
The Company will also continue
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to market fixed location services on the narrowband PCS network in 1997,
although the Company's efforts relating to fixed location services are expected
to be primarily developmental during 1997. The ability of the Company to achieve
adequate levels of net unit additions on the narrowband PCS network will depend
upon the success of the direct, reseller and other distribution channels, the
commercial acceptability of the advanced messaging services and the competitive
environment, including pricing, for such services.
Mtel's consolidated revenues include revenues recorded by the Company's
international operations in Argentina, Colombia, Uruguay, Hong Kong, Puerto Rico
and Costa Rica. During the first half of 1997, revenues recorded by the
Company's consolidated international operations provided approximately 7% of
Mtel's revenues as compared to 5% in the first half of 1996. On July 25, 1997,
the Company completed the sale of its operations in Hong Kong. Revenues from the
Hong Kong operations were not material to the consolidated revenues of the
Company.
During the first half of 1997, one-way messaging operations provided
approximately 87% of Mtel's revenues as compared to 90% in the first half of
1996. Advanced messaging operations provided approximately 4% of consolidated
revenues during the first half of 1997 as compared to 2% in the first half of
1996. Other Mtel operations provided approximately 2% of revenues in the first
half of 1997 as compared to 3% in the first half of 1996.
EXPENSES
Expenses include operating, selling, general and administrative, and
depreciation and amortization.
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Operating expenses primarily consist of salaries, telephone costs and
transmitter and receiver site rentals associated with the Company's one-way and
advanced messaging operations in the United States and one-way international
messaging operations, as well as expenses associated with the maintenance of the
Company's operating equipment and facilities. These expenses on a consolidated
basis increased 9% in the first six months of 1997 as compared to the first six
months of 1996 and increased 11% in the second quarter of 1997 as compared to
the second quarter of 1996. This increase primarily reflects operating expenses
attributable to the narrowband PCS network, which because of system design and
functionality has significantly higher fixed operating expenses than the
Company's one-way operations, and increased telephone and system costs
associated with the increasing one-way and advanced messaging subscriber base in
the United States. As a percentage of consolidated revenues, operating expenses
decreased to 32% in the first six months of 1997 as compared to 33% in the first
six months of 1996, but increased to 32% in the second quarter of 1997 as
compared to 31% in the second quarter of 1996. Mtel expects to continue to incur
increased operating expenses during the remainder of 1997 and future periods,
primarily as a result of the projected increase in the number of units in
service on its one-way and narrowband PCS networks in the United States and the
expansion of coverage of the narrowband PCS network.
Selling, general and administrative expenses include marketing and
advertising costs, personnel costs associated with the direct sales and
marketing staff, costs associated with customer support operations and corporate
overhead costs, primarily salaries and administrative expenses. On a
consolidated basis, these expenses decreased 4% in the first six months of 1997
as compared to the first six months of 1996 and decreased 5% in the second
quarter of 1997 as compared to the second quarter of 1996. This decrease
primarily reflects reduced selling expenses in the second quarter and first half
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of 1997. As a percentage of consolidated revenues, selling, general and
administrative expenses decreased to 57% in the first six months of 1997 as
compared to 67% in the first six months of 1996 and decreased to 57% in the
second quarter of 1997 as compared to 64% in the second quarter of 1996.
Selling, general and administrative expenses on a consolidated basis are
expected to increase during the remainder of 1997 and in future periods as a
result of the Company's plans to expand its direct sales force in the United
States and additional marketing expenses which the Company expects to incur in
connection with the promotion of the advanced messaging products on its
narrowband PCS network.
Depreciation and amortization decreased 6% in the first six months of
1997 as compared to the first six months of 1996 and decreased 7% in the second
quarter of 1997 as compared to the second quarter of 1996, primarily due to the
write-down of the book value of paging equipment, the cessation of the Company's
international operations in Europe and the Company's decision to divest its
operations and investments in the Asia Pacific region, all of which resulted in
an impairment loss that was recorded in the fourth quarter of 1996. As a
percentage of revenues, depreciation and amortization expenses decreased to 22%
in the first six months of 1997 as compared to 26% in the first six months of
1996 and decreased to 22% in the second quarter of 1997 as compared to 26% in
the second quarter of 1996. The Company expects depreciation and amortization
expenses to increase during the remainder of 1997, primarily as a result of the
expansion of coverage of the narrowband PCS network and the purchase of pagers
and advanced messaging units to support the projected increase in the Company's
subscriber base.
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OPERATING INCOME (LOSS)
Mtel reported a consolidated operating loss of approximately $21.0
million for the first six months of 1997 as compared to an operating loss of
approximately $44.6 million for the first six months of 1996, and an operating
loss of $10.4 million for the second quarter of 1997 as compared to an operating
loss of $18.5 million for the second quarter of 1996. For the three-month
period ended June 30, 1997, one-way messaging operations recorded operating
income of $21.7 million, which was offset by an operating loss of $26.6 million
from advanced messaging operations and an operating loss of $4.9 million from
international operations.
The Company expects to report operating losses on a consolidated basis
in 1997 and 1998 as a result of continuing operating losses related to its
advanced messaging operations in the United States and international messaging
operations. However, the Company expects its one-way messaging business to
continue to report operating income in 1997 and future periods as a result of
continued growth in profitable units in service, although the level of growth
will be dependent on the success of its direct, reseller and other distribution
channels, the competitive environment, including pricing, for messaging services
and the extent to which subscribers for the Company's one-way messaging services
elect to use the advanced messaging services available on the Company's
narrowband PCS network.
INTEREST INCOME (EXPENSE)
Interest expense increased 39% in the first six months of 1997 as
compared to the first six months of 1996 and increased 23% in the second quarter
of 1997 as compared to the second quarter of 1996. This increase is primarily
due to interest accrued on borrowings under the Company's bank
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credit facility. Interest expense for the first six months of 1997 also included
approximately $2.9 million of fees incurred in connection with the amendment of
the bank credit facility in March 1997. In addition, the increase in interest
expense reflects the fact that the Company did not capitalize any interest costs
in the second quarter and first six months of 1997, although approximately $1.4
million and $4.0 million in interest costs were capitalized in the second
quarter of 1996 and first six months of 1996, respectively.
Interest income totaled $2.4 million in the first six months of 1997 as
compared to $2.9 million in the first six months of 1996 and totaled $1.2
million in the second quarter of 1997 as compared to $1.4 million in the second
quarter of 1996. This decrease is primarily attributable to a reduction in the
aggregate amount of securities restricted for debt service related to the Senior
Notes.
PROVISION FOR INCOME TAXES
Mtel recorded a provision for income taxes of $2.4 million and $1.3
million in the first six months of 1997 and 1996, respectively, and $1.2 million
and $0.7 million in the second quarter of 1997 and 1996, respectively, relating
to state and local income taxes. The Company reported net losses for federal
income tax purposes during the three and six month periods ended June 30, 1997
and 1996 and, accordingly, no provision for federal income taxes has been made
for such periods.
PREFERRED STOCK DIVIDENDS
The Company accrued and paid dividends of approximately $2.1 million in
each of the quarters ended June 30, 1997 and 1996 on the Company's $2.25
Cumulative Convertible Exchangeable Preferred Stock (the "$2.25 Preferred
Stock"). In addition, the Company accrued approximately $1.2
17
<PAGE>
million in the second quarter of 1997 as compared to $0.9 million in the second
quarter of 1996 related to stock dividends on the Company's 7.5% Cumulative
Convertible Accruing Pay-In-Kind Preferred Stock (the "PIK Preferred Stock")
issued in April and May of 1996. Although dividends on the $2.25 Preferred Stock
and the PIK Preferred Stock are not treated as an expense on the Company's
consolidated statements of operations and, therefore, do not affect reported net
income, such dividends are deducted from net income for the purpose of
determining net income (loss) per common share.
NET INCOME (LOSS)
Mtel recorded a consolidated net loss of approximately $44.6 million in
the six month period ended June 30, 1997 which, combined with the effect of the
preferred stock dividends, resulted in a consolidated net loss per common share
of $0.94 for such period. This compares to a consolidated net loss of
approximately $57.5 million, or $1.15 per common share, in the first six months
of 1996. The consolidated net loss in the first six months of 1997 was offset
by a gain of approximately $7.4 million from the sale of the Company's 19%
equity interest in a joint venture that conducts paging operations in Brazil
which was completed in February 1997. The consolidated net loss in the first
six months of 1996 was offset by a gain of approximately $6.6 million from the
sale of a portion of the Company's investment in American Mobile Satellite Corp.
The Company recorded a consolidated net loss of $23.1 million, or $0.49 per
common share, in the second quarter of 1997 as compared to a consolidated net
loss of $28.9 million, or $0.59 per common share, in the second quarter of 1996.
The Company expects to incur a net loss on a consolidated basis in 1997 and 1998
as a result of continuing losses from its advanced messaging and international
operations, although one-way messaging operations are expected to generate net
income during these periods.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
DOMESTIC
The Company invested $11.1 million in the first half of 1997, including
$4.8 million in the second quarter of 1997, to procure messaging units to
support its one-way messaging subscriber base and to expand the coverage of its
one-way messaging system in the United States. In addition, in the first half
of 1997, Mtel incurred capital expenditures of $22.1 million, including $12.8
million in the second quarter of 1997, for messaging units, infrastructure
equipment, and development and construction costs related to the narrowband PCS
network. Capital expenditures in the second quarter of 1997 were funded with
cash generated from one-way messaging operations and proceeds from the sale of
certain non-strategic assets.
The Company's total borrowing availability under the bank credit facility
increased to $190 million as of June 30, 1997. During the second quarter of
1997, the Company did not increase its outstanding borrowings under its bank
credit facility, resulting in a balance of $130.5 million in borrowings
outstanding as of June 30, 1997. Letters of credit in the amount of $12.2
million had been issued under the credit facility as of June 30, 1997, and the
credit available under the facility has been reduced by a corresponding amount.
As of June 30, 1997, the Company had borrowing availability under the bank
credit facility of approximately $47.3 million.
The Company has entered into an arrangement with a third-party finance
company to provide financing to Mtel's customers for a lease-to-own pager
program. Under the lease-to-own program, a finance company will directly lease
paging units to the Company's customers and will be paid a monthly rental fee
for two years. The customer will have the opportunity to purchase the unit at
the conclusion of the two-year period for an additional charge. The finance
19
<PAGE>
company has committed $10.0 million of funding for this program, and the Company
expects to begin offering this program to its customers in the third quarter of
1997.
INTERNATIONAL
On June 27, 1997, Mtel Latam purchased 100% of the outstanding shares of
RadioMensaje for an aggregate purchase price (in U.S. dollars) of $32.0 million,
consisting of $16.0 million in cash and $16.0 million in debt securities.
Approximately $8.0 million principal amount of debt securities was issued by
Mtel Latam. These notes bear interest at a rate of 10% per annum during the
first three months, increasing 1/2 of 1% per annum each month thereafter until
maturity on June 27, 1998. The remaining $8.0 million principal amount of debt
securities was issued by Mtel Argentina S.A., a wholly-owned subsidiary of Mtel
Latam. These notes bear interest at a rate of 8% per annum and are payable in
semi-annual installments of principal and interest on each December 30 and June
30 commencing December 30, 1997 and continuing through June 30, 2001. The cash
portion of the purchase price was funded directly by Mtel Latam, independent of
Mtel.
In 1996, the Company designated Mtel Latam as an "unrestricted
subsidiary" for purposes of the Company's bank credit agreement and the
indenture relating to its Senior Notes. As a result of this designation, Mtel
Latam is required to finance its operations and development efforts independent
of Mtel. On July 18, 1997, Mtel Latam entered into a Credit and Security
Agreement (the "Credit Agreement") with Credit Lyonnais New York Branch under
which Mtel Latam may borrow up to an aggregate of $6.5 million. Borrowings under
the Credit Agreement are secured by an installment payment of $7.15 million
payable to Mtel Latam in connection with the sale of its 19% equity interest in
the Brazilian joint venture which was completed in February 1997, together with
the related bank
20
<PAGE>
guarantee issued by Banco Itau S.A. which secures this installment obligation.
Borrowings under the Credit Agreement bear interest at the matched rate (as
defined in the Credit Agreement) plus 2% and mature on February 12, 1998.
Mtel Latam will require additional financing to repay the indebtedness
incurred in connection with the acquisition of RadioMensaje and to fund future
working capital requirements. Mtel Latam is currently involved in negotiations
with a financial institution to establish a credit facility in the amount of
approximately $25 - $30 million.
DISPOSITION OF ASSETS
On April 22, 1997, the Company completed the sale of its ACX telephone
answering service operations effective as of March 31, 1997 for approximately
$4.2 million. As a result, the consolidated results of the Company for the
second quarter of 1997 do not include any income or expenses related to these
operations. Proceeds from the sale equaled the net book value of these
operations, therefore, no gain or loss was recorded on the transaction. The
Company had previously determined that ACX was a non-strategic business.
On July 15, 1997, the Company completed an agreement for the sale of its
Hong Kong operations for approximately $1.7 million. In addition, the Company
is involved in negotiations with respect to the sale of its 25% equity interest
in Malaysia, its 40% equity interest in the Philippines and its 19% equity
interest in Indonesia. The Company expects that these transactions will be
completed by the end of 1997, although each of these transactions is subject to
the execution of definitive agreements.
21
<PAGE>
PIONEER'S PREFERENCE LICENSE
The Company's initial nationwide narrowband PCS license was granted by
the FCC pursuant to a Pioneer's Preference and such grant was conditioned by the
FCC upon the payment by Mtel of a license fee in the amount of approximately
$33.0 million. See Note 4 of Notes to Consolidated Financial Statements in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996. The
FCC's payment condition was, however, reversed and remanded to the FCC by the
United States Court of Appeals for the District of Columbia Circuit. In June
1997, the FCC commenced the remand proceeding pursuant to the order of the
United States Court of Appeals for the District of Columbia Circuit to consider
the issue of Mtel's reliance upon earlier determinations by the FCC that Mtel
would not be required to pay for the Pioneer's Preference license. The
Company's filings with the FCC also raised the issue of whether the FCC's action
of imposing a payment condition was consistent with other contemporaneous
licensing decisions and the legality of the FCC's use of its authority under
Section 4(i) of the Communication Act of 1934, as amended, to charge auction-
based fees for the Pioneer's Preference license. Payment for the license will
not be required to be made unless and until this litigation is definitively
resolved adversely to Mtel. The narrowband PCS network does not currently
operate on the frequency covered by this license.
22
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
On February 20, 1997, a civil complaint was filed in the United States
District Court for the District of Columbia, Kris Lindblom and Jack Fefer v.
Mobile Telecommunication Technologies Corporation, SkyTel Corporation, J. Robert
Fugate, Leonard G. Kriss, M. Bernard Puckett, Thomas G. Barksdale, Calvin C.
LaRoche, Jai Bhagat and John N. Palmer, Civil Action No. 1:97CV00337. The
complaint has two counts, one alleging violations of Section 10(b) of the
Exchange Act against all defendants, and one alleging violations of Section
20(a) of the Exchange Act against the Company and defendants Palmer and Puckett.
The plaintiffs seek unspecified damages and to certify the case as a class
action. The defendants have filed motions to dismiss the complaint and intend
to vigorously defend the case. Subsequent to the filing of the complaint, the
Company, as have other companies involved in private securities litigation,
received from the staff of the Securities and Exchange Commission ("SEC") an
informal inquiry letter seeking documents pertaining to consultants and products
used in the development and operation of the narrowband PCS network. The
Company is cooperating with the SEC staff.
Except as set forth above and except for certain proceedings involving
the narrowband PCS license awarded to the Company by the FCC in July 1994
pursuant to a Pioneer's Preference which is referenced in "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" in this Quarterly Report on Form 10-Q, there
are no material legal or regulatory proceedings involving the Company or any of
its subsidiaries except license applications and renewals and other regulatory
proceedings incident to the Company's business.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The Company's 1997 Annual Meeting of Stockholders was held on May 22,
1997. At the 1997 Annual Meeting, John N. Palmer, Gregory B. Maffei and John E.
Welsh III were elected directors of the Company for a three year term expiring
at the 2000 Annual Meeting of Stockholders
23
<PAGE>
and until their respective successors are elected and qualified. The holders of
48,125,271, 48,136,129 and 48,135,319 shares of Common Stock present in person
or by proxy at the 1997 Annual Meeting voted in favor of the election of Messrs.
Palmer, Maffei and Welsh, respectively, and the holders of 425,781, 414,923 and
415,733 shares of Common Stock, respectively, withheld their vote for such
nominees. Messrs. Haley Barbour, Jai P. Bhagat, R. Faser Triplett, M.D. and R.
Gerald Turner will continue to serve as directors of the Company until the 1998
Annual Meeting of Stockholders, and Messrs. Thomas G. Barksdale, John T. Stupka
and E. Lee Walker will continue to serve as directors of the Company until the
1999 Annual Meeting of Stockholders, in each case until their respective
successors are elected and qualified.
Item 5. Other Information
--------------------------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
The following Exhibits are filed as part of this Quarterly Report on
Form 10-Q:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<S> <C>
10.1 Stock Purchase Agreement dated June 6, 1997
among BGH S.A., Motorola International
Development Corporation and Jacobel S.A., as
Sellers, and Mtel Latin America, Inc., as Purchaser.
10.2 Form of Bridge Note of Mtel Latin America, Inc.
issued as of June 27, 1997 in the aggregate principal
amount of U.S. $8 million.
10.3 Form of Promissory Note of Mtel Argentina S.A.
issued as of June 27, 1997 in the aggregate principal
amount of U.S. $8 million.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.4 Pledge Agreement dated June 27, 1997 by Mtel Latin
America, Inc., as Pledgor, in favor of The Chase
Manhattan Bank, as Collateral Agent, for the benefit
of BGH S.A., Motorola International Development
Corporation and Jacobel S.A, as Sellers.
10.5 Credit and Security Agreement dated as of July 18, 1997 among
Mtel Latin America, Inc. and Credit Lyonnais New York Branch.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
None.
</TABLE>
25
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOBILE TELECOMMUNICATION
TECHNOLOGIES CORP.
Dated: August 12, 1997 By /s/ John T. Stupka
-------------------------------------------
John T. Stupka
President and Chief Executive Officer
Dated: August 12, 1997 By /s/ Robert Kaiser
-------------------------------------------
Robert Kaiser
Senior Vice President-Finance and
Chief Financial Officer
26
<PAGE>
Exhibit 10.1
- --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
dated June 6, 1997
among
BGH S.A., MOTOROLA INTERNATIONAL DEVELOPMENT
CORPORATION and JACOBEL S.A., as Sellers
and
MTEL LATIN AMERICA, INC., as Purchaser
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS.................................................... 3
1.1 Certain Definitions................................................. 3
1.2 Other Terms......................................................... 11
1.3 Other Definitional Provisions....................................... 11
ARTICLE II SALE AND PURCHASE............................................. 12
2.1 Sale and Purchase................................................... 12
2.2 Closing............................................................. 13
2.3 Payment............................................................. 13
2.4 Adjustment of the Purchase Price.................................... 15
2.5 Excess Cash Distribution and Special Sale........................... 18
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS................ 21
3.1 Organization........................................................ 21
3.2 Authority to Execute and Deliver this Agreement..................... 22
3.3 Ownership of Purchased Shares....................................... 22
3.4 No Conflict......................................................... 23
3.5 Rights Relating to Purchased Shares................................. 23
3.6 Capitalization; No Liens............................................ 24
3.7 Financial Information............................................... 24
3.8 Changes............................................................. 25
3.9 Taxes............................................................... 25
3.10 Compliance.......................................................... 26
3.11 Consents and Approvals.............................................. 26
3.12 Litigation.......................................................... 27
3.13 Employee Benefit Matters............................................ 27
3.14 Labor Matters....................................................... 28
3.15 Voting and Other Agreements......................................... 28
3.16 Material Contracts.................................................. 28
3.17 Properties.......................................................... 29
3.18 Insurance........................................................... 30
3.19 Intellectual Property............................................... 30
3.20 Frequencies......................................................... 31
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3.21 Inventory........................................................... 32
3.22 Accounts Receivable and other Receivables........................... 32
3.23 Dividends and Other Distributions................................... 32
3.24 Brokers or Finders.................................................. 33
3.25 Environmental Matters............................................... 33
3.26 Undisclosed Liabilities............................................. 34
3.27 Certain Interests................................................... 34
3.28 Foreign Corrupt Practices Act....................................... 34
3.29 Solvency of BGH and Jacobel......................................... 34
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER............... 35
4.1 Organization........................................................ 35
4.2 Authority to Execute and Deliver this Agreement..................... 35
4.3 No Conflict......................................................... 36
4.4 Consents and Approvals.............................................. 36
4.5 Absence of Litigation............................................... 36
4.6 Brokers or Finders.................................................. 37
4.7 Newbridge Latin America, L.P. Purchase Obligation................... 37
4.8 Financial Information............................................... 37
4.9 Changes............................................................. 38
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS; ADDITIONAL AGREEMENTS 38
5.1 Operation of the Company............................................ 38
5.2 Operation of the Purchaser.......................................... 39
5.3 Operation of Mtel Argentina......................................... 39
5.4 Restricted Activity................................................ 40
5.5 CNC Letter; Merger of the Company and Mtel Argentina................ 46
5.6 Directors of Mtel Argentina......................................... 47
ARTICLE VI CONDITIONS PRECEDENT........................................... 47
6.1 Conditions to Each Party's Obligations.............................. 47
6.2 Conditions to Obligations of the Purchaser.......................... 48
6.3 Conditions to Obligations of each Seller............................ 48
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE VII THE CLOSING.................................................. 49
7.1 Resignation of Directors............................................ 49
7.2 Notice of Transfer of the Purchased Shares.......................... 49
7.3 Purchase Price...................................................... 50
7.4 Legal Opinions...................................................... 50
7.5 Other Documents..................................................... 50
7.6 Company Expenses.................................................... 50
ARTICLE VIII INDEMNIFICATION............................................. 51
8.1 Indemnification by the Sellers...................................... 51
8.2 Indemnification by the Purchaser.................................... 54
8.3 Indemnification Procedures; Third Party Claims...................... 54
8.4 Exclusive Remedy.................................................... 57
8.5 Offset.............................................................. 57
8.6 Certain Tax Matters................................................. 58
8.7 Reporting Indemnity Payments........................................ 62
ARTICLE IX MISCELLANEOUS................................................. 63
9.1 Survival of Representations and Warranties.......................... 63
9.2 Waivers and Amendments.............................................. 63
9.3 Notices, etc........................................................ 64
9.4 Submission to Jurisdiction.......................................... 64
9.5 Governing Law....................................................... 65
9.6 Successors and Assigns.............................................. 65
9.7 Entire Agreement.................................................... 65
9.8 Severability........................................................ 65
9.9 Titles and Subtitles................................................ 66
9.10 Counterparts........................................................ 66
9.11 Delays or Omissions................................................. 66
9.12 Expenses............................................................ 66
9.13 Termination......................................................... 66
9.14 Judgment Currency................................................... 67
9.15 Access of Information; Confidentiality.............................. 68
EXHIBITS
- --------
Exhibit A-1 Form of BGH Promissory Note
Exhibit A-2 Form of Jacobel Promissory Note
Exhibit A-3 Form of Motorola Promissory Note
Exhibit B-1 Form of BGH Bridge Note
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
Exhibit B-2 Form of Jacobel Bridge Note
Exhibit B-3 Form of Motorola Bridge Note
Exhibit C Form of Pledge Agreement
Exhibit D Memorandum of Understanding Relating to Implementation of a Two-
Way Paging System in Argentina
Exhibit E Form of CNC Letter
Exhibit F Form of Collateral Agency Agreement
Exhibit G Form of Legal Opinions of Counsel to the
Purchaser
</TABLE>
iv
<PAGE>
STOCK PURCHASE AGREEMENT, dated June 6, 1997 (the "Agreement"),
---------
entered into by and among BGH S.A., a corporation organized and existing under
the laws of the Republic of Argentina ("BGH"), Motorola International
---
Development Corporation, a corporation organized and existing under the laws of
the State of Delaware ("Motorola"), Jacobel S.A., a corporation organized and
--------
existing under the laws of the Republic of Argentina ("Jacobel") and Mtel Latin
-------
America, Inc., a corporation organized and existing under the laws of the State
of Delaware (the "Purchaser").
---------
WHEREAS, BGH owns 213 Class A Shares and 563,387 Class B Shares of the
common stock of Radiomensaje S.A.C. (the "Company"), Motorola owns 143 Class A
-------
Shares and 399,857 Class B Shares of the common stock of the Company, and
Jacobel owns 36,400 Class B Shares of the common stock of the Company (all
shares mentioned in this paragraph being treated as a single class and
collectively referred to herein as the "Shares");
------
WHEREAS, BGH, Motorola and Jacobel (hereinafter individually a
"Seller" and collectively the "Sellers") wish to sell to the Purchaser, and the
------ -------
Purchaser wishes to purchase from the Sellers, the Purchased Shares (as defined
in Section 2.1 hereof), all upon the terms and subject to the conditions set
forth herein; and
WHEREAS, the Purchaser and the Sellers are simultaneously entering
into a Memorandum of Understanding Relating to Implementation of a Two-Way
Paging System in Argentina, dated the date hereof, among the Sellers and the
Purchaser in the form attached hereto as Exhibit D (the "MOU") providing, among
---
other things, that they shall negotiate in good faith with regard to forming a
joint venture to conduct Two-Way Paging (as defined herein) in Argentina.
<PAGE>
NOW, THEREFORE, intending to be legally bound, the parties
hereby agree as follows:
2
<PAGE>
ARTICLE I
DEFINITIONS
-----------
1.1 Certain Definitions. The following capitalized terms used in
-------------------
this Agreement shall have the meanings set forth below:
"Affiliate" or "affiliate" means, with respect to any specified
--------- ---------
Person, any Person directly or indirectly controlling, controlled by, or under
common control with, such specified Person, at any time during the period for
which the determination of affiliation is being made; provided that in the case
of a Person who is an individual, such terms shall also include members of such
specified Person's immediate family (as defined in Instruction 2 of Item 404(a)
of Regulation S-K under the Securities Act of 1933, as amended).
"Agreement" has the meaning set forth in the preamble hereof.
---------
"Arbitrating Auditor" has the meaning set forth in Section 2.4(c)
-------------------
hereof.
"Argentine GAAP" means generally accepted accounting principles as
--------------
applied in Argentina.
"Asserted Liability" has the meaning set forth in Section 8.3 hereof.
------------------
"BGH" has the meaning set forth in the preamble hereof.
---
"BGH Promissory Note" has the meaning set forth in Section 5.4(b)
-------------------
hereof.
"Bridge Notes" have the meaning set forth in Section 2.3(c) hereof.
------------
3
<PAGE>
"Business Day" means a day in which banks are opened for business in
------------
Buenos Aires, Argentina and New York, New York.
"Carrier's Carrier" has the meaning set forth in Section 5.4(h)
-----------------
hereof.
"Closing" has the meaning set forth in Section 2.2 hereof.
-------
"Closing Balance Sheet" has the meaning set forth in Section 2.4(a)
---------------------
hereof.
"Closing Date" has the meaning set forth in Section 2.2 hereof.
------------
"CNC" has the meaning set forth in Section 6.1(a) hereof.
---
"CNC Letter" has the meaning set forth in Section 5.5(a) hereof.
----------
"Company" has the meaning set forth in the preamble hereof.
-------
"Company Expenses" means any out-of-pocket costs and expenses incurred
----------------
by the Company for the benefit of any Seller in connection with the transactions
contemplated by this Agreement on or prior to the date hereof and shall include,
without limitation, any attorneys and financial advisory fees and expenses.
"CRM" has the meaning set forth in Section 5.4(c) hereof.
---
"CRM Entity" has the meaning set forth in Section 5.4(e) hereof.
----------
"Dispute" has the meaning set forth in Section 9.4(a) hereof.
-------
4
<PAGE>
"Dividend" has the meaning set forth in Section 2.5(d) hereof.
--------
"Dollars" or "$" means the lawful currency of the United States of
------- -
America.
"Environmental Laws" has the meaning set forth in Section 3.25 hereof.
------------------
"Estatutos" means with respect to any corporate entity, the charter
---------
and by-laws of such corporate entity.
"Estimated Working Capital Balance" has the meaning set forth in
---------------------------------
Section 6.3(c) hereof.
"Excess Cash Distribution" means one or more cash distributions made
------------------------
by the Company to the Sellers (by way of dividends or otherwise) or to the
directors appointed by the Sellers (by way of directors' fees or otherwise) in
an amount so as not to prohibit the Chief Financial Officer of the Company from
delivering the Officers Certificate referred to in Section 6.3(c) or to make
untrue any of the statements contained therein.
"Excluded Liabilities" has the meaning set forth in Section 2.5(b)
--------------------
hereof.
"Financial Statements" has the meaning set forth in Section 3.7
--------------------
hereof.
"Hazardous Materials" has the meaning set forth in Section 3.25
-------------------
hereof.
"Indebtedness" means (1) all indebtedness or liability for borrowed
-------------
money; (2) all obligations evidenced by bonds, debentures, notes, or other
similar instruments; (3) all obligations for the deferred purchase price of
property or services (including trade obligations); (4) all obligations as
lessee under capital leases; (5) all current liabilities in respect of unfunded
vested benefits under employee benefit plans covered by Argentine regulation;
(6)
5
<PAGE>
all obligations under letters of credit; (7) all obligations under acceptance
facilities; (8) all guarantees, endorsements (other than for collection or
deposit in the ordinary course of business), and other contingent obligations to
purchase, to provide funds for payment, to supply funds to invest in any person
or entity, or otherwise to assure a creditor against loss; and (9) all
obligations secured by any mortgage, lien, pledge, or security interest or other
charge or encumbrance on property, whether or not the obligations have been
assumed.
"Intangible Property" has the meaning set forth in Section 3.19(a)
-------------------
hereof.
"Jacobel" has the meaning set forth in the preamble hereof.
-------
"Knowledge of the Seller" or "Seller's Knowledge" and corresponding
----------------------- ------------------
terms with respect to each Seller mean, with respect to matters relating to a
Seller, the actual knowledge of the senior executive officers of the relevant
Seller with respect to such matters and, in the case of any matters relating to
the Company, the actual knowledge, after due inquiry, of any of the senior
executive officers of the Company.
"License Indemnity" has the meaning set forth in Section 8.1(a)
-----------------
hereof.
"Licenses" has the meaning set forth in Section 3.20 hereof.
--------
"Lien" means any lien, security interest, hypothecation, easement,
----
mortgage, pledge, usufruct, assignment to a trustee, conditional sale or other
title retention agreement, court or official attachment orders or any other
encumbrance having the effect of constituting a security interest.
"Losses" has the meaning set forth in Section 8.1(a) hereof.
------
6
<PAGE>
"Material Adverse Change" and "Material Adverse Effect" mean any
----------------------- -----------------------
change in, or effect on, as the case may be, the Company, that is materially
adverse to the assets, business, results of operations or the condition
(financial or otherwise) of the Company, but shall exclude any change or effect
principally due to general economic or industry wide conditions in the One-Way
Paging Business.
"Material Contracts" have the meaning set forth in Section 3.16
------------------
hereof.
"Merger" has the meaning set forth in Section 5.5(b) hereof.
------
"Motorola" has the meaning set forth in the preamble hereof.
--------
"Motorola Promissory Note" has the meaning set forth in Section 5.4(b)
------------------------
hereof.
"MOU" has the meaning set forth in the preamble hereof.
---
"Mtel Argentina" has the meaning set forth in Section 2.3(b) hereof.
--------------
"Net Book Value" means the book value of the relevant asset as
--------------
reflected in the accounting records of the Company, net of reserves,
amortization or depreciation applicable thereto under Argentine GAAP.
"Notes" have the meaning set forth in Section 2.3(b) hereof.
-----
"Notice of Disagreement" has the meaning set forth in Section 2.4(c)
----------------------
hereof.
"One-Way Paging" has the meaning set forth in Section 5.4(h) hereof.
--------------
7
<PAGE>
"One-Way Paging Business" has the meaning set forth in Section 5.4(h)
-----------------------
hereof.
"One-Way Paging System" has the meaning set forth in Section 5.4(h)
---------------------
hereof.
"Operating Approvals" have the meaning set forth in Section 3.10
-------------------
hereof.
"Party" has the meaning set forth in Section 9.4(a) hereof.
-----
"Person" means any natural person, corporation, association,
------
partnership, organization, business, firm, joint venture, trust, unincorporated
organization or any other entity or organization, including a government or any
political subdivision, department or agency of any government.
"Plans" has the meaning set forth in Section 3.13 hereof.
-----
"Pledge Agreement" has the meaning set forth in Section 2.3(b) hereof.
----------------
"Pledged Shares" has the meaning set forth in Section 2.3(b) hereof.
--------------
"Proceeds" has the meaning set forth in Section 8.1(b) hereof.
--------
"Properties" has the meaning set forth in Section 3.17 hereof.
----------
"Proprietary Information" has the meaning set forth in Section 9.15
-----------------------
hereof.
"Ps." means the lawful currency of the Republic of Argentina.
---
"Purchase Price" has the meaning set forth in Section 2.1 hereof.
--------------
8
<PAGE>
"Purchase Price Adjustment" has the meaning set forth in Section
-------------------------
2.4(b) hereof.
"Purchased Shares" has the meaning set forth in Section 2.1 hereof.
----------------
"Purchaser" has the meaning set forth in the preamble hereof.
---------
"Purchaser Financial Statements" have the meaning set forth in Section
------------------------------
4.8(a) hereof.
"Reimbursement Amounts" has the meaning set forth in Section 2.5(f)
---------------------
hereof.
"Repeater Business" has the meaning set forth in Section 2.5(h)
-----------------
hereof.
"Repeater Business Assets" has the meaning set forth in Section 2.5(h)
------------------------
hereof.
"Representatives" has the meaning set forth in Section 9.15 hereof.
---------------
"Request" has the meaning set forth in Section 9.4(a) hereof.
-------
"Reserves" has the meaning set forth in Section 8.1(b) hereof.
--------
"Sellers" has the meaning set forth in the preamble hereof.
-------
"Services" has the meaning set forth in Section 2.5(f) hereof.
--------
"Shares" has the meaning set forth in the preamble hereof.
------
"Special Sale" has the meaning set forth in Section 2.5(b) hereof.
------------
9
<PAGE>
"Specified Representations" means the representations and warranties
-------------------------
contained in (i) Sections 3.1(a), 3.2 and 3.3 hereof, and (ii) Sections 3.4,
3.5, 3.11 and 3.29 hereof insofar as such representations and warranties are
being made by a Seller with respect to such Seller; provided that, Specified
Representations shall not include the representations and warranties contained
in Sections 3.4, 3.5 and 3.11 hereof insofar as such representations and
warranties are being made by a Seller with respect to the Company.
"Stockholders Agreement" has the meaning set forth in Section 3.15(b)
----------------------
hereof.
"Taxes" means all taxes, charges, fees, levies or other assessments,
-----
including without limitation, all net income, gross income, gross receipts,
sales, use, ad valorem, value added, turnover, transfer, franchise, profits,
license, withholding, payroll, employment, excise, estimated, severance, stamp,
occupation, property or other taxes, customs duties, fees, assessments or
charges of any kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed or collected by any taxing
authority, including any national, provincial, state, local or other taxing
authority, including but not limited to, any political subdivision,
instrumentality, agency or similar body of any Argentine or local taxing
authority.
"Tax Returns" means all returns, declarations, reports, estimates,
-----------
information returns and statements and other documents of, relating to, or
required to be filed in respect of any and all Taxes.
"Territory" has the meaning set forth in Section 5.4(h) hereof.
---------
"Transaction Documents" means this Agreement, the Notes, the Bridge
---------------------
Notes and the Pledge Agreements.
10
<PAGE>
"Two-Way Paging" has the meaning set forth in Section 5.4(h) hereof.
--------------
"Two-Way Paging Business" has the meaning set forth in Section 5.4(h)
-----------------------
hereof.
"Two-Way Paging System" has the meaning set forth in Section 5.4(h)
---------------------
hereof.
"Working Capital Adjustment" means the difference (which difference
--------------------------
may be a negative number) between (i) $777,219 and (ii) the Working Capital
Balance as of the Closing Date as set forth on the Closing Balance Sheet.
"Working Capital Assets" means the sum of any amounts included in the
----------------------
line items "Caja y Bancos", "Inversiones", "Creditos por Ventas", "Otros
Creditos" and "Bienes de Cambio" included within the "Activo Corriente" on the
balance sheets of the Company.
"Working Capital Balance" means, as of any time, the difference (which
-----------------------
difference may be a negative number) between (i) the Working Capital Assets and
(ii) the Working Capital Liabilities at such time.
"Working Capital Liabilities" means the sum of any amounts included in
---------------------------
the line items "Cuentas por Pagar", "Cargas Sociales", "Cargas Fiscales" and
"Otros Pasivos" included within the "Pasivo Corriente" on the balance sheets of
the Company.
1.2 Other Terms. Other terms may be defined elsewhere in the text of
-----------
this Agreement and, unless otherwise indicated, shall have such meaning
throughout this Agreement.
1.3 Other Definitional Provisions. The words "hereof", "herein" and
----------------------------- ------ ------
"hereunder" and words of similar import, when used in this Agreement, shall
---------
refer to this Agreement as a whole and not to any particular provision of this
Agreement. The terms defined in the singular shall
11
<PAGE>
have a comparable meaning when used in the plural, and vice versa. Unless
otherwise expressly indicated, the word "including" shall always be read as if
followed by the words "without limitation" whether these words are actually
mentioned or not. The phrase "the transactions contemplated hereby or thereby"
shall not include or be deemed to include the Merger.
ARTICLE II
SALE AND PURCHASE
-----------------
2.1 Sale and Purchase. Upon the basis of the representations and
-----------------
warranties and subject to the terms and conditions of this Agreement, each
Seller will sell to the Purchaser and the Purchaser will purchase from each
Seller all of the right, title and interest of such Seller in and to the number
of Shares set forth alongside such Seller's name in Schedule 2.1 (the "Purchased
---------
Shares") at a purchase price per Purchased Share of $32 or an aggregate purchase
- ------
price of $32,000,000 (the "Purchase Price"), payable as provided for in Section
--------------
2.3 hereof and adjusted as contemplated in Section 2.4 hereof. The obligation
hereunder of each Seller to sell the Purchased Shares owned by it is several but
not joint. The purchase of any of the Purchased Shares by the Purchaser is
conditioned upon the sale by all the Sellers of all of the Purchased Shares.
The Purchaser shall have no obligation to purchase any of the Purchased Shares
if one or more of the Sellers does not participate in such sale. The Purchaser
shall also be entitled as part of the sale, without any increase in the Purchase
Price, to (i) the rights to dividends, whether declared or not as of the date
hereof, and other corporate distributions, corresponding to the Purchased
Shares; (ii) all amounts contributed by the Sellers and their Affiliates to the
Company as capital but not yet capitalized; (iii) all proceeds from any loans
made by the Sellers and their Affiliates to the Company and outstanding on the
date hereof; and (iv) any and all other rights pertaining to the
12
<PAGE>
Purchased Shares for which rights are outstanding on the date hereof, in each
case other than the Special Sale, the Excess Cash Distribution and the
reimbursement of management fees to the Sellers (by way of directors' fees or
otherwise) which shall occur prior to the Closing.
2.2 Closing. The closing (the "Closing") of the purchase and sale of
------- -------
the Purchased Shares shall take place at the offices of Chadbourne & Parke LLP
at 30 Rockefeller Plaza, New York, New York at 10:00 a.m. (New York time) as
soon as practicable (but in no event more than three (3) Business Days) after
the satisfaction or, to the extent permitted hereunder, waiver of the conditions
set forth in Article VI hereof (the date of such Closing, the "Closing Date").
------------
Upon the terms and subject to the conditions of this Agreement, at the Closing
each Seller agrees to take such actions as may be necessary under Argentine law
to transfer to the Purchaser full title to the Purchased Shares of such Seller
free and clear of all Liens and for the Company to register the Purchased
Shares, free and clear of all Liens, in the Purchaser's name on the Company's
stock ledger against receipt by such Seller of the Purchase Price and shall
deliver the share certificates evidencing the Purchased Shares to the Purchaser.
2.3 Payment. At the Closing, the following payments and deliveries
-------
shall be made:
(a) The Purchaser shall pay an aggregate amount of $16,000,000 in
immediately available funds by wire transfer in the amounts and to the accounts
set forth below:
(i) to Motorola: $6,400,000 to account no. 40669411 (routing 021-000-089)
at Citibank, New York, New York;
(ii) to BGH: $9,170,072 to account no. 400-339250 (routing 021-000-021) at
The Chase Manhattan Bank, New York, New York; and
13
<PAGE>
(iii) to Jacobel: $429,928 to account no. 18176354 (routing 021-001-033) at
Bankers Trust Company, New York, New York.
(b) The Purchaser shall assign and deliver to BGH, Jacobel and
Motorola promissory notes (each, a "Note" and collectively, the "Notes") with an
---- -----
aggregate principal amount of $8,000,000 issued by Mtel Argentina S.A., a wholly
owned subsidiary of the Purchaser and a corporation organized and existing under
the laws of the Republic of Argentina ("Mtel Argentina"), in the forms attached
--------------
hereto as Exhibits A-1, A-2 and A-3, respectively. The Notes evidence an
intercompany loan in such aggregate principal amount made by the Purchaser to
Mtel Argentina. As of the date of this Agreement and as of the Closing Date,
there is and shall be no breach of any representation or warranty of Mtel
Argentina under any Note, and Mtel Argentina has performed and shall have
performed and complied with all of its covenants and agreements required
thereunder to be performed or complied with by it prior to or at the Closing, in
each case as if such Notes were issued as of the date hereof. The Notes shall
be secured by a pledge agreement pledging all of the Purchased Shares (the
"Pledged Shares") until the closing of the Merger, on the terms and subject to
- ---------------
the conditions set forth therein, to be delivered by the Purchaser to the
collateral agent referred to below for the equal and ratable benefit of BGH,
Jacobel and Motorola in the form attached hereto as Exhibit C (the "Pledge
------
Agreement"). The Purchaser shall designate The Chase Manhattan Bank, as
- ---------
collateral agent (all of whose fees and expenses shall be borne by the
Purchaser) under the Pledge Agreement for the purpose of holding and
administering the Pledged Shares, and at the Closing the Sellers will enter into
a collateral agency agreement with such collateral agent substantially in the
form attached hereto as Exhibit F which shall govern the rights of the Sellers
with regard to the Pledged Shares. The Notes shall be issued to the Purchaser
and assigned to each Seller in the principal amounts set forth below:
14
<PAGE>
Motorola: $3,200,000
BGH: $4,508,800
Jacobel: $ 291,200
(c) The Purchaser shall execute and deliver to BGH, Jacobel and
Motorola bridge promissory notes (each, a "Bridge Note" and collectively, the
-----------
"Bridge Notes") with an aggregate principal amount of $8,000,000 issued by the
------------
Purchaser in the forms attached hereto as Exhibits B-1, B-2 and B-3,
respectively. As of the date of this Agreement and as of the Closing Date,
there is and shall be no breach of any representation or warranty of the
Purchaser under any Bridge Note, and the Purchaser has performed and shall have
performed and complied with all of its covenants and agreements required
thereunder to be performed or complied with by it prior to or at the Closing, in
each case as if such Bridge Notes were issued as of the date hereof. The Bridge
Notes shall be issued to each Seller in the principal amounts set forth below:
Motorola: $3,200,000
BGH: $4,508,800
Jacobel: $ 291,200
2.4 Adjustment of the Purchase Price.
(a) As promptly as practicable following the Closing, but in any
event no later than 45 (forty-five) days after the Closing Date, the Purchaser
shall cause the Company to prepare and deliver to the Sellers a balance sheet
for the Company as of the Closing Date which balance sheet shall not give effect
to any actions taken or events occurring after the Closing (the "Closing Balance
---------------
Sheet") and which shall be audited by Deloitte & Touche in accordance with
- -----
Argentine GAAP consistently applied by the Company and shall be prepared by the
Company in accordance with the same accounting policies and practices used in
the preparation of the Financial Statements to the extent such policies and
practices do not contradict Argentine GAAP. The Purchaser shall cause the
Company to prepare and deliver
15
<PAGE>
to the Sellers and the Purchaser a preliminary Closing Balance Sheet for review
and to Deloitte & Touche for audit at least 20 (twenty) days prior to the
delivery of the Closing Balance Sheet. Any delay in delivery of the Closing
Balance Sheet attributable to Deloitte & Touche or their failure to deliver a
satisfactory audit on a timely basis shall not be considered a breach of this
Section 2.4 by the Purchaser so long as the Purchaser shall have caused the
Company to deliver to Deloitte & Touche for audit the Closing Balance Sheet as
soon as practicable following the Closing.
(b) Subject to subsection (c) below, within 20 (twenty) days after
delivery to the Sellers of the Closing Balance Sheet pursuant to subsection (a)
above, the Sellers agree to pay to the Purchaser in cash the purchase price
adjustment (the "Purchase Price Adjustment") if it is a positive amount and the
-------------------------
Purchaser agrees to pay to the Sellers in cash the Purchase Price Adjustment if
it is a negative amount. The Purchase Price Adjustment shall be equal to the
Working Capital Adjustment; provided, however, that no adjustment shall be made
if the Purchase Price Adjustment does not exceed a positive or negative number
of $10,000, as the case may be.
(c) If the Purchaser or the Sellers in good faith disagree with the
Closing Balance Sheet, then any such party shall notify the other party in
writing (the "Notice of Disagreement") of such disagreement within twenty (20)
----------------------
days after delivery of the Closing Balance Sheet to the Sellers. The Notice of
Disagreement shall set forth in reasonable detail the basis for the
disagreement. The parties shall have forty-five (45) days after delivery of
such Notice of Disagreement to resolve the issues stated therein with Deloitte &
Touche representing the Sellers and Arthur Andersen representing the Purchaser.
If after the end of such 45 day period the parties are unable to resolve such
dispute, the Sellers and the Purchaser have selected Coopers & Lybrand as a
mutually acceptable and independent accounting firm (such accounting firm being
hereinafter
16
<PAGE>
referred to as the "Arbitrating Auditor") to resolve the disputed items and make
-------------------
a determination with respect thereto. The Sellers and the Purchaser shall each
be entitled to make written submissions prepared by their respective accountants
to the Arbitrating Auditor. The determination by the Arbitrating Auditor shall
be final, binding and conclusive upon the parties hereto and shall be rendered
within 35 days of the submission date. The scope of such firm's engagement
(which shall not be an audit) shall be limited to the resolution of the items
contained in the Notice of Disagreement, and the recalculation, if any, of the
Closing Balance Sheet and the Working Capital Adjustment in light of such
resolution. The fees, costs and expenses in connection with the preparation of
the Closing Balance Sheet shall be split equally between the Purchaser and the
Sellers. The Sellers shall be jointly and severally responsible for their half
of such fees. The fees, costs and expenses of the Arbitrating Auditor, if any,
will be borne as decided by the Arbitrating Auditor taking into consideration
the outcome of its report. Within 10 (ten) days of delivery of a notice of
determination by the Arbitrating Auditor as described above, any adjustment
shall be paid. Any portion of the Purchase Price Adjustment not in dispute shall
be paid when due; provided, however, that no adjustment shall be made if the
Purchase Price Adjustment does not exceed a positive or negative number of
$10,000, as the case may be.
(d) Subject to clause (a) above, the parties agree that for the
purposes of the Purchase Price Adjustment, the accounting treatment criteria
used by Deloitte & Touche in preparing the Financial Statements, to the extent
that such accounting treatment criteria were (i) in accordance with Argentine
GAAP and (ii) consistently applied by Deloitte & Touche in the past in
connection with the preparation of the Company's financial statements, shall be
applied by the Arbitrating Auditor in resolving any dispute pursuant to Section
2.4(c).
17
<PAGE>
2.5 Excess Cash Distribution and Special Sale.
-----------------------------------------
(a) The Sellers will cause the Company to make the Excess Cash
Distribution prior to the Closing Date.
(b) Prior to the Closing Date, the Sellers shall cause the Company to
sell, assign and convey (the "Special Sale") to Omnilink S.A. or an affiliate
------------
thereof designated in writing by the Sellers, all of the Company's right, title
and interest in the Repeater Business and assume all the obligations and
liabilities, including liabilities for Taxes, with respect thereto (the
"Excluded Liabilities"), for an aggregate price of $91,560.33 payable in cash on
- ---------------------
the terms and conditions set forth below. Subject to (d), (e) and (f) below,
the Sellers have taken all actions necessary to effect the Special Sale.
(c) No Purchase Price Adjustment shall be made in connection with the
Special Sale or any action taken in connection thereto.
(d) The Excess Cash Distribution shall be distributed to the Sellers
as a dividend (the "Dividend") to be approved prior to the Closing Date by a
shareholders meeting of the Company out of the earned surplus as reflected on
the audited balance sheet for the Company for the fiscal year ended June 30,
1996 pursuant to a resolution in the form attached hereto as Schedule 2.5(d).
The Dividend is a valid dividend and has been declared and paid in accordance
with applicable Argentine law and the Company had adequate surplus to declare
the Dividend as of the date of declaration.
(e) The Purchaser shall use its commercially reasonable efforts to
cause the Company to take, or cause to be taken, or to do, or cause to be done,
all things necessary or desirable under applicable laws to consummate the
Special Sale, and to execute and deliver such other documents, certificates,
agreements and other writings and take such other actions, corporate or
otherwise, as may be
18
<PAGE>
necessary or desirable in order to consummate the Special Sale.
(f) The Special Sale shall be implemented through the sale,
assignment and conveyance of all the Repeater Business Assets from the Company
to Omnilink S.A or an affiliate thereof designated in writing by the Sellers,
for an aggregate price of $91,560.33; provided, however, that until the transfer
of the frequencies is duly consummated or authorized by the relevant regulatory
or governmental authorities, the Purchaser shall use its reasonable commercial
efforts to cause the Company to continue to send invoices to customers and to
seek to collect the accounts receivable allocable to such Repeater Business
(collectively, the "Services") for the sole account and benefit of the Sellers,
and the Company shall be compensated on a monthly basis, commencing thirty (30)
days following the Closing, for its reasonable costs and expenses (including
reasonably attributable administrative overhead) in rendering such services and
for any other out-of-pocket costs, expenses or liabilities, including
liabilities for Taxes with respect thereto, arising out of the conduct of such
Repeater Business (the "Reimbursement Amounts"). The Company will provide such
---------------------
services until December 31, 1997. Any income or revenue received by the Company
or the Purchaser in respect of the Repeater Business shall be received by the
Company or the Purchaser shall be held for the account of Omnilink S.A. or an
affiliate thereof designated in writing by the Sellers, as the case may be to be
paid on a monthly basis, net of all Reimbursement Amounts then owed to the
Purchaser on a monthly basis, commencing thirty (30) days following the Closing.
To the extent not fully consummated prior to Closing, the Purchaser agrees to
cause the Company to transfer and convey to Omnilink S.A. or an affiliate
thereof designated in writing by the Sellers the Repeater Business Assets set
forth in Schedule 2.5(h)(ii), as soon as practicable after the Closing. The
Purchaser hereby disclaims on behalf of the Company and itself any right, title
or interest in or to the Repeater Business Assets other than as expressly
provided
19
<PAGE>
herein. The Purchaser shall have no liability to the Sellers or the transferee
of the Repeater Business Assets with regard to the Services or any other aspect
of the Repeater Business other than as a result of the gross negligence or
willful misconduct of the Purchaser or the Company.
(g) The Sellers jointly and severally agree to pay, assume, remove,
extinguish or cause to be extinguished all of the Excluded Liabilities
(including all Taxes arising in connection with the operation of, or from the
distribution of, the Repeater Business Assets) of the Company arising out of the
Special Sale, whether arising prior to or following the Closing.
(h) For the purposes of this Section 2.5, "Repeater Business" means
-----------------
all rights, income and revenues, present or future, related to the rendering of
community repeater services pursuant to a license granted to the Company by
Resolution C.N.T. No. 2958 dated June 9, 1993 and the Repeater Business Assets.
"Repeater Business Assets" means the frequencies specified under the heading
------------------------
"Repeater Frequencies" in Schedule 3.20 and the assets and properties listed in
Schedule 2.5(h)(i) and (ii).
(i) All agreements and other documentation to be entered into in
connection with the Special Sale shall be provided to the Purchaser and shall be
subject to the approval of the Purchaser, such approval to be given promptly and
not to be unreasonably withheld (it being understood that the only grounds upon
which the Purchaser may object to either the form or substance of any such
agreement or documents is that in its good faith and reasonable judgment it
believes that such agreement or documents (i) impose obligations or liabilities
on the Purchaser post-Closing which were not intended by the parties hereto or
(ii) require the Purchaser to transfer assets other than those contemplated in
this Section 2.5 or (iii) are in violation of Argentine law or regulations).
20
<PAGE>
(j) All costs and expenses incurred by the Company, the Sellers or
any Affiliate thereof in connection with the Special Sale shall be the joint and
several obligation of the Sellers and shall not be paid by the Company or
Purchaser, except as agreed upon in (f) above.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLERS
---------------------------------------------
Each Seller hereby jointly and severally (with the exception of the
Specified Representations for which liability shall be several and not joint)
represents and warrants to the Purchaser as of the date hereof the following:
3.1 Organization.
------------
(a) Such Seller is a corporation duly organized and validly existing
under the laws of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own and operate its properties and to carry on
its business as presently conducted.
(b) The Company is a corporation duly organized and validly existing
under the laws of the Republic of Argentina and has all requisite corporate
power and authority to own and operate its properties and to carry on its
business as presently conducted. True and correct copies of the Estatutos of
the Company as of the date hereof are attached hereto as Schedule 3.1(b). The
Company does not have any subsidiaries.
(c) The minute books of the Company accurately reflect all material
actions and proceedings taken to date by the respective meetings of the
stockholders and the board of directors of the Company. The stock ledger of the
Company reflects accurately all transfers of capital stock of all classes of the
Company.
21
<PAGE>
3.2 Authority to Execute and Deliver this Agreement. Such Seller has
-----------------------------------------------
all requisite right, power and authority and full legal capacity to execute and
deliver this Agreement and the other Transaction Documents to which it is a
party, to carry out its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement by such Seller and the other Transaction Documents to which such
Seller is a party, and the consummation by such Seller of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
action on the part of such Seller, and no other corporate proceedings on its
part are necessary to authorize this Agreement or the other Transaction
Documents to which such Seller is a party, or to consummate the transactions
contemplated hereby or thereby. This Agreement and the other Transaction
Documents to which such Seller is a party, have been duly executed by such
Seller and, assuming the due authorization and execution by the Purchaser and
the other Sellers, constitute the legal, valid and binding obligations for such
Seller enforceable against such Seller in accordance with their respective terms
except as enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect
affecting creditors' rights generally and (ii) general principles of equity
(regardless of whether the application of such principles is considered in a
proceeding in equity or at law).
3.3 Ownership of Purchased Shares.
-----------------------------
(a) Such Seller owns the Purchased Shares set forth alongside its
name on Schedule 2.1, and has good and marketable title to such Purchased
Shares, free and clear of all Liens;
(b) Each Seller shall sign a notice of transfer relating to its
portion of the Purchased Shares and shall give such notice to the Company for
registration of the transfer on the Company's stock ledger; and
22
<PAGE>
(c) Upon (i) receipt by the Company of the notices of transfer signed
by such Seller and the registration of the transfer of such Purchased Shares on
the Company's stock ledger, and (ii) receipt of the Purchase Price as provided
herein, the Purchaser will receive good and marketable title to such Purchased
Shares, free and clear of all Liens.
3.4 No Conflict. The execution, delivery and performance by such
-----------
Seller of this Agreement and the other Transaction Documents to which it is a
party, and the consummation of the transactions contemplated hereby and thereby,
do not (i) conflict with or violate any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to such Seller
or the Company, (ii) conflict with, or result in a breach of or constitute a
default of, or an event creating rights of acceleration or termination (or an
event which, with or without notice or lapse of time or both, would constitute a
breach, acceleration or default) under, or permit cancellation of any terms or
conditions of any Material Contract binding upon the Company, and (iii) conflict
with, or result in a breach of or default under, any terms or conditions of the
Estatutos or other organizational documents of such Seller and the Company.
3.5 Rights Relating to Purchased Shares. Such Seller by executing
-----------------------------------
this Agreement waives any and all rights of first refusal and/or preemptive
rights arising from and/or in connection with the transactions contemplated in
this Agreement whether arising by statute, Estatutos or as a result of any
agreement or arrangement by or among the Sellers, the Company or any third
parties. Except for this Agreement and the other Transaction Documents, there
are no contracts, warrants, options, puts, calls or other commitments or
understandings of any character to which such Seller or the Company is a party
or by which any of such Seller's or the Company's respective assets are bound
relating to the issuance, sale, purchase, redemption,
23
<PAGE>
conversion, exchange, registration, ownership, voting or transfer of any Shares
of the Company.
3.6 Capitalization; No Liens. The issued capital stock of the
------------------------
Company consists of 356 Class A Shares of common stock, of 5 (five) votes each,
and 999,644 Class B Shares of common stock, of 1 (one) vote each, par value Ps.
1 (one) per share. All the Shares have been duly authorized and are fully paid,
outstanding and non-assessable and have not been issued in violation of any
preemptive rights. There are no (i) capital contributions made to the Company
and which are not yet capitalized, whether made by the Sellers or by other
parties; (ii) capital increases or reductions resolved by the shareholders'
meeting of the Company which would change the capitalization described above in
this Section 3.6.
3.7 Financial Information.
---------------------
(a) The audited balance sheet for the Company for the fiscal year
ended June 30, 1996 and the fiscal quarters ended September 30, 1996, December
31, 1996 and March 31, 1997 and the related audited statements of income and
retained earnings, audited statement of sources and uses of funds and exhibits
and notes thereto of the Company for the fiscal year ended June 30, 1996 and the
fiscal quarters ended September 30, 1996, December 31, 1996 and March 31, 1997
(the "Financial Statements") attached hereto as Schedule 3.7 are true and
--------------------
accurate copies of the Financial Statements, have been prepared based upon the
books and records of the Company, fairly present the financial condition and the
results of operations and the sources and uses of funds of the Company for such
respective periods and have been prepared in accordance with Argentine GAAP
consistently applied with only such deviations from Argentine GAAP as referred
to in the notes to the Financial Statements; and
(b) Except as otherwise noted in the Financial Statements, the books
and records of the Company have been
24
<PAGE>
maintained in accordance with Argentine law and otherwise in a manner
substantially customary with the industry in the Republic of Argentina in which
the Company is active.
3.8 Changes. Except as otherwise contemplated by this Agreement,
-------
since December 31, 1996 (a) the Company has been operated only in the ordinary
course of business consistent with past practice and (b) there has been no
change in the business condition (financial or otherwise), affairs, operations,
assets or properties of the Company, other than changes in the ordinary course
of business consistent with past practice which have not and would not
reasonably be expected to, in the aggregate, constitute a Material Adverse
Change.
3.9 Taxes.
----------
(a) The Company has, within the time and in the manner prescribed by
law, paid all Taxes that are due and payable on or prior to the Closing Date.
The Company has filed on a timely basis all Tax Returns required to be filed,
which Tax Returns are materially true, complete and correct. The Company has
filed all Tax Returns with the appropriate taxing authorities on a timely basis
in respect of all periods on or prior to the Closing Date.
(b) No audits or, except as set forth in Schedule 3.9(b), other
administrative proceedings, examinations, or court proceedings are presently
pending or, to such Seller's Knowledge, threatened against the Company with
regard to any Taxes or Tax Returns.
(c) There are no Liens for Taxes upon the assets of the Company,
except Liens for Taxes not yet due and payable.
(d) The Company has established (and until the Closing will
establish) on its books and records reserves that are adequate for the payment
of all Taxes (whether or not due) in accordance with Argentine GAAP and the past
accounting practices of the Company.
25
<PAGE>
(e) The statute of limitations for the assessment of any Taxes has
expired for all of the Company's Tax Returns or the Company's Tax Returns have
been examined by the corresponding authorities for all periods through January
1992, and no deficiency for any Taxes has been proposed, asserted or assessed
against the Company which have not been resolved and paid in full.
(f) The Company is not a party to any agreement or arrangement
providing for the allocation or sharing of Taxes, other than any provisions
regarding Taxes contained in the Material Contracts.
3.10 Compliance. The Company (i) is not in breach or violation of
----------
any term of its Estatutos and (ii) has obtained (a) all permits, approvals,
authorizations, registrations, qualifications and filings with and under all
Argentine or other authorities and agencies that are required to enable it to
carry on its One-Way Paging Business as currently conducted and (b) all other
material permits, approvals, authorizations, registrations, qualifications and
filings with and under all Argentine or other authorities and agencies that are
required to enable it or carry on its business as currently conducted ((a) and
(b) collectively, the "Operating Approvals"), and all such Operating Approvals
-------------------
are in full force and effect with respect to the Company and, to such Seller's
Knowledge, no suspension of them has been threatened.
3.11 Consents and Approvals. No consent, approval, action or
----------------------
authorization of, or registration, declaration or filing with, or notification
to, any third party or administrative, governmental, judicial or regulatory
authority on the part of the Company or such Seller is required to be obtained
or made by such Seller or the Company for the valid execution of this Agreement
and the other Transaction Documents to which such Seller is a party or the
consummation by such Seller of the transactions contemplated hereby or thereby,
except for any consents, approvals, actions, authorizations, registrations,
26
<PAGE>
declarations, filings or notifications which relate to the CNC Approval as
described in Section 6.1(a).
3.12 Litigation. Except as set forth in Schedule 3.12, there is no
----------
suit, claim, action, proceeding (including any reorganization, insolvency or
bankruptcy proceeding) or investigation pending or, to such Seller's Knowledge,
threatened, including without limitation, by any third party, government or
governmental agency except for those suits, claims, actions, proceedings or
investigations which, in the aggregate, would not result or, are not reasonably
expected to result in a Material Adverse Change or in any substantial impairment
of the right or ability of the Company to carry on its business as it is
presently conducted or materially impair or delay such Seller's ability to
effect the Closing or consummate the transactions contemplated hereby. Except
as set forth in Schedule 3.12, the Company is not a party to or subject to the
provisions of any order, injunction, judgment or decree of any court or
governmental agency or instrumentality (other than government decrees of general
applicability) except for those orders, injunctions, judgments or decrees which
would not have or would not reasonably be expected to have a Material Adverse
Effect and there is no action, suit, claim, proceeding or investigation by the
Company currently pending or to the Seller's Knowledge threatened, or which the
Company intends to initiate except for those actions, suits, claims, proceedings
or investigations which would not result or would not reasonably be expected to
result in a Material Adverse Change.
3.13 Employee Benefit Matters. Except as otherwise provided in
------------------------
Schedule 3.13, there are no bonus, stock option, stock purchase, incentive,
deferred compensation, post-retirement medical or life insurance, supplemental
retirement, severance or other related employee benefit plans, severance or
compensation agreements, in each case for the benefit of, or relating to,
current employees and former employees of the Company (collectively, the
"Plans") which are not mandatory by law, union labor
-----
27
<PAGE>
agreements or as set forth on Schedules 3.13 and 3.14. Schedule 3.13 lists the
current position and salary of each employee of the Company as of the date
hereof.
3.14 Labor Matters. Schedule 3.14 lists all collective bargaining
-------------
agreements or other labor union contracts applicable to persons employed by the
Company. To such Seller's Knowledge, there are no grievances outstanding
against the Company except for such grievances which would not have a Material
Adverse Effect and, currently, there are no strikes, slowdowns, work stoppages,
lockouts, or to such Seller's Knowledge threats thereof, by or with respect to
any employees of the Company.
3.15 Voting and Other Agreements.
---------------------------
(a) There are no stockholder agreements, voting trusts, proxies or
other similar agreements or understandings in effect with respect to the voting
or transfer of any of the Purchased Shares except as described below.
(b) The stockholders agreement entered into by Motorola, BGH, Jacobel
and the Company, dated December 4, 1992 (the "Stockholders Agreement"), and all
----------------------
terms and provisions contained therein shall have been terminated on or prior to
the Closing and upon such termination shall have no further force or effect.
The Company will not have any further obligations to any Seller or any third
party thereunder, including but not limited to, the obligation to pay any
management fees specified thereunder, and any payments required to be made but
which have not been made under such stockholders agreement shall be canceled.
3.16 Material Contracts. Schedule 3.16 contains an accurate and
------------------
complete list of all contracts to which the Company is a party or by which it is
bound or its assets are subject and that (i) obligates the Company to pay an
amount in the aggregate of U.S. $100,000 or more (other than purchase orders in
the ordinary course), (ii) relates to any
28
<PAGE>
reseller, distribution or other similar agreement, (iii) contains a covenant
that materially limits or restricts the ability of the Company to compete or to
conduct its business in any manner or place, (iv) evidences any liability or
Indebtedness (whether incurred, assumed, guaranteed or secured by any asset) in
excess of U.S. $100,000, (v) grants a power of attorney, agency, or similar
authority to another person or entity, (vi) relates to any properties as
described in Section 3.17, (vii) contains a right of first refusal with respect
to any assets with a fair market value in excess of U.S. $100,000, (viii)
constitutes an employment or collective bargaining agreement or provides for
severance benefits to any officer, director, or employee, (ix) provides for
acquisitions or dispositions of assets or other capital expenditures in the
aggregate in excess of U.S. $100,000, or (x) provides for the indemnification
of, or indemnification by, the Company outside of the ordinary course of
business (collectively, the "Material Contracts"). True, correct, and complete
------------------
copies of the Material Contracts appearing in Schedule 3.16, including all
amendments and supplements, have been delivered to the Purchaser with Schedule
3.16. Each Material Contract is valid and binding and in full force and effect
with respect to the Company, and to the Company's knowledge, the other parties
thereto. There has not occurred any alleged or actual breach or default, or
event which would (with the passage of time, notice or both) constitute a breach
or default or would result in the termination or acceleration of or the right to
terminate or accelerate (with the passage of time, notice or both) by the
Company, under any of the Material Contracts, or to the Company's knowledge, the
other parties thereto, which remains unremedied as of the date hereof, except
for those which would not reasonably be expected to have a Material Adverse
Effect.
3.17 Properties.
----------
(a) The Company has good and marketable title and the right of
possession or other legal right to all real and
29
<PAGE>
personal properties (the "Properties") with a Net Book Value in excess of an
amount equal to the equivalent of $100,000, free and clear of all Liens (except
such liens and imperfections of title as do not materially and adversely affect
the value of such property as reflected in the Financial Statements).
(b) All properties held by or for the benefit of the Company under
leases or licenses are held under valid, binding and enforceable leases or
licenses, with such exceptions as do not have a Material Adverse Effect.
3.18 Insurance. Except with respect to the inventory pagers located
---------
in the offices of the Company, the Company is, and continuously since December
31, 1996 has been, insured with reputable insurers against all risks (i)
normally insured against by companies of the same type and in the same line of
business in the Republic of Argentina, including for workmen's accidents, or
(ii) as required under applicable law. All of the insurance policies or bonds
maintained by it are in full force and effect and will remain in effect
immediately following the Closing, all premiums due and owing thereunder through
the date hereof and until the Closing have been paid in full and will be paid in
full until the Closing, and all material claims under such insurance have been
filed in due and timely fashion. To such Seller's Knowledge, such insurance
coverage is generally in such form and amounts as is customarily maintained by
prudent business persons engaged in the same or similar lines of business.
3.19 Intellectual Property. The Company owns and/or has enforceable
---------------------
rights to, free and clear of all Liens, patents, copyrights, service marks,
trademarks, brand names, trade names, trade secrets, secret processes,
confidential information, know-how, software, licenses and other intellectual
property rights, including without limitation the use of the Radiomensaje name
(collectively, "Intangible Property") required for use in connection with the
-------------------
Company's business and does not have to pay a fee for
30
<PAGE>
the use thereof, nor to return any of the above to any third party upon the
consummation of the purchase and sale of the Purchased Shares. Schedule 3.19
lists all patents, copyrights, service marks, trademarks, brand names, or trade
names, and all registrations or applications for registration of any of the
foregoing which are owned or used by the Company. The use by the Company of the
Intangible Property has not and will not result in the infringement, violation
or misappropriation of the rights of any third party, other than such
infringement, violation or misappropriation which has not had a Material Adverse
Effect. There are no pending, or to such Seller's Knowledge, threatened claims
that any of the Intangible Property is invalid or unenforceable or that the use
of such Intangible Property infringes, violates or misappropriates the rights of
any third party. The Company has entered into confidentiality agreements with
each of the employees listed on Schedule 3.13 substantially consistent with the
form of employee confidentiality agreement previously delivered to the
Purchaser.
3.20 Frequencies. Schedule 3.20(i) lists all paging and messaging
-----------
licenses, permits, frequencies and similar regulatory documents which are
material to the business or operations of the Company (the "Licenses") and such
--------
schedule includes all Licenses which are necessary, according to applicable law
and regulations, to conduct its business or operations as they have been
conducted to date. The Licenses are in full force and effect in accordance with
applicable law and the terms thereof and are free and clear of all Liens which
have been imposed by an action of the Company or any actions taken or not taken
by the Company and such validity and effectiveness have not been impaired by the
passage of any law, statute, or regulation by any governmental authority in
Argentina since the granting or assignment of the Licenses. Except as provided
in Schedule 3.20(ii), the Company has fully complied with the terms of each such
License, conducted its business in accordance with the terms of each such
License and is not, and has not received any notice that the Company is, in
31
<PAGE>
default (or with the giving of notice or lapse of time or both, would be in
default) under, or has violated, any terms of any such License. The Company
holds or has a right to use the necessary licenses to operate its paging and
messaging services on the Frequencies listed in Schedule 3.20(i) and none of the
licenses listed in Section 1 of Schedule 3.20(i) is scheduled to expire in
accordance with its terms prior to December 31, 1997.
3.21 Inventory. No exception to Argentine GAAP has been taken by the
---------
Company's auditors in the Financial Statements regarding the Company's
inventory, which inventory is of good, usable and merchantable quality, except
for reasonable wear and tear. Such inventory is valued at cost which does not
exceed the net realizable value and is net of an allowance for obsolescence of
spare parts.
3.22 Accounts Receivable and other Receivables. The customer
-----------------------------------------
accounts receivables provided in the Financial Statements arose in the ordinary
course of business of the Company and represent the actual obligations of its
customers. The accounts receivables balance in the aggregate fairly reflects
the amounts owed to the Company by customers, net of a reserve for bad debts,
which reserve was reasonable in accordance with Argentine GAAP in light of the
circumstances existing at the time the reserve was booked.
3.23 Dividends and Other Distributions. Except for the Excess Cash
---------------------------------
Distribution and the Special Sale, there has been no dividend or other
distribution of assets or securities, whether consisting of money, property, or
any other thing of value, declared, issued, or paid subsequent to the date of
the Financial Statements by the Company; provided, however, that the management
fees reimbursed to the Sellers (by way of directors' fees or otherwise) in the
ordinary course of business, including without limitation interim directors'
fees payable pursuant to the shareholders' resolution in the form attached
hereto as Schedule 2.5(d), should not be deemed a dividend or other
32
<PAGE>
distribution of assets for the purposes of this Section 3.23; and, provided,
further, that the Purchaser shall duly ratify, in the shareholders meeting held
to approve the balance sheet for the fiscal year ended June 30, 1997, any such
interim directors' fees payable pursuant to the shareholders' resolution
referred to above, for purposes of complying with Article 261 of Argentine Law
No. 19,550, as amended.
3.24 Brokers or Finders. Other than as set forth in Schedule 3.24,
------------------
the Sellers have not retained, employed or used any broker or finder in
connection with the purchase and sale of the Purchased Shares pursuant to this
Agreement or in connection with the negotiations hereof. The Sellers shall be
solely responsible for the fees and expenses of any broker or finder hired, if
any, in connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of the Sellers or any of their
Affiliates.
3.25 Environmental Matters. Except as would not result or would not
---------------------
reasonably be expected to result in a Material Adverse Effect, (i) the
operations of the Company are in compliance with applicable Environmental Laws,
(ii) the Company is not subject to any judicial or administrative proceeding
alleging the violation of any Environmental Law or regarding any Hazardous
Materials on any real property owned or leased by the Company, (iii) the Company
has not caused or permitted its operations (X) to be used to generate,
manufacture, transport, treat, store, handle, dispose or process Hazardous
Materials, except in compliance with Environmental Laws, or (Y) to release,
spill, leak, emit, discharge, dispose or dump any Hazardous Material that has
gone onto or offsite any real property owned or leased by the Company, except in
compliance with Environmental Laws and (iv) no person or entity has in the past
utilized any real property owned or leased by the Company in a manner which has
created any Hazardous Material on or offsite of such property, except in
compliance with Environmental Laws. For the purposes of this Section 3.25,
"Environmental Laws"
------------------
33
<PAGE>
shall mean any federal, provincial or local law, ordinance, regulation, order or
permit in Argentina pertaining to the environment, natural resources or public
health or safety as presently in effect and "Hazardous Materials" shall mean
-------------------
hazardous wastes, pollutants, substances or constituents, toxic or dangerous
substances, or related material defined as such or any other similar designation
in, or otherwise subject to regulation under, Environmental Laws.
3.26 Undisclosed Liabilities. Except for liabilities (i) reflected
-----------------------
on or reserved against on the Financial Statements of the Company as of December
31, 1996, (ii) incurred since that date in the ordinary course of the Company's
business or (iii) contemplated by this Agreement or any other of the Transaction
Documents, to such Seller's Knowledge, the Company does not have any liabilities
or other obligations (absolute, accrued, contingent or otherwise) individually
having a value in excess of $1,000 and in the aggregate having a value in excess
of $100,000, which relate to the Company or its business.
3.27 Certain Interests. Other than the Special Sale, the Company is
-----------------
not a party to any transaction with any Seller or any Affiliate of any Seller
other than (i) the Stockholders Agreement and (ii) purchase orders that have
been entered into with an Affiliate of Motorola on an arms-length basis.
3.28 Foreign Corrupt Practices Act. To such Seller's Knowledge,
-----------------------------
neither the Company, such Seller nor any of their respective officers, directors
or employees has taken any action which would reasonably be expected to cause
the Purchaser or its Affiliates to be liable under the Foreign Corrupt Practices
Act of the United States of 1977, as amended, following the Closing.
3.29 Solvency of BGH and Jacobel. Each of BGH and Jacobel currently
---------------------------
are in sound financial standing and are solvent.
34
<PAGE>
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF THE PURCHASER
---------------------------
The Purchaser represents and warrants to each Seller as of the date
hereof:
4.1 Organization. The Purchaser is a company duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own and operate its properties
and to carry on its business as presently conducted.
4.2 Authority to Execute and Deliver this Agreement. The Purchaser
-----------------------------------------------
has all requisite right, power and authority and full legal capacity to execute
and deliver this Agreement and the other Transaction Documents to which it is a
party, to carry out its obligations hereunder and thereunder and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement and the other Transaction Documents to which it is a party by the
Purchaser and the consummation by the Purchaser of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on the part
of the Purchaser, and no other corporate proceedings on its part are necessary
to authorize this Agreement or the other Transaction Documents to which it is a
party or to consummate the transactions contemplated hereby or thereby. This
Agreement and the other Transaction Documents to which it is a party have been
duly executed by the Purchaser and, assuming the due authorization and execution
by the Sellers, constitute the legal, valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with their terms
except as enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws, now or hereafter in effect
affecting creditors' rights generally and (ii) general principles of equity
(regardless
35
<PAGE>
of whether the application of such principles is considered in a proceeding in
equity or at law).
4.3 No Conflict. The execution, delivery and performance of this
-----------
Agreement and the other Transaction Documents to which it is a party by the
Purchaser and the consummation of the transactions contemplated hereby and
thereby do not (a) conflict with or violate any law, rule, regulation, order,
writ, judgment, injunction, decree, determination or award applicable to the
Purchaser, (b) conflict with, or result in a breach of or constitute a default
of, or an event creating rights of acceleration or termination (or an event
which, with or without notice or lapse of time or both, would constitute a
breach, acceleration or default) under, or permit cancellation of any terms or
conditions of any material agreement binding on the Purchaser, and (c) conflict
with, or result in a breach of or default under, any terms or conditions of the
by-laws or other organizational documents of the Purchaser.
4.4 Consents and Approvals. No consent, approval, action or
----------------------
authorization of, or registration, declaration, or filing with or notification
to, any third party or administrative, governmental, judicial or regulatory
authority on the part of the Purchaser is required to be obtained or made by the
Purchaser for the valid execution of this Agreement and the other Transaction
Documents to which it is a party or the consummation by the Purchaser of the
transactions contemplated hereby or thereby, except for any consents, approvals,
actions, authorizations, registrations, declarations, filings or notifications
which relate to the CNC Approval as described in Section 6.1(a).
4.5 Absence of Litigation. There are no suits, claims, actions,
---------------------
proceedings (including any reorganization, insolvency or bankruptcy proceeding)
or investigations pending or, to the Purchaser's knowledge, threatened,
including without limitation, by any third party, government or governmental
agency, against the Purchaser or any of its
36
<PAGE>
Affiliates, or any of its or their assets or properties, before any court,
arbitrator or administrative, governmental or regulatory authority which seek to
delay or prevent the consummation of the transactions contemplated hereby or
which would, individually or in the aggregate, be reasonably likely to adversely
affect or restrict the Purchaser's ability to consummate the transactions
contemplated hereby.
4.6 Brokers or Finders. The Purchaser has not retained, employed or
------------------
used any broker or finder in connection with the purchase and sale of the
Purchased Shares pursuant to this Agreement or in connection with the
negotiations hereof. The Purchaser shall be solely responsible for the fees and
expenses of any broker or finder hired in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Purchaser or any of its Affiliates.
4.7 Newbridge Latin America, L.P. Purchase Obligation. The "Common
-------------------------------------------------
Shares Purchase Price" referred to in Section 1.4(a) of that certain Purchase
Agreement dated as of September 19, 1996 by and between Newbridge Latin America,
L.P. and the Purchaser was paid in full on or prior to April 30, 1997, and no
unpaid portion of such Common Shares Purchase Price remains outstanding.
4.8 Financial Information.
---------------------
(a) The audited balance sheet for the Purchaser for the fiscal year
ended December 31, 1996 and the related statements of income (the "Purchaser
---------
Financial Statements") attached hereto as Schedule 4.8 are true and accurate
- --------------------
copies of the Purchaser Financial Statements, have been prepared based upon the
books and records of the Purchaser, fairly present the financial condition and
the results of operations of the Purchaser for such period and have been
prepared in accordance with generally accepted accounting principles in the
United States consistently applied with only such deviations from U.S. GAAP as
referred to in the notes to the Purchaser Financial Statements; and
37
<PAGE>
(b) Except as otherwise noted in the Purchaser Financial Statements,
the books and records of the Purchaser have been maintained in accordance with
applicable law and otherwise in a manner substantially customary with the
industry in which the Purchaser is active.
4.9 Changes. Since December 31, 1996 (a) the Purchaser has been
-------
operated only in the ordinary course of business consistent with past practice
and (b) there has been no change in the business condition (financial or
otherwise), affairs, operations, assets or properties of the Purchaser, other
than changes in the ordinary course of business consistent with past practice
which have not and would not reasonably be expected to, in the aggregate,
constitute a change in the Purchaser that is materially adverse to the assets,
business, results of operations or the condition (financial or otherwise) of the
Purchaser (excluding any change principally due to general economic or industry
wide conditions).
ARTICLE V
COVENANTS RELATING TO CONDUCT OF
BUSINESS; ADDITIONAL AGREEMENTS
-------------------------------
5.1 Operation of the Company. From the date hereof to the Closing
------------------------
Date, the Sellers jointly and severally agree to cause the Company to conduct
its business only in the ordinary course of business and shall use their
reasonable commercial efforts to preserve intact the current business
organization of the Company, keep available the services of the current
officers, employees, and agents of the Company, and maintain the relations and
good will with suppliers, customers, landlords, creditors, employees, agents,
and others having business relationships with the Company. Without limiting the
generality of the foregoing, from the date hereof to the Closing Date, the
Sellers jointly and severally agree to cause the Company not to:
38
<PAGE>
(a) create, permit or suffer to exist any Lien upon or with respect
to the Company or any of its assets or revenues.
(b) incur, create, assume or permit to exist any Indebtedness.
(c) subject to Section 2.5, declare, set aside or make any dividends,
payments or distributions in cash, securities or property to the stockholders of
the Company.
(d) amend its Estatutos or other comparable organizational document.
(e) redeem or otherwise acquire any shares of its capital stock, or
issue any capital stock or any option, warrant or right relating thereto or any
securities convertible into or exchangeable for any shares of its capital stock,
or split, combine or reclassify any of its capital stock or issue any securities
in exchange or in substitution for shares of its capital stock.
(f) make any change in any method of accounting or accounting
practice or policy, except as required by applicable law or by Argentine GAAP.
(g) increase any salaries of any officer, director or employee,
except as in the ordinary course of business.
5.2 Operation of the Purchaser. From the date hereof to the Closing
--------------------------
Date, the Purchaser will conduct its business only in the ordinary course of
business and shall use its reasonable commercial efforts to preserve intact its
current business organization.
5.3 Operation of Mtel Argentina. From the date hereof to the Closing
---------------------------
Date, the Purchaser will cause Mtel Argentina to conduct its business only in
the ordinary course of business and shall use its reasonable commercial efforts
to preserve intact the current business organization
39
<PAGE>
of Mtel Argentina, keep available the services of the current officers,
employees, and agents of Mtel Argentina, and maintain the relations and good
will with suppliers, customers, landlords, creditors, employees, agents, and
others having business relationships with Mtel Argentina.
5.4 Restricted Activity. From and after the Closing:
-------------------
(a) Each Seller severally but not jointly covenants and agrees that
it will not, and will cause its Affiliates not to, engage in the One-Way Paging
Business in the Territory for a period of five years from the Closing Date,
except (i) as stated in paragraph (e) herein or (ii) following (A) a default by
Mtel Argentina to pay principal or interest under any Note, and either (B) any
transfer of title related thereto, including by foreclosure, by a Seller or
Sellers thereunder of fifty percent (50%) or more in the aggregate of the
tangible or operating assets of Mtel Argentina or (C) the exercise of remedies
related thereto by the Collateral Agent pursuant to the Pledge Agreement.
(b) Each Seller severally but not jointly covenants and agrees that
it will not, and will cause each of its Affiliates not to, engage in the Two-Way
Paging Business in the Territory for a period of five years from the Closing
Date, except as stated in paragraph (e) herein and except (i) such Seller or
Sellers (and their Affiliates) may engage in a Two-Way Paging Business in the
Territory as a Carrier's Carrier at any time after twenty-one months from the
Closing Date upon having given nine months prior written notice, provided that
such Seller or Sellers pay to Mtel Argentina upon the commencement of commercial
operations as a Carrier's Carrier the amount of $3.0 million to be comprised of
(A) if such commercial operations commence on or before twenty-four months from
the Closing Date, cash equal to $1,500,000 and reductions from the final
payments due upon maturity in the amounts of (x) $900,000 under the promissory
note of Mtel Argentina, dated the date hereof, in favor of the Purchaser and
assigned and delivered to BGH
40
<PAGE>
pursuant to this Agreement (the "BGH Promissory Note"), and (y) $600,000 under
-------------------
the promissory note of Mtel Argentina, dated the date hereof, in favor of the
Purchaser and assigned and delivered to Motorola pursuant to this Agreement (the
"Motorola Promissory Note") or (B) if such commercial operations commence
------------------------
between twenty-four months and thirty-six months from the Closing Date, a
reduction from the final payments due upon maturity in the amounts of (x) $1.8
million under the BGH Promissory Note and (y) $1.2 million under the Motorola
Promissory Note, (ii) such Seller or Sellers (and their Affiliates) may engage
in the Two-Way Paging Business as a Carrier's Carrier after thirty-six months
from the Closing Date without paying any fee to the Purchaser or being subject
to any other restriction and (iii) if the parties mutually engage in the Two-Way
Paging Business in the Territory as provided in any joint venture agreement
among the parties at such time. In the event that (i) Mtel Argentina defaults in
its obligations to pay principal or interest under any Note, and (ii) such
Seller or Sellers desire to engage in a Two-Way Paging Business in the Territory
as a Carrier's Carrier at any time after twenty-one months from the Closing
Date, the payment obligations of the Sellers under paragraph (b) of this Section
shall be comprised of a reduction from the final payments due upon maturity in
the amounts of (x) $1.8 million under the BGH Promissory Note and (y) $1.2
million under the Motorola Promissory Note. In the event the remaining
outstanding principal balance of the Note of any Seller is less than the amount
of any payment due by such Seller under this Section 5.4(b), any remaining
portion of such payment owed by such Seller shall be paid to the Purchaser in
cash. In the event that one but not all of the Sellers engages in a Two-Way
Paging Business in the Territory as permitted in this paragraph (b), then such
Seller shall be solely responsible for payment of the entire $3.0 million
referred to above; provided that if commercial operations of such business
commence on or before twenty-four months from the Closing Date, such payment
shall be comprised, subject to the immediately preceding sentence, of $1,500,000
in cash and reduction of $1,500,000 from the
41
<PAGE>
final payment due upon maturity of the promissory note of such Seller. So long
as each Seller is not in default of any of its obligations under this Section
5.4, payment of the amounts set forth in this paragraph (b) shall act as a full
and complete release of any further obligations of such Seller or Sellers (and
their Affiliates) hereunder and the provisions of this Section are the sole
remedy available to the Purchaser.
(c) If such Seller or Sellers or their Affiliates commence commercial
operations in the Territory as a Carrier's Carrier pursuant to Section
5.4(b)(i), such Seller or Sellers and their Affiliates (other than Compania de
Radiocomunicaciones Moviles S.A. ("CRM") or any subsidiary or parent company of
---
CRM) severally but not jointly agree to provide to Mtel Argentina upon request
"most favored nation" terms, including but not limited to pricing, for Two-Way
Paging services offered by such Seller or Sellers or their Affiliates (other
than CRM or any subsidiary or parent company of CRM) in the Territory for five
years from the Closing Date.
(d) In the event that the Purchaser defaults in its obligations to
pay principal or interest under any Bridge Note, such default shall act as a
full and complete release of the payment obligations of such Seller or Sellers
under paragraph (b) of this Section.
(e) Nothing contained in this Agreement shall restrict or prohibit in
any manner any existing or future operations, activities or conduct of business
by CRM or any subsidiary or parent company of CRM other than any Seller (each, a
"CRM Entity"); provided that for a period of five years from the Closing Date
----------
none of the Sellers or any representative of any of such Seller or Sellers shall
participate, encourage, promote, initiate, provide information to, collude,
cooperate, assist or advise in any activity, either in their respective
capacities as stockholders, employees or directors of any CRM Entity which would
directly or indirectly assist a CRM Entity in entering
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or engaging in a One-Way Paging Business or a Two-Way Paging Business, except as
a reseller of Mtel Argentina or any future Two-Way Paging venture entered into
between the Purchaser and such Sellers; and provided further, that nothing
contained in this Section 5.4(e) shall restrict or prohibit in any manner
Motorola or any of its Affiliates from selling or otherwise providing equipment
to any Person. If any representative of any Seller is a director of a CRM
Entity, such representative shall comply with provisions set forth above if such
representative: (i) constitutes a different individual than the representative
which then serves as a director of Mtel Argentina and such Seller has set up a
"chinese wall" prohibiting access to information with respect to Mtel
Argentina's One-Way Paging Business and Two-Way Paging Business between such
individuals; provided that this clause (i) shall not apply to Alberto Hojman
during the period he serves as a director of both CRM and Mtel Argentina, (ii)
excuses himself or herself from participating in any discussions with any
director, officer, employee, agent or representative of any CRM Entity regarding
any CRM Entity entering into, implementing or conducting the One-Way Paging
Business or Two-Way Paging Business, whether at CRM board of directors meetings
or otherwise, (iii) abstains from voting on any issue relating to the CRM Entity
entering into, implementing or conducting the One-Way Paging Business or Two-Way
Paging Business, and (iv) does not use any information or intelligence obtained
from Mtel Argentina to the competitive disadvantage of the One-Way Paging
Business or the Two-Way Paging Business of Mtel Argentina. For all periods prior
to the Merger, "Mtel Argentina", as used in this Section 5.4(e), shall mean both
the Company and Mtel Argentina.
(f) The Parties agree that this Section 5.4 is intended to restrict
any Seller or Sellers and their Affiliates from engaging in the One-Way Paging
Business and Two-Way Paging Business in the Territory and not to restrict (by
way of example) activities involving cellular communication systems, land mobile
systems or high-
43
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capacity
data transfers, except as they now or in the future operate on frequencies
designated for One-Way Paging and Two-Way Paging.
(g) Each Seller severally but not jointly acknowledges that the
period of restriction and the territory provided in this Agreement are the
minimum necessary to protect the Company and its successors and assigns in the
use and enjoyment of the assets and the stock purchased by the Company, which
gives this Agreement a peculiar value to the Company, the loss of which may not
be reasonably or adequately compensated for by damages in an action at law, and
that a violation or breach or threatened violation or breach by any Seller or
any of their respective Affiliates of any of the provisions contained in this
Section 5.4 will cause the Company irreparable injury. Each Seller therefore
agrees that the Company shall be entitled, in addition to any other right or
remedy, to a temporary, preliminary and permanent injunction, to the extent
permitted by applicable law without the necessity of proving the inadequacy of
monetary damages or the posting of any bond or security, enjoining or
restraining each Seller and their respective Affiliates from any such violation
or threatened violations. Obtainment of such injunction by the Company shall
not be considered an election of remedies or a waiver of any right to assert any
other remedies available at law or in equity. The restrictive covenants
contained herein shall be construed as agreements which are independent of any
other provisions of the Agreement or any other understanding or agreement
between the parties. To the extent any provision hereof is deemed unenforceable
by virtue of its scope in terms of territory, business activities or length of
time, but may be made enforceable by limitations thereon, each Seller severally
but not jointly agrees that such reductions or limitations may be made so that
the same shall be enforceable to the fullest extent permissible under the laws
and public policies applied in such jurisdiction in which enforcement is sought.
44
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(h) For the purposes of this Section 5.4, the following definitions
--------------------------------------------------------------------
shall apply:
- ------------
"Carrier's Carrier" means an entity that distributes messaging
-----------------
services generated on a Two-Way Paging System in the Territory exclusively on a
wholesale basis through resellers and other third party distribution channels.
"One-Way Paging" means providing to customers and/or operating one-way
--------------
tone, numeric and/or alpha-numeric messaging services.
"One-Way Paging Business" means directly or indirectly, owning,
-----------------------
operating, selling, marketing, distributing or otherwise dealing in or with One-
Way Paging provided by means of a One-Way Paging System.
"One-Way Paging System" means a telecommunications system which
---------------------
operates through the use of (i) radio frequencies at present allocated 148 MHz,
149 MHz and 173 MHz for tone and voice and 400 MHz or 900 MHz allocated for
numeric and/or alpha-numeric messaging services and/or (ii) any other
frequencies allocated in the future for the provision of One-Way Paging.
"Territory" means the Republic of Argentina.
---------
"Two-Way Paging" means providing to customers and/or operating tone,
--------------
voice, numeric and/or alpha-numeric alert services for such messaging to
subscriber units capable of generating an acknowledgment or initiating a signal
to be received in a network and includes acknowledgment paging, interactive two-
way messaging and fixed location services.
"Two-Way Paging Business" means directly or indirectly owning,
-----------------------
operating, selling, marketing, distributing or otherwise dealing in or with Two-
Way Paging provided by means of a Two-Way Paging System.
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"Two-Way Paging System" means a telecommunications system which
---------------------
operates through the use of (i) radio frequencies anticipated to be allocated
900 MHz and/or (ii) any other frequencies allocated for the provision of Two-Way
Paging.
5.5 CNC Letter; Merger of the Company and Mtel Argentina.
----------------------------------------------------
(a) As promptly as practicable after the execution of this Agreement,
the Purchaser shall cause Mtel Argentina S.A. and the Sellers jointly and
severally agree to cause the Company to file with the CNC a letter substantially
in the form attached hereto as Exhibit E (the "CNC Letter") and the Purchaser
----------
shall use its commercially reasonable efforts to obtain the CNC Approval. In
furtherance of the foregoing, each Seller shall furnish to the Purchaser such
information and assistance as the Purchaser may reasonably request in connection
with obtaining the CNC Approval. Each Seller also severally but not jointly
agrees to cooperate with the Purchaser using commercially reasonable efforts to
obtain the CNC Approval.
(b) As promptly as practicable following (i) the Closing and (ii) the
receipt of the CNC Letter, the Purchaser shall take, or cause to be taken, all
reasonable corporate and other actions in the Company and in Mtel Argentina to
duly approve and consummate a merger (the "Merger") of Mtel Argentina with and
------
into the Company, including using its commercially reasonable efforts to obtain
or make all necessary governmental approvals, consents, waivers, registrations
and filings in connection therewith.
(c) Any other provision of this Agreement to the contrary
notwithstanding, (i) no Seller is making any representation, warranty, covenant
or agreement with respect to the Merger, including the Company's authority or
ability to effect the Merger, any required consents or approvals for the
consummation thereof, or the consequences of the Merger
46
<PAGE>
to the Company, the Purchaser or Mtel Argentina, other than as contained in
Section 5.5(a) or 6.1(b), and (ii) the Purchaser shall have no liability under
this Agreement and the other Transaction Documents in the event it is delayed in
its ability or unable to effect the Merger as a result of any breach of a
representation, warranty, covenant or agreement by any of the Sellers; provided
that in such event the Pledge Agreement shall remain in effect in accordance
with its terms.
5.6 Directors of Mtel Argentina. From and after the Closing so long
---------------------------
as any portion of obligations of Mtel Argentina under any Note shall remain
unpaid, the Purchaser shall vote the Purchased Shares (or shall cause the
Purchased Shares to be voted) and any other shares of capital stock of the
Company hereafter acquired and take all other necessary action to cause the
board of directors of Mtel Argentina to include at all times one director
designated in writing by BGH and one director designated in writing by Motorola.
ARTICLE VI
CONDITIONS PRECEDENT
--------------------
6.1 Conditions to Each Party's Obligations. The respective
--------------------------------------
obligations of the Sellers to sell the Purchased Shares and of the Purchaser to
purchase the Purchased Shares shall be subject to the satisfaction of the
following conditions:
(a) CNC Approval. The Purchaser shall have obtained a favorable
------------
response from the President of the Comision Nacional de Comunicaciones ("CNC")
---
or, in his absence, from his duly authorized designee, substantially to the
effect set forth in the fifth paragraph of the CNC Letter (the "CNC Approval").
------------
(b) No Injunctions or Restraints. No statute, rule, regulation,
----------------------------
injunction, restraining order or decree or
47
<PAGE>
any court or governmental or regulatory authority of competent jurisdiction
shall be in effect that restrains or prevents the sale or purchase of the
Purchased Shares or the consummation of the Merger.
6.2 Conditions to Obligations of the Purchaser. The obligations of
------------------------------------------
the Purchaser to purchase the Purchased Shares are subject to the satisfaction
of the following conditions, any or all of which may be waived in whole or in
part by the Purchaser:
(a) Representations and Warranties. There shall be no breach of any
------------------------------
representation or warranty of any Seller hereunder or under any of the other
Transaction Documents to which any Seller is a party.
(b) Agreements. Each Seller shall have performed and complied with
----------
all of its covenants and agreements required by this Agreement or by any of the
other Transaction Documents to which such Seller is a party to be performed or
complied with by it prior to or at the Closing.
6.3 Conditions to Obligations of each Seller. The obligations of the
----------------------------------------
each Seller to sell the Purchased Shares owned by it are subject to the
satisfaction of the following conditions, any or all of which may be waived in
whole or in part by each Seller:
(a) Representations and Warranties. There shall be no breach of any
------------------------------
representation or warranty of the Purchaser hereunder or under any of the other
Transaction Documents to which the Purchaser is a party.
(b) Agreements. The Purchaser shall have performed and complied with
----------
all of its covenants and agreements required by this Agreement or by any of the
other Transaction Documents to which the Purchaser is a party to be performed or
complied with by it prior to or at the Closing.
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<PAGE>
(c) Officers Certificate. The Chief Financial Officer of the Company
--------------------
shall have delivered an Officers Certificate to the Purchaser, dated as of a
date no more than two Business Days prior to the Closing, which shall state that
the amount of cash or cash equivalents held by the Company as of that date is at
least $400,000 (which statement shall be confirmed in a supplemental Officers
Certificate delivered by the Chief Financial Officer of the Company delivered to
the Purchaser as of the Closing Date if such original Officers Certificate is
delivered more than one Business Day prior to the Closing), and shall state his
good faith estimate of the Working Capital Balance as of the date of such
Certificate, based on the Company's financial statements for the end of the
previous month and the Company's books and records for the interim period, and
that `such amount is at least $700,000.
ARTICLE VII
THE CLOSING
-----------
At the Closing the following shall take place:
7.1 Resignation of Directors. Each of the members of the Board of
------------------------
Directors and members of the Surveillance Committee (Comision Fiscalizadora) of
the Company shall have submitted written resignations of all executive or non-
executive positions in the Company and such resignations shall be accepted and
their performance approved by a stockholders meeting of the Company to be held
at the Closing. Such resignations declare that the signatories thereof have no
claims against the Company for director fees, reimbursement of expenses or for
any other reason.
7.2 Notice of Transfer of the Purchased Shares. The Sellers shall
------------------------------------------
have prepared and delivered to the Purchaser a notification to the Company with
instructions to
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<PAGE>
register the Purchased Shares in the name of the Purchaser in the Company's
stock ledger.
7.3 Purchase Price. The Purchase Price shall be paid by the
--------------
Purchaser in accordance with the form of payment set forth in Section 2.3
hereof. The Purchaser shall (i) assign and deliver to the Sellers the Notes,
and (ii) execute and deliver to the Sellers the Bridge Notes and the Pledge
Agreements. The Sellers shall deliver to the Purchaser all stock certificates
for the Purchased Shares.
7.4 Legal Opinions. Counsel to the Purchaser shall deliver a legal
--------------
opinion to the Sellers as to the matters set forth in Exhibit G hereto.
7.5 Other Documents. The Purchaser and each of the Sellers shall
---------------
deliver to the others the following: (i) certified copies of its respective
organizational documents and by-laws, (ii) in the case of the Purchaser, BGH and
Jacobel, certified copies of the resolutions of its board of directors approving
the execution, delivery and performance of this Agreement and the other
Transaction Documents to which it is a party and any documents relating hereto
or thereto, and, in the case of Motorola, an Assistant Secretary's Certificate
certifying to the authority of the officer executing this Agreement and the
other Transaction Documents to which it is a party and to sell the Purchased
Shares owned by it, (iii) a certificate setting out the names and signatures of
the persons authorized to sign, on its behalf, as applicable, this Agreement and
the other Transaction Documents to which it is a party and any documents to be
delivered by such party related thereto, and (iv) such other certificates and
documents as the others shall reasonably request.
7.6 Company Expenses. The Sellers shall reimburse the Company for
----------------
any Company Expenses.
All of the transactions, payments and transfers described above shall
be accomplished simultaneously, it
50
<PAGE>
being the intention of the parties that none of the documents shall be deemed
delivered and none of the actions shall be deemed effective until all of such
matters have been consummated, and the Purchase Price has been paid.
ARTICLE VIII
INDEMNIFICATION
---------------
8.1 Indemnification by the Sellers.
------------------------------
(a) The Sellers shall jointly and severally from time to time
indemnify and hold harmless the Purchaser and its directors, officers,
employees, affiliates, agents and successors (collectively, the "Purchaser
---------
Indemnified Parties") from and after the Closing Date from and against any and
- -------------------
all losses, payments (whether in cash or in kind), claims, damages, liabilities
(including liabilities for Taxes), obligations, penalties, judgments, awards,
costs, expenses (including, without limitation, reasonable attorneys' fees),
interest and disbursements, any amounts (whether in cash or in kind) in
settlement of any and all actions, suits, proceedings and investigations in
respect thereof (hereinafter collectively referred to as "Losses"), directly or
------
indirectly caused by, relating to, based upon or arising out of or in connection
with (i) the breach of any representation or warranty contained in Article III
(other than the Specified Representations) for such period as such
representation or warranty survives or (ii) except as otherwise stated, the
breach of or failure to perform any covenant or agreement of each Seller
pursuant to this Agreement. For a period of ten (10) years from and after the
Closing, the Sellers shall jointly and severally from time to time indemnify and
hold harmless the Purchaser Indemnified Parties from and after the Closing Date
from and against any Losses directly or indirectly caused by, relating to, based
upon or arising out of or in connection with the Special Sale. For a period of
ten (10) years from and after the Closing, the Sellers shall jointly and
51
<PAGE>
severally from time to time indemnify and hold harmless the Purchaser
Indemnified Parties from and after the Closing Date from and against any Losses
directly or indirectly caused by, relating to, based upon or arising out of or
in connection with the (i) validity or effectiveness of any License during any
period prior to the Closing or (ii) the imposition of a Lien, use, misuse or
violation of the terms of any License, in each case by the Company during any
period prior to the Closing (collectively, the "License Indemnity"). Each
-----------------
Seller shall severally but not jointly from time to time indemnify and hold
harmless the Purchaser Indemnified Parties from and after the Closing Date from
and against any and all Losses caused by, relating to, based upon or arising in
connection with the breach of any of the Specified Representations by such
Seller for such period as such representations or warranties survive. The
obligations of the Sellers under any covenant in this Agreement are joint and
several except where otherwise stated. No claim for recovery for any Losses
relating to, based upon or arising out of or in connection with Taxes shall be
made under this Section 8.1(a) to the extent that such claim has been made under
Section 8.6.
(b) Losses shall be reduced by (i) the net amounts recovered by the
Company under any insurance policy in respect of any such Loss (less any
retrospective premiums or any forms of self-insurance paid after the Closing
Date) or any cash indemnity, contribution or similar payment actually received
by the Company in respect of such Loss (collectively "Proceeds") and (ii) any
--------
reserves established in the Financial Statements specifically established in
accordance with Argentine GAAP with respect to the matters which are the subject
of any such Losses ("Reserves"); except with regard to any Losses directly or
--------
indirectly caused by, relating to, based upon or arising out of or in connection
with Sections 2.5, 3,3, 3.5 or 3.20 as to which Losses shall not be reduced by
either Proceeds or Reserves or Section 3.9 as to which Losses shall not be
reduced by Proceeds.
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<PAGE>
(c) No claim may be made by the Purchaser Indemnified Parties against
any Seller for indemnification pursuant to Section 8.1(a)(i) hereof relating to
the breach of any representation or warranty contained herein (other than those
representations or warranties contained in Sections 2.5, 3.3, 3.5, 3.9 and 3.20
as to which this Section shall not apply) except to the extent that the amount
of Losses relating to each such claim individually exceeds $1,000 and the
aggregate amount of Losses exceeds $250,000 (in which case all such Losses in
excess of $50,000 shall be indemnifiable). Any individual or aggregate claim
relating to Sections 2.5, 3.3, 3.5, 3.9 or 3.20 shall not be subject to any
minimum dollar threshold.
(d) No claim shall be made by the Purchaser Indemnified Parties
against any Seller for indemnification pursuant to Section 8.1(a)(i) hereof in
respect of breaches of any representation or warranty of each Seller contained
in (i) Article III (other than any representation or warranty contained in
Sections 2.5, 3.3, 3.5, 3.9 and 3.20 hereof) for amounts individually or in the
aggregate exceeding $10,000,000, or (ii) Sections 3.3, 3.5 and 3.20 hereof for
amounts individually or in the aggregate exceeding $32,000,000, and the Sellers
shall have no personal liability for any Losses in excess of any such amounts.
No claim shall be made by the Purchaser Indemnified Parties against any Seller
for indemnification in respect of the License Indemnity for amounts individually
or in the aggregate exceeding $32,000,000, and the Sellers shall have no
personal liability for any Losses in excess of any such amount. There shall be
no limitation on liability applicable to Sections 2.5 or 3.9.
(e) Any indemnification obligation of any Seller, whether joint or
several, shall first be paid with the same proportional combination of cash,
Notes and Bridge Notes in which the Purchase Price is payable as provided in
Section 2.3 hereof. Any payment made by a Seller shall be made as follows: (i)
with regard to cash, in Dollars, by wire transfer of immediately available funds
to an account
53
<PAGE>
specified by the Purchaser, and (ii) with regard to a payment on the Notes or
Bridge Notes, by a reduction in principal of the Notes or Bridge Notes to the
extent such notes are still outstanding. Any additional indemnification
obligation of such Seller (whether joint or several) which exceeds the above
shall be paid by such Seller in cash. For any joint and several obligation, the
Purchaser shall be entitled to enforce its rights against any or all Sellers for
the full amount of the obligation.
8.2 Indemnification by the Purchaser. The Purchaser shall indemnify,
--------------------------------
defend and hold harmless the Sellers and each of their respective directors,
officers, employees, affiliates, agents and successors (collectively, the
"Seller Indemnified Parties") from and after the Closing Date from and against
any and all Losses caused by, relating to, based upon, arising out of or in
connection with the conduct of the Company's operations and business from and
after the Closing (other than with respect to the Excluded Liabilities).
8.3 Indemnification Procedures; Third Party Claims. The Purchaser
----------------------------------------------
Indemnified Parties or the Seller Indemnified Parties, as the case may be, shall
give the other(s) prompt written notice of any claim, assertion, event or
proceeding concerning any liability or damage as to which it may request
indemnification from the other(s) hereunder (an "Asserted Liability"); provided,
however, that any failure by a party to notify the other(s) shall not relieve
the other(s) from its or their obligations hereunder. Upon written notice to
the Purchaser Indemnified Party given by the Sellers after receipt of notice of
any such action or proceeding by or in respect of a third party, the Sellers may
assume the defense thereof at their own expense with counsel chosen by the
Sellers, which shall be reasonably satisfactory to the Purchaser Indemnified
Party; provided that if, under applicable standards of professional conduct a
conflict on any significant issue between the Sellers and any Purchaser
Indemnified Party exists in respect of such Asserted Liability, then the Sellers
shall
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<PAGE>
severally but not jointly reimburse the Purchaser Indemnified Party for the
reasonable fees and expenses of one additional counsel to be retained in order
to resolve such conflict, promptly upon presentation by the Purchaser
Indemnified Party of invoices or other documentation evidencing such amounts to
be reimbursed. If the Sellers undertake to defend against such Asserted
Liability, the Sellers shall control the investigation, defense and settlement
thereof; provided that (i) the Sellers shall severally but not jointly use their
reasonable efforts to defend and protect the interests of the Purchaser
Indemnified Party with respect to such Asserted Liability, (ii) the Purchaser
Indemnified Party, prior to or during the period in which the Sellers assume
control of such matter, may take such reasonable actions as the Purchaser
Indemnified Party deems necessary to preserve any and all rights with respect to
such matter, without such actions being construed as a waiver of the Purchaser
Indemnified Party's rights to defense and indemnification pursuant to this
Agreement, (iii) the Sellers shall not, without the prior written consent of the
Purchaser Indemnified Party, consent to any settlement which (A) does not
contain an unconditional release of the Purchaser Indemnified Party from the
subject matter of the settlement, (B) imposes any liabilities or obligations on
the Purchaser Indemnified Party, and (C) with respect to any non-monetary
provision of such settlement, could, in the Purchaser Indemnified Party's
judgment, have an adverse effect on the business, operations, assets or
properties of the business or the Purchaser Indemnified Party and (iv) in the
event that the Sellers undertake to defend against such Asserted Liability, the
Sellers shall be deemed to have agreed that they will indemnify the Purchaser
Indemnified Party pursuant to, and subject to the conditions and limitations set
forth in, the provisions of this Article VIII. Notwithstanding the foregoing,
the Purchaser Indemnified Party shall have the right to control, pay or settle
any Asserted Liability which the Sellers shall have undertaken to defend so long
as the Purchaser Indemnified Party shall also waive any right to indemnification
therefor by the Sellers. If the Sellers
55
<PAGE>
undertake to defend against such Asserted Liability, the Purchaser Indemnified
Party shall cooperate to the extent reasonable (during regular business hours)
with the Sellers and their counsel in the investigation, defense and settlement
thereof. If the Purchaser Indemnified Party desires to participate in any such
defense it may do so at its sole cost and expense. If the Sellers do not
undertake within 30 days following the notice of claim to defend against such
Asserted Liability, then the Sellers shall have the right to participate in any
such defense at its sole cost and expense, but, in such case, the Purchaser
Indemnified Party shall control the investigation and defense and may settle or
take any other actions the Purchaser Indemnified Party deems reasonably
advisable without in any way waiving or otherwise affecting the Purchaser
Indemnified Party's rights to indemnification pursuant to this Agreement. The
Purchaser Indemnified Party and the Sellers agree to make available to each
other, their counsel and other representatives, all information and documents
available to them which relate to such claim or demand. The Purchaser
Indemnified Party and the Sellers and their employees also agree (which
agreement shall be several but not joint, in the case of the Sellers) to render
to each other such assistance and cooperation as may reasonably be required to
ensure the proper and adequate defense of such claim or demand.
In the event that a Purchaser Indemnified Party has a claim against
the Sellers hereunder which it determines to assert, but which does not involve
a claim or demand being asserted against or sought to be collected from it by a
third party, the Purchaser Indemnified Party shall send a notice notifying the
Sellers in writing of such Asserted Liability (the "Claim Notice") with respect
to such claim to the Sellers. The Sellers shall have 60 days from the date such
Claim Notice is delivered during which to notify the Purchaser Indemnified Party
in writing of any good faith objections it has to the Purchaser Indemnified
Party's Claim Notice or claims for indemnification, setting forth in reasonable
detail each of the Sellers' objections
56
<PAGE>
thereto. If the Sellers do not deliver such written notice of objection within
such 60-day period, the Sellers shall be deemed to have accepted responsibility
for the prompt payment of the Purchaser Indemnified Party's claims for
indemnification, and shall have no further right to contest the validity of such
indemnification claims. If the Sellers do deliver such written notice of
objection within such 60-day period, the Sellers and the Purchaser Indemnified
Party shall attempt in good faith to resolve any such dispute within 45 days of
the delivery by the Sellers of such written notice of objection. If the Parties
are unable to resolve such dispute within the 45 day period, then such dispute
may be submitted for resolution to judicial proceedings in accordance with the
procedures for submission to jurisdiction as set forth in Section 9.4.
8.4 Exclusive Remedy. The indemnification provisions of Section 8.1
---------------------
hereof shall constitute the exclusive remedy available to the parties hereto for
breaches of any representation or warranty or the failure to perform or
otherwise fulfill any undertaking or agreement or obligation hereunder; provided
that nothing contained in this Section 8.4 shall preclude any party from
pursuing any other remedy available to such party in the case of fraud or
willful misconduct by any other party hereunder. Anything in this Agreement to
the contrary notwithstanding, in no event shall any Party hereto be liable for
punitive damages or for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if such Party
has been advised of the likelihood of such loss or damage and regardless of the
form of action, except that the Sellers may be liable for claims of
consequential loss or damage in respect of (i) a breach of the representation
and warranty contained in Section 3.20 and (ii) the License Indemnity.
8.5 Offset. Once fully applied in respect of any indemnification
------
obligation pursuant to this Article VIII, any Reserves or Proceeds may not
thereafter be applied to reduce or offset any other indemnification obligation.
57
<PAGE>
8.6 Certain Tax Matters.
-------------------
To the extent the provisions in Section 8.6 with respect to Taxes and
any tax indemnity are inconsistent with the other indemnification procedures set
forth in Article VIII, the procedures set forth in this Section 8.6 shall
govern. No claim for recovery for any Losses relating to Taxes shall be made
under Section 8.1(a) to the extent that such claim has been made under this
Section 8.6.
(a) Indemnification.
(i) The Sellers jointly and severally hereby agree to indemnify,
defend and hold the Company, the Purchaser and its Affiliates harmless from
and against any and all Taxes of the Company, to the extent that such Taxes
exceed the amounts reserved for on the Closing Balance Sheet, that are
imposed upon such indemnified party with respect to (1) any taxable period
ending on or before the Closing Date (such Taxes are hereinafter referred
to as "Pre-Closing Taxes" and such periods as "Pre-Closing Periods") and
(2) the aggregate amount of any real property transfer or gains, sales,
use, transfer, value-added, stock transfer and stamp Taxes, any transfer,
recording, registration and other fees, and any similar Taxes that are
required to be paid in connection with the transactions contemplated herein
(collectively, "Transfer Taxes"), in each case, together with all
reasonable legal fees, costs and expenses incurred by the Company, the
Purchaser or their Affiliates, as the case may be, in connection therewith.
(ii) The Purchaser hereby agrees to indemnify, defend and hold each
Seller harmless from and against any and all Taxes (other than Transfer
Taxes and any Taxes arising from the Excluded Liabilities) with respect to
the Company that are imposed upon such Seller with respect to any taxable
period beginning after the Closing Date, together with all reasonable
58
<PAGE>
legal fees, costs and expenses incurred by each Seller and its Affiliates
in connection therewith.
(iii) For purposes of this Article VIII, Taxes of the Company for
any taxable period that begins before and ends after the Closing Date shall
be deemed to be allocated to the portion of such period ending on and
including the Closing Date on the basis of a hypothetical closing of the
books of the Company.
(b) Control of Contests.
(i) If a notice of deficiency, proposed adjustment, adjustment,
assessment, audit, examination, suit, dispute or other claim (a "Tax
Claim") shall be delivered, sent, commenced, or initiated to or against the
Company or any Purchaser Indemnified Party by any taxing authority (whether
foreign or domestic) with respect to Taxes for which the Company or the
Purchaser Indemnified Party are entitled to indemnification under this
Section 8.6, the Purchaser shall promptly notify the Sellers in writing of
the Tax Claim. If a Tax Claim shall be delivered, sent, commenced or
initiated to or against any Seller Indemnified Party by any taxing
authority (whether foreign or domestic) with respect to Taxes for which one
Party to this Agreement is entitled to indemnification under this Section
8.6, such Seller Indemnified Party shall promptly notify the Purchaser in
writing of such Tax Claim.
(ii) If any Seller notifies the Purchaser in writing within 10 days
of receiving notice of a Tax Claim involving solely Pre-Closing Taxes (the
"Control Notice"), the Sellers shall be entitled to control, at their sole
cost and expense, the defense of any such Tax Claim, provided, however,
that (1) the Sellers shall keep the Purchaser informed about, and shall
allow them to participate in (but not control), at their sole expense, the
defense of any such Tax Claim; (2) the Sellers shall not pay, discharge,
settle,
59
<PAGE>
compromise, litigate or otherwise dispose (collectively, "dispose") of any
such Tax Claim without obtaining the prior written consent of the
Purchaser, which shall not be unreasonably withheld or delayed; and (3) if
the Purchaser disagrees with any proposed disposition of any such Tax
Claim, the Purchaser shall have the right, at its sole expense, to litigate
such Tax Claim; provided, further, that (a) the Sellers' indemnification
obligation with respect to such Tax Claim shall be no greater than such
obligation would have been had such Tax Claim been disposed of in the
manner originally contemplated by the Sellers and (b) the Purchaser
severally shall indemnify, defend and hold harmless the Sellers from and
against any liability for Taxes with respect to the Company that are
imposed upon such indemnified party in excess of the liability for Taxes,
if any, that otherwise would have resulted had such Tax Claim been disposed
of in the manner originally contemplated by the Sellers.
(iii) If the Sellers do not provide the Purchaser with the Control
Notice within the 10-day period prescribed in subparagraph (b)(ii) above,
the Purchaser shall control the defense of any Tax Claim involving solely
Pre-Closing Taxes and (1) shall consult with the Sellers and keep Sellers
informed of all material developments and events relating to such Tax Claim
and (2) shall not dispose of such Tax Claim without the written consent of
the Sellers, which shall not be unreasonably withheld or delayed.
(iv) The Purchaser, in its sole discretion, shall be entitled to
control the defense and disposition of all other Tax Claims.
(v) The indemnifying party shall pay to the indemnified party all
indemnity amounts in respect of any Tax Claim within ten (10) business days
after such Tax Claim is disposed of or a Final Determination has been made
with respect thereto. "Final Determination"
60
<PAGE>
shall mean (1) the entry of a decision of a court competent jurisdiction at
such time as an appeal may no longer be taken from such decision or (2) the
execution of a closing agreement or its equivalent between the particular
taxpayer and the particular relevant taxing authority.
(c) Preparation and Filing of Tax Returns; Payment of Taxes.
(i) On or prior to the Closing Date, (1) the Sellers jointly and
severally agree to cause the Company to prepare or cause to be prepared and
file or cause to be filed on a timely basis and in a manner consistent with
past practice all Tax Returns of the Company for all Pre-Closing Periods,
which Tax Returns are due (giving effect to any extensions thereto) on or
before the Closing Date and (2) the Sellers or the Company shall be
responsible for and shall timely pay all Taxes shown to be due thereon
prior to the Closing Date.
(ii) After the Closing Date, the Purchaser shall cause the Company
to prepare or cause to be prepared and shall file or cause to be filed on a
timely basis all other Tax Returns with respect to the Company and shall
pay or cause to be paid the Taxes shown due thereon; provided, however,
that if the Sellers do not consent to the filing of any such Tax Return,
the Purchaser shall be entitled to file such Tax Return, and any disputed
items relating to such Tax Return shall be subject to the dispute
resolution procedures set forth in Section 9.4.
(iii) The party responsible for filing any Tax Return with respect
to Transfer Taxes shall prepare or cause to be prepared and shall file or
cause to be filed on a timely basis such Tax Return and shall pay or cause
to be paid the Transfer Taxes shown due thereon. The filing party shall
provide the other
61
<PAGE>
party with a schedule calculating in reasonable detail such other party's
indemnification obligation pursuant to subsection (a) hereof, which amounts
shall be paid to the filing party within five days of receiving such
schedule.
(d) Mutual Cooperation. Each of the Purchaser and the Sellers shall
provide the other, and, after the Closing Date, the Purchaser shall cause the
Company to provide the Sellers, with such assistance as may reasonably be
requested by either of them in connection with the preparation of any Tax
Return, any audit or other examination by any taxing authority, any judicial or
administrative proceedings relating to liability for Taxes, or any Tax Claim,
and each will retain and provide the other with any records or information that
may be relevant to such Tax Return, audit or examination, proceedings or
determination. Such assistance shall include making employees available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder and shall include providing copies of any
relevant Tax Returns and supporting work schedules.
(e) Miscellaneous. Any payment required by this Section 8.6 which is
not made on or before the date provided shall bear interest after such date
until paid at the rate of twelve percent (12%) per annum from the date of
payment by the Purchaser or the Company.
8.7 Reporting Indemnity Payments. Any payment made by the Sellers to
----------------------------
a Purchaser Indemnified Party pursuant to this Article VIII shall be treated as
if it reduced the Purchase Price by the amount of the payment, and any payment
made by the Purchaser to a Seller Indemnified Party pursuant to this Article
VIII shall be treated as if it increased the Purchase Price by the amount of the
payment. To the extent permitted by applicable law, each of the Purchaser and
Sellers agree to report all such payments for all foreign, federal, state and
local income tax
62
<PAGE>
purposes in a manner consistent with the treatment described above and to notify
each other promptly in the event that any taxing authority proposes to disallow
such treatment.
ARTICLE IX
MISCELLANEOUS
-------------
9.1 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties of the Sellers and the Purchaser contained in this Agreement
shall survive the Closing Date and remain in full force and effect for a period
of eighteen (18) months following the Closing, except for (i) the
representations and warranties contained in Sections 2.5, 3.3 and 3.20 hereof
which shall survive for ten (10) years following the Closing and (ii) the
representations and warranties contained in Section 3.9 hereof which shall
survive until the applicable period under the statute of limitations therefor
has expired; provided, however, that the indemnification obligations of each of
the parties with respect to such matters shall not terminate with respect to any
matter as to which the party entitled to indemnification hereunder shall have
made a claim prior to the time such representations and warranties shall have
ceased to survive by delivering written notice thereof to the other party
pursuant to the provisions set forth in Section 9.3 of this Agreement.
9.2 Waivers and Amendments. This Agreement may only be modified with
----------------------
the written consent of the parties hereto. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by a statement in writing signed by the party against which enforcement of
the change, waiver, discharge or termination is sought. The Sellers hereby
waive the right to demand that the Purchaser post a performance bond or guaranty
in any action proceeding initiated against the Sellers in Argentina.
63
<PAGE>
9.3 Notices, etc. Except as otherwise provided in this Agreement,
------------
all notices and other communications pursuant to this Agreement shall be in
writing and shall be delivered in person, by courier, or by certified airmail
(postage prepaid, return receipt requested). All such notices shall be sent to
the facsimile number or address (as the case may be) specified for the intended
recipient in Schedule 9.3, or to such other number or address as such recipient
may have last specified by notice to the other parties. All such notices shall
be effective upon receipt.
9.4 Submission to Jurisdiction.
--------------------------
(a) In the event of any dispute, controversy or claim arising out of
or relating to this Agreement (including, without limitation, any provision of
any Schedule hereto or as to whether or not a party to this Agreement (a
"Party") is entitled to indemnification pursuant to Sections 8.1 or 8.2 hereof
-----
or the amount of such claim) or the breach, termination or validity thereof (a
"Dispute"), upon the written request (a "Request") of any Party, the matter
- -------- -------
shall immediately be referred to the senior officers of each Party for
resolution. The senior officers shall meet immediately and attempt in good
faith and in the spirit of mutual cooperation to negotiate a resolution of the
Dispute.
(b) If the Parties are unable to resolve the Dispute within forty-two
(42) days after receipt of a Request, then the Dispute may be submitted for
resolution to judicial proceedings. Each Party hereby irrevocably (i) agrees
that any legal suit, action or proceeding over a Dispute may be instituted in
any state or federal court sitting in the City of New York, Borough of
Manhattan, State of New York, (ii) waives, to the fullest extent it may
effectively do so, any objection which it may have now or hereafter based on
lack of personal jurisdiction, forum non conveniens or to the laying of venue of
any such suit, action or proceeding, and (iii) expressly consents and submits to
the exclusive jurisdiction of any such court in
64
<PAGE>
any such suit, action or proceeding. Each Party also hereby irrevocably and
unconditionally waives trial by jury in any legal action or proceeding relating
to this Agreement.
9.5 Governing Law. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
-------------
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
9.6 Successors and Assigns.
----------------------
(a) This Agreement shall be binding upon the parties and their
respective successors and shall not be assignable by any party hereto.
(b) Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors any rights, remedies, obligations or liabilities under or by reason
of this Agreement.
9.7 Entire Agreement. This Agreement, its Schedules and the other
----------------
Transaction Documents constitute the entire understanding of the parties with
respect to the matter hereof, and supersede all prior understandings, agreements
and negotiations of the parties with respect to such matters.
9.8 Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
parties shall negotiate in good faith with a view to the substitution therefor
of a suitable and equitable solution in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid provision;
provided, however, that the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions contained
herein shall not be in any way impaired thereby, it being intended
65
<PAGE>
that all of the rights and privileges of the parties hereto shall be enforceable
to the fullest extent permitted by law.
9.9 Titles and Subtitles. The titles of the paragraphs and
--------------------
subparagraphs of this Agreement are for reference only, and shall not affect the
interpretation of this Agreement.
9.10 Counterparts. This Agreement shall be executed in 4 (four)
------------
copies, each of which shall be an original.
9.11 Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy on the part of any party upon any breach or default of
any party to this Agreement shall impair any such right, power or remedy, nor
shall it be construed to be a waiver of any such breach or default, or any
acquiescence therein, or of any similar breach or default thereafter occurring;
nor shall any waiver of any single breach or default be deemed a waiver of any
of the breach or default theretofore or thereafter occurring. In addition, any
waiver, permit, consent or approval of any kind or character on any party of any
breach or default under this Agreement must be in writing and shall be effective
only to the extent specifically set forth in such writing and all remedies
either under this Agreement, or by law otherwise afforded to any party, shall be
cumulative and not alternative.
9.12 Expenses. Each party shall bear its own costs and expenses in
--------
connection with the transactions contemplated hereby, whether or not such
transactions are consummated.
9.13 Termination.
-----------
(a) This Agreement and the transactions contemplated hereby shall
terminate if the Closing does not occur on or before June 27, 1997, and
otherwise may be terminated at any time before the Closing as follows:
66
<PAGE>
(i) By mutual consent in writing of the Purchaser and each Seller.
(ii) By the Purchaser, on the one hand, and any Seller, on the other
hand, if there has been a breach by the other of any of its or their
representations, warranties, covenants or agreements contained herein or in
any of the other Transaction Documents to which it or such other party or
parties is a party.
(b) In the event that this Agreement shall be terminated pursuant to
Section 9.13(a), all further obligations of the parties hereunder shall
terminate without further liability of any party to another, provided that a
termination of this Agreement shall not relieve any party of any liability for a
breach of any representation, warranty, covenant or agreement hereunder, or be
deemed to constitute a waiver of any available remedy for any such breach.
9.14 Judgment Currency. Any obligation of the Purchaser or the
-----------------
Sellers hereunder to make payments in United States dollars shall not be
discharged or satisfied by any tender or recovery pursuant to any judgment
expressed in or converted into any other currency except to the extent that such
tender or recovery results in the effective receipt by the Purchasers or the
Sellers (as the case may be) of the full amount of United States dollars payable
hereunder and the Purchaser and the Sellers (as the case may be) shall indemnify
each other Party hereto (and each Party shall have an additional legal claim)
for any difference between such full amount and the amount effectively received
by such Party pursuant to any such tender or recovery. Each Party's
determination of amounts effectively received by them shall be conclusive absent
manifest error. Each Party will provide the other Parties hereto with a copy of
such Party's calculations in connection with making such determination. The
rate at which any other currency is converted into United States dollars
pursuant to this Section 9.14 shall be established by an objective third party.
67
<PAGE>
9.15 Access of Information; Confidentiality. Prior to and following
--------------------------------------
the Closing, each Seller on behalf of itself and each of its officers,
directors, employees, agents or representatives (collectively,
"Representatives") severally but not jointly covenants and agrees for so long as
---------------
such Seller (or, in the case of Jacobel, for so long as BGH) has a
representative on the board of directors of Mtel Argentina and for a period of
two (2) years thereafter to keep Proprietary Information (as defined below)
confidential and not to disclose such Proprietary Information to any third
party, which shall include without limitation CRM or any CRM Entity and its
Representatives; provided that such Seller may disclose such Proprietary
Information without liability in connection with any Dispute hereunder or if
such Seller (i) for periods prior to the Closing only, has received the opinion
of counsel that such disclosure must be made in order to comply with applicable
law or such Seller's listing requirements or (ii) is requested or required (by
oral questions, interrogatories, requests for information or documents in legal
proceedings, subpoena, civil investigative demand or other similar process) to
disclose such Proprietary Information. "Proprietary Information" shall mean all
-----------------------
information relating to the business, operations, properties or assets of the
Company, including without limitation the One-Way Paging Business or the Two-Way
Paging Business of the Company, or the Purchaser or Mtel Argentina, excluding
for such purposes any information which became or becomes generally available to
the public other than as a result of a disclosure by any Seller or which is or
becomes known to any Seller on a non-confidential basis from a source other than
the Company or another Seller or any of their Representatives.
68
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
BGH S.A.
By:
----------------------------------
Name:
Title:
MOTOROLA INTERNATIONAL DEVELOPMENT
CORPORATION
By:
----------------------------------
Name:
Title:
JACOBEL S.A.
By:
----------------------------------
Name:
Title:
MTEL LATIN AMERICA, INC.
By:
----------------------------------
Name:
Title:
69
<PAGE>
Exhibit 10.2
BRIDGE NOTE
-----------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. THIS NOTE
MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE PROPOSED
TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER APPLICABLE
FEDERAL OR STATE SECURITIES LAWS. THIS NOTE IS SUBJECT TO SET-OFF UNDER CERTAIN
CIRCUMSTANCES.
New York, New York
June 27, 1997
FOR VALUE RECEIVED, the undersigned, Mtel Latin America, Inc., a
corporation organized under the laws of Delaware (the "Company"), HEREBY
-------
PROMISES TO PAY to the order of ________________________________________________
(together, with its successors and assigns, the "Payee"), in lawful money of the
-----
United States of America in immediately available funds, at such account as the
Payee may, from time to time, designate in writing to the Company, the principal
sum of_______________________(the "Principal Amount"), which amount shall be
----------------
payable in accordance with the terms hereof.
This Note is being issued in connection with the Stock Purchase
Agreement, dated as of June 6, 1997 (as amended, restated or modified from time
to time, the "Purchase Agreement") among the Company, the Payee,and
------------------ -----------
.
- ---------------
1. Interest. Interest shall accrue on the Principal Amount during
--------
each Interest Accrual Period from the date hereof until the Principal Amount
shall be paid
<PAGE>
in full at the rates set forth below ("Interest Accrual Period" shall mean the
-----------------------
period from and including the first day of each month during the term of this
Note commencing on the date hereof to but excluding the first day of the
subsequent month):
<TABLE>
<CAPTION>
Interest Accrual Interest Rate
Period per annum
---------------- -------------
<S> <C>
1, 2, 3 10.0%
4 10.5%
5 11.0%
6 11.5%
7 12.0%
8 12.5%
9 13.0%
10 13.5%
11 14.0%
12 14.5%
</TABLE>
Interest on this Note will be computed on the average daily outstanding balance,
based upon a 365-day year, and paid for the number of days elapsed. Accrued
interest shall be paid quarterly in arrears (i) on September 30, 1997, December
30, 1997, March 30, 1998 and June 30, 1998, and (ii) on any prepayment, at
maturity (whether by acceleration or otherwise) and, after a Demand Event (as
defined below), upon demand.
2. Principal. Subject to Sections 3 and 7 hereof, the Principal
---------
Amount shall be repaid by the Company, without premium or penalty, on June 30,
1998 (the "Maturity Date"), provided, however, that the Company shall have the
------------- -------- -------
right to prepay the Principal Amount in whole or in part from time to time prior
to the Maturity Date. All payments and prepayments under this Note shall
2
<PAGE>
be made to the Payee not later than 12:00 noon, New York time, on the date when
due in immediately available funds to such account as may be specified from time
to time in writing to the Company, and any funds received after such time shall,
for all purposes hereof, be deemed to have been paid on the next succeeding
business day. Whenever any payment to be made hereunder shall be stated to be
due on a day which is not a business day, the due date thereof shall be extended
to the next succeeding business day and, with respect to payments of principal,
interest thereon shall be payable at the applicable rate during such extension.
3. Set-Off. The Company may, at its option, set-off and apply any
-------
and all amounts owed to the Company arising under the Purchase Agreement as
determined by mutual agreement between the Company and the Payee or by a court
of competent jurisdiction, against any and all of the obligations of the Company
now or hereafter existing under this Note. In such event, the Company shall so
notify the Payee in writing at least three (3) business days before such set-
off; provided that, the failure to give such notice shall not affect the
-------- ----
validity of such set-off and application.
4. Demand Events. Upon the occurrence of any Demand Event, the
-------------
unpaid balance on the Principal Amount, any and all accrued and unpaid interest
on the Principal Amount and any and all other obligations hereunder shall be due
and payable upon demand of the Payee, which demand shall be in the form of
written notice delivered to the Company at the address set forth on the
signature page hereof. "Demand Event" shall mean (i) an Event of Default
------------
described in Section 7 hereof or (ii) (a) one Business Day after the closing by
the Company of any transaction involving any public or private offering of debt
or equity securities or a bank financing, (b) three Business Days after the
closing by the Company of any transaction
3
<PAGE>
involving a sale, liquidation, disposal or transfer of the Company's assets
outside of the ordinary course of business (including in any event any sale of
the capital stock or other equity interests or all or substantially all of the
assets of any of the Company's subsidiaries or all or substantially all of the
assets of the Company or any of its subsidiaries relating to the business of the
Company located in a particular country or a particular geographic region), in
the case of each of (a) and (b), in which the cash proceeds actually received by
the Company from non-affiliates exceed, individually or cumulatively from and
after June 6, 1997 (in the case of a series of such transactions), $8 million or
(c) the closing by the Company of any transaction involving the redemption or
other acquisition of any shares of the capital stock of the Maker, provided
--------
that, "Demand Event" shall not include any borrowing by the Company secured by
- ----
proceeds expected in connection with the second installment of purchase
consideration arising from the sale of the Company's 19% interest in Teletrim.
"Business Day" for purposes of this Note shall mean any day other than a
Saturday, Sunday or other day on which commercial banks are required or
authorized to close in the City of New York, New York, United States of America
and Buenos Aires, Argentina.
5. Representations and Warranties. As of the date hereof, the
------------------------------
Company represents and warrants as follows:
(a) The Company (1) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, (2)
has all requisite corporate power and authority to own and operate its
properties and to carry on its business as presently or heretofore
conducted or proposed to be conducted, to execute and deliver this Note and
to perform its obligations under this Note, and (3)
4
<PAGE>
is duly qualified, licensed, or admitted to do business as a foreign
corporation or other entity, as the case may be, and, if applicable, is in
good standing, in each jurisdiction where failure to be so qualified,
licensed or admitted or to be in good standing would reasonably be expected
to have a Material Adverse Effect. "Material Adverse Effect" means any
-----------------------
change in, or effect on, as the case may be, the Company, that is
materially adverse to (i) the assets, business, results of operations or
the condition (financial or otherwise) of the Company or (ii) the ability
of the Payee to enforce its remedies hereunder, but shall exclude any
change or effect principally due to general economic or industry wide
conditions in the one-way paging business.
(b) The Company has all requisite corporate power and authority to
execute and deliver this Note and to perform all of its obligations
hereunder. The execution and delivery of this Note, and the performance by
the Company of its obligations hereunder, have been duly authorized by all
necessary corporate action (including any necessary stockholder action) on
its part, and do not: (1) contravene any applicable laws, rules,
regulations, orders, writs, judgments, injunctions, decrees, determinations
or awards applicable to the Company, (2) violate any provision of its
organizational documents or by-laws, (3) result in a breach of or
constitute a default under any indenture, mortgage, deed of trust, lease,
loan or credit agreement, or any other agreement or instrument to which it
is a party or by which it or its properties may be bound or affected,
except for such breaches or defaults which, individually or in the
aggregate, would not have a Material Adverse Effect, or (4) require any
consent, approval, authorization or other action by, or filing with or
notification to, any third party
5
<PAGE>
or any governmental, judicial or regulatory authority.
(c) This Note has been duly authorized, executed and delivered by
the Company and constitutes the legal, valid and binding obligation of the
Company, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights of
creditors generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
(d) As of the date hereof, no event has occurred and is continuing
which constitutes, or with the giving of notice or the passage of time will
constitute, an event of default under this Note.
(e) There is no action, suit or proceeding, or any governmental
investigation or any arbitration, in each case pending or, to the Company's
actual knowledge after due inquiry, threatened against the Company or any
of its affiliates before any governmental, judicial or regulatory authority
which if adversely determined would have, individually or in the aggregate,
a Material Adverse Effect on the Company's results of operations, financial
condition or ability to perform its obligations under this Note.
(f) As of the date of this Note, except for liabilities (i)
reflected on or reserved against on the balance sheets as of December 31,
1996 of the Company or disclosed in any note thereto, or (ii) reflected on
or reserved against on the balance sheets as of March 31, 1997 of the
Company, (iii)
6
<PAGE>
evidenced by this Note and the other bridge promissory notes issued in
connection with the Purchase Agreement, or (iv) incurred in the ordinary
course of the Company's business, the Company has no liabilities (absolute,
accrued, contingent or otherwise) which would be required by generally
accepted accounting principles in the United States to be reflected on or
reserved against on the balance sheet of the Company.
6. Covenants. For so long as any portion of the obligations of the
---------
Company under the Note shall remain unpaid, the Company covenants and agrees as
follows:
(a) Except in connection with a transaction contemplated by
subsection (b) below, the Company shall not liquidate, wind-up or dissolve
itself (or suffer any of the same, unless contemporaneously reconstituted
with no Material Adverse Effect) or discontinue its business.
(b) The Company shall not consolidate or merge into, or transfer
its properties and assets substantially as an entirety to, another person,
unless (i) the surviving person, if other than the Company, or the
transferee assumes all the obligations of the Company under this Note, and
(ii) after giving effect to such consolidation, merger or assumption, there
would not exist any Event of Default (as hereinafter defined) or event
which, with the giving of notice or the passage of time, would give rise to
an Event of Default under this Note.
(c) The Company shall notify the Payee promptly by telephone,
confirmed in writing, or in writing, upon the occurrence of a Demand Event,
including without limitation (i) any Event of Default or event
7
<PAGE>
with the giving of notice or the passage of time would give rise to such an
Event of Default and (ii) the closing of any transaction referred to in
Section 4(ii)(b) hereof in which the cash proceeds actually received by the
Company from non-affiliates individually or cumulatively from and after
June 6, 1997 (in the case of a series of such transactions) first exceeds
$2,000,000, $4,000,000 and 6,000,000.
7. Events of Default. Each of the following events, acts,
-----------------
occurrences or conditions shall constitute an "Event of Default" under this
----------------
Note:
(a) The Company shall default in any payment when due of the
Principal Amount;
(b) The Company shall default in any payment when due of interest
on the Principal Amount and such failure continues uncured for 5 Business Days;
(c) The Company shall default in any other obligation hereunder and
such failure continues uncured for 20 days;
(d) Any representation or warranty of the Company contained herein
shall prove to have been false in any material respect on the date made and such
condition shall remain uncured for 10 days; and
(e) (i) The Company shall commence a voluntary case concerning
itself under Title 11 of the United States Code (the "Bankruptcy Code"); or (ii)
---------------
an involuntary case is commenced against the Company under the Bankruptcy Code
and the petition is not dismissed within 90 days after commencement of the case;
or (iii) a custodian (as defined in the Bankruptcy Code) is appointed for, or
takes charge of, all or substantially all of the property of the Company or the
Company commences any
8
<PAGE>
other proceedings under any reorganization, arrangement, adjustment of debt,
relief of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or there
is commenced against the Company any such proceeding which remains undismissed
for a period of 90 days; or (iv) any order of relief or other order approving
any such case or proceeding is entered; or (v) the Company is adjudicated
insolvent or bankrupt; or (vi) the Company makes a general assignment for the
benefit of creditors.
8. Remedies. (a) Upon the occurrence and during the continuance of
--------
any Event of Default under Section 7(a) or 7(b) above, the Payee may demand the
Principal Amount, any and all accrued and unpaid interest on the Principal
Amount and any and all other obligations of the Company hereunder to be
immediately due and payable in accordance with Section 4 hereof.
(b) Upon the occurrence and during the continuance of any Event of
Default under Section 7(c) above, the unpaid balance on the Principal Amount and
any and all accrued and unpaid interest on the Principal Amount and any and all
other obligations hereunder shall be immediately due and payable automatically,
without presentation, demand, or protest or other requirements of any kind
(including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and notice of
acceleration), all of which are hereby expressly waived by Company.
(c) Upon the occurrence and during the continuance of any Event of
Default, the $3 million penalty specified in Section 5.4 of the Purchase
Agreement shall be eliminated; provided, that, the Payee shall not initiate
-------- ----
commercial service with regard to the Two-Way Paging Business (as defined in the
Purchase Agreement) in Argen-
9
<PAGE>
tina for at least 21 months from the Closing Date (as defined in the Purchase
Agreement). Notwithstanding the foregoing, all other provisions of Section 5.4
of the Purchase Agreement, including but not limited to the concept of a
Carrier's Carrier (as defined in Section 5.4(h) of the Purchase Agreement),
shall remain in full force.
9. Expenses. Each party shall bear its own out-of-pocket costs,
--------
expenses and taxes in connection with the negotiation, preparation, execution,
delivery, amendment, enforcement or waiver of this Note.
10. Successors and Assigns. This Note shall inure to the benefit of
----------------------
and be binding upon the successors and assigns of the Payee and the Company.
11. Governing Law. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE
-------------
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF
RELATING TO CONFLICTS OF LAW).
12. Jurisdiction. The Company and the Payee each hereby irrevocably
------------
(i) agrees that any legal suit, action or proceeding arising out of this Note or
the subject matter hereof may be instituted in any state or federal court
sitting in the City of New York, Borough of Manhattan, State of New York, (ii)
waives, to the fullest extent it may effectively do so, any objection which it
may have now or hereafter based on lack of personal jurisdiction, forum non
conveniens or to the laying of venue of any such suit, action or proceeding, and
(iii) expressly consents and submits to the exclusive jurisdiction of any such
court in any such suit, action or proceeding.
10
<PAGE>
IN WITNESS WHEREOF, the Company has caused its duly authorized officer
to execute and deliver this Note as of the date first above written.
MTEL LATIN AMERICA, INC.
By:
-------------------------
Name:
Title:
Notice Address:
Mobile Telecommunication Technologies Corp.
200 South Lamar Street
Jackson, Mississippi 39201
Tel: (601)944-1300
Fax: (601)944-7158
Accepted and Agreed:
Payee:
By:
----------------------
Name:
Title:
11
<PAGE>
Exhibit 10.3
PROMISSORY NOTE
June 27, 1997
FOR VALUE RECEIVED, Mtel Argentina S.A., a corporation organized and
existing under the laws of the Republic of Argentina (together with its
permitted successors and assigns, the "Maker") by this promissory note (this
-----
"Note") unconditionally promises to pay to the order of Mtel Latin America, Inc.
- -----
a corporation organized under the laws of Delaware ("Mtel LATAM") or any
----------
assignee of Mtel LATAM (together with their respective successors and assigns,
the "Payee") the principal sum of
-----
________________________________________________________________________________
which sum shall be subject to reduction in accordance with Section 5.4 of the
Stock Purchase Agreement (as defined herein), in consecutive installments, one
installment to be due on each December 30 and each June 30 beginning December
30, 1997, each such installment to be in an amount equal to the amount specified
on Schedule 1 hereto with respect to the applicable date specified thereon,
together with interest on the unpaid principal amount hereof from time to time
outstanding until such principal is paid in full.
This Note is being originally issued to partially evidence debt of the
Maker to Mtel LATAM in an aggregate principal amount of
________________________________________________________________________________
which is duly registered in the books and records of the Maker. The issuance of
this Note was duly approved by a resolution of the board of directors of the
Maker passed on May 31, 1997. In contemplation of the assignment referred to
below in the last sentence of this paragraph, as specifically requested by Mtel
LATAM, in order to induce Mtel LATAM to make the intercompany loan to the Maker
and in consideration of such loan and other good
<PAGE>
and valuable consideration the receipt of which is acknowledged, the Maker has
agreed to include in this Note certain representations, warranties, covenants,
events of default and other provisions which are designed to facilitate the
assignment of this Note as hereinafter set forth. This Note is being assigned
from Mtel LATAM to
________________________________________________________________________________
in connection with the Stock Purchase Agreement dated as of June 6, 1997 (as
amended, supplemented or otherwise modified from time to time, the "Stock
-----
Purchase Agreement") by and among Mtel LATAM, BGH S.A., a corporation organized
- ------------------
and existing under the laws of the Republic of Argentina ("BGH"), Motorola
---
International Development Corporation, a corporation organized and existing
under the laws of the State of Delaware, United States of America ("Motorola")
--------
and Jacobel S.A., a corporation organized and existing under the laws of the
Republic of Argentina ("Jacobel"). Any reference herein to the Payee shall be a
-------
reference to ___________, as assignee of Mtel LATAM, to which order this Note is
payable pursuant to the assignment of this Note from Mtel LATAM to ____________
in connection with the Stock Purchase Agreement.
1. Definitions. (a) The following terms shall have the following
-----------
meanings:
"Argentine GAAP" means generally accepted accounting principles
--------------
as applied in Argentina.
"Business Day", for purposes of this Note, shall mean any day
------------
other than a Saturday, Sunday or other day on which commercial banks are
required or authorized to close in the City of New York, New York, United
States of America and Buenos Aires, Argentina.
"Capital Lease" shall mean any lease (or
-------------
2
<PAGE>
other arrangement conveying the right to use) of real or personal property,
or a combination thereof, which is required to be classified and accounted
for as a capital lease on the balance sheet of the Maker under Argentine
GAAP. The amount of any Capital Lease at any time shall be the portion
thereof required to be so capitalized at such time in accordance with
Argentine GAAP.
"Debt Service Coverage Ratio" shall mean with respect to the
---------------------------
Maker for any period, the ratio of (i) EBITDA for the four most recent
consecutive fiscal quarters plus the proceeds of any inter-company advances
made during such period in accordance with Section 8(k)(i) hereof minus
capital expenditures other than those financed with Indebtedness of the
Maker permitted hereunder to (ii) Debt Service Expense of the Maker for the
four most recent consecutive quarters ending on the date of determination.
"Debt Service Expense" shall mean, with respect to the Maker for
--------------------
any period, the aggregate of all regularly scheduled principal payments
plus the aggregate of all cash interest expense payments made or required
to be made by the Maker during such period under this Note and the notes
referred to in (iv) and (v) of the definition of "Transaction Documents"
herein.
"EBITDA" shall mean, with respect to the Maker for any period,
------
including prior to the Merger, the sum of (i) Net Income, (ii) Interest
Expense, (iii) depreciation and amortization and (iv) federal, state and
local income taxes, in each case for such person and for such period,
computed and calculated in accordance with Argentine GAAP and determined on
a Pro Forma Combined Basis prior to
3
<PAGE>
the Merger and on a consolidated basis with Radiomensaje following
consummation of the Merger.
"Indebtedness" shall mean (1) all indebtedness or liability for
------------
borrowed money; (2) all obligations evidenced by bonds, debentures, notes,
or other similar instruments; (3) all obligations for the deferred purchase
price of property or services (excluding trade obligations); (4) all
obligations as lessee under capital leases; (5) all current liabilities in
respect of unfunded vested benefits under Plans covered by Argentine
regulation; (6) all obligations under letters of credit; (7) all
obligations under acceptance facilities; (8) all guarantees, endorsements
(other than for collection or deposit in the ordinary course of business),
and other contingent obligations to purchase, to provide funds for payment,
to supply funds to invest in any person or entity, or otherwise to assure a
creditor against loss; (9) all intercompany indebtedness, and (10) all
obligations secured by any mortgage, lien, pledge, or security interest or
other charge or encumbrance on property (other than obligations secured by
Liens arising under clauses (a), (b), (c) or (d) of the definition of
"Permitted Liens"), whether or not the obligations have been assumed.
"Interest Expense" shall mean, with respect to the Maker for any
----------------
period, interest expense during such period for such person determined in
accordance with Argentine GAAP and shall in any event include, without
limitation, (i) the amortization of debt discounts; (ii) the amortization
of all fees payable in connection with the incurrence of Indebtedness to
the extent included in interest expense; (iii) the portion of any
capitalized lease obligation allocable to interest expense; (iv) all
4
<PAGE>
fixed and calculable dividend payments on preferred stock; and (v) payments
of interest expense in kind.
"Lien" shall mean any lien, security interest, hypothecation,
----
easement, mortgage, pledge, usufruct, assignment to a trustee, conditional
sale or other title retention agreement, court or official attachment
orders or any other encumbrance having the effect of constituting a
security interest.
"Material Adverse Change" and "Material Adverse Effect" shall
----------------------- -----------------------
mean any change in, or effect on, as the case may be, the Maker, that is
materially adverse to (i) the assets, business, results of operations or
the condition (financial or otherwise) of the Maker or (ii) the ability of
the Payee to enforce its remedies hereunder, but shall exclude in each case
any change or effect principally due to general economic or industry wide
conditions in the One-Way Paging Business.
"Merger" shall mean the merger of the Maker with and into
------
Radiomensaje.
"Net Income" shall mean, with respect to the Maker for any
----------
period, the aggregate income (or loss) for such period which shall be an
amount equal to net revenues and other proper items of income for such
person less the aggregate for such person of any and all items that are
----
treated as expenses under Argentine GAAP, and less federal, state and local
----
income taxes, but excluding any extraordinary gains or losses or any gains
or losses from the sale or disposition of assets other than in the ordinary
course of business, all computed and calculated in accordance with
Argentine GAAP.
5
<PAGE>
"Net Working Capital" shall mean, at any time, the current assets
-------------------
of the Maker minus the current liabilities of the Maker, determined on a
Pro Forma Combined Basis in accordance with Argentine GAAP.
"Permitted Liens" shall mean:
---------------
(a) Liens for taxes not yet due and payable or which are being
contested in good faith by appropriate proceedings diligently pursued;
(b) mechanics', materialmen's, carriers', warehousemen's and
similar Liens arising by operation of law and in the ordinary course of
business and securing obligations that are either promptly paid in the
ordinary course of business or are being contested in good faith by
appropriate proceedings diligently pursued;
(c) Liens arising in connection with worker's compensation,
unemployment insurance, pensions and social security benefits, in each case
that are not overdue or are being contested in good faith by appropriate
proceedings diligently pursued;
(d) imperfections of title, covenants, restrictions, easements
and other encumbrances on real property that (i) do not arise out of the
incurrence of any Indebtedness and (ii) do not interfere with or impair in
any material respect the utility, operation, value or marketability of the
real property on which such Lien is imposed;
(e) Liens securing Indebtedness in respect of the purchase of
property and any refinancing thereof to the extent permitted by Section
8(k)(iii) to the extent such Liens do not extend
6
<PAGE>
to any property other than the property financed with the proceeds of such
Indebtedness; and
(f) Liens on operating equipment which is leased under Capital
Leases to the extent permitted by Section 8(k)(ii).
"Pro Forma Combined Basis" shall mean, for any period prior to
------------------------
the Merger, with respect to any financial calculation relating to the Maker
and Radiomensaje, such financial calculation determined on a pro forma
--- -----
combined basis as if the financial statements and accounts of the Maker and
Radiomensaje had been consolidated.
"Radiomensaje" shall mean Radiomensaje S.A.C., a corporation
------------
organized under the laws of the Republic of Argentina.
"Subsidiary" shall mean any corporation of which a majority of
----------
the total voting power of its outstanding voting securities, or of any
other partnership, limited liability company, joint venture, or other
entity of which a majority of the partnership interests or other similar
equity interests thereof, is owned, directly or indirectly, by the Maker.
"Transaction Documents" shall mean (i) this Note, (ii) the Stock
---------------------
Purchase Agreement dated June 6, 1997, between Mtel LATAM, BGH, Motorola
and Jacobel, (iii) the Pledge Agreement, dated June 27, 1997 made by Mtel
LATAM in favor of The Chase Manhattan Bank, as Collateral Agent for the
benefit of BGH, Motorola and Jacobel,(iv) the promissory note, dated June
27, 1997, issued by the Maker and payable to the order of Mtel LATAM and
assigned to BGH S.A. ("BGH"),(v) the promissory
7
<PAGE>
note, dated June 27, 1997, issued by the Maker and payable to the order of
Mtel LATAM and assigned to Jacobel S.A. ("Jacobel"), (vi) the bridge note,
dated June 27, 1997, issued by Mtel LATAM and payable to the order of
Motorola, (vii) the bridge note, dated June 27, 1997, issued by Mtel LATAM
and payable to the order of BGH, and (viii) the bridge note, dated June 27,
1997, issued by Mtel LATAM and payable to the order of Jacobel.
(b) Unless otherwise expressly provided, all references herein to
Sections or other subdivisions refer to the corresponding Sections and other
subdivisions of this Note.
(c) The terms "hereof," "herein," "hereby," "hereto," "hereunder,"
"hereinafter" and "herewith" refer to this Note.
2. Interest. The Maker further promises to pay interest to the
--------
Payee on the unpaid principal amount hereof from the date hereof until such
principal amount is paid in full, at an interest rate of eight percent (8%) per
annum in arrears, with payment due on December 30 and June 30 of each year,
commencing December 30, 1997, and on payment in full hereof.
If the Maker fails to make any payment of principal, interest or other
amounts payable hereunder, then the Maker shall pay interest on such overdue
principal, interest or other amounts from the date such amount is due until the
date it is paid in full, payable on demand, at an interest rate of twelve
percent (12%) per annum. No interest payment or interest rate charged hereunder
shall exceed the maximum rate authorized from time to time by applicable law.
If any payment to be made hereunder falls due
8
<PAGE>
on a day which is not a Business Day, then such due date shall be extended to
the next following Business Day and, with respect to payments of principal, the
interest shall accrue and be payable for the period of such extension. All
interest to be paid hereunder shall be computed on the basis of the actual
number of days elapsed and a 360-day calendar year consisting of twelve 30-day
months.
3. Prepayment. Upon not less than ten (10) Business Days prior
----------
written irrevocable notice to the Payee, the Maker may, without premium or
penalty, prepay this Note in whole or in part from time to time, provided,
--------
however, that (i) such prepayment is accompanied by the payment of all unpaid
- -------
interest accrued to the date of prepayment and any other amounts then due under
this Note and (ii) an equivalent prepayment is made under the promissory notes,
dated the date hereof, of the Maker issued in connection with the Stock Purchase
Agreement and payable to the order of BGH and Jacobel respectively.
4. Currency and Place of Payment. All payments to be made hereunder
-----------------------------
by the Maker shall be made without deduction, counterclaim, or other defenses in
each case other than as permitted under Section 5 hereof to the Payee at account
no. 500-2117729 (routing 065-305-436) at Deposit Guaranty National Bank,
Jackson, Mississippi (or such other account specified in writing by the Payee to
the Maker, before noon (New York City time) on the Business Day when due) in
United States dollars and in (a) same day funds through the New York Clearing
House Interbank Payments System, or (b) immediately available funds through the
New York Federal Reserve Bank, or (c) in such other funds as the Payee may
designate to the Maker and pursuant to written instructions of the Payee given
two (2) Business Days prior to each such payment.
Each payment made to the Payee shall apply, unless otherwise specified
required pursuant to the terms
9
<PAGE>
hereof, as follows:
(i) first against costs, expenses and indemnities due to the
Payee hereunder;
(ii) then against interest;
(iii) then against payments of all other accrued and unpaid
interest on other amounts due hereunder; and
(iv) then against payments of principal.
5. Set-Off. The Maker may, at its option, set-off and apply any and
-------
all amounts owed to Mtel LATAM arising under the Stock Purchase Agreement as
determined by a court of competent jurisdiction or by mutual agreement between
Mtel LATAM and the Payee against any and all of the obligations of the Maker now
or hereafter existing under this Note. In such event, the Maker shall so notify
the Payee in writing at least three (3) Business Days before such set-off;
provided that, the failure to give such notice shall not affect the validity of
- -------- ----
such set-off and application.
6. Representations and Warranties. The Maker hereby represents and
------------------------------
warrants as of the date hereof that:
(a) The Maker (1) is a corporation duly organized, validly existing
and in good standing under the laws of the Republic of Argentina, (2) has all
requisite corporate power and authority to own and operate its properties, to
lease the properties it operates as lessee and to carry on its business as
presently conducted, to execute and deliver this Note and to perform its
obligations under this Note, and (3) is duly qualified to do business in all
jurisdictions where such qualification is
10
<PAGE>
necessary except for such jurisdictions in which the failure to so qualify would
not reasonably be expected to result in a Material Adverse Effect;
(b) The execution and delivery of this Note, and the performance by
the Maker of its obligations hereunder (including payment as specified in
Section 4 hereof) have been duly authorized by all necessary corporate action
(including any necessary stockholder action) on its part, and do not: (1)
contravene any applicable laws, rules, regulations, orders, writs, judgments,
injunctions, decrees, determinations or awards applicable to the Maker, (2)
violate any provision of its organizational documents or by-laws, (3) result in
a breach of or constitute a default under any indenture, mortgage, deed of
trust, lease, loan or credit agreement, or any other agreement or instrument to
which it is a party or by which it or its properties may be bound or affected,
except for such breaches or defaults which, individually or in the aggregate,
would not have a Material Adverse Effect, (4) require any consent, approval,
authorization or other action by, or filing with or notification to, any third
party or any governmental, judicial or regulatory authority or (5) result in or
require the creation or imposition of any lien, security interest or other
charge or encumbrance of any kind, or any other type of preferential
arrangement, upon or with respect to any of the properties of the Maker;
(c) Each of the Transaction Documents to which it is a party has been
duly authorized, executed and delivered by the Maker and constitutes the legal,
valid and binding obligation of the Maker, enforceable against it in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization and other similar laws affecting the
rights of creditors generally and by general principles of equity (regardless of
whether such enforceability is
11
<PAGE>
considered in a proceeding in equity or at law);
(d) As of the date hereof, no event has occurred and is continuing
which results, or with the giving of notice or the passage of time will occur
which will result, in a termination or an event of default under any of the
Transaction Documents;
(e) There is no action, suit or proceeding, or any governmental
investigation or any arbitration, in each case pending or, to the Maker's actual
knowledge after due inquiry, threatened against the Maker or any affiliates
thereof before any governmental, judicial or regulatory authority which if
adversely determined would have, individually or in the aggregate, a Material
Adverse Effect;
(f) The obligations of the Maker under this Note rank at least pari
passu (in priority of payment, security and otherwise) with all other unsecured
pecuniary obligations of whatsoever nature (including accounts payable and
contingent obligations) of the Maker outstanding as of the date hereof;
(g) The audited balance sheet for the Maker for the fiscal year ended
December 31, 1996 and the related statements of income (the "Maker Financial
---------------
Statements") delivered to the Payee are true and accurate copies of the Maker
- ----------
Financial Statements, have been prepared based upon the books and records of the
Maker, fairly present the financial condition and the results of operations of
the Maker for such period, have been prepared in accordance with Argentine GAAP
consistently applied with only such deviations from Argentine GAAP as referred
to in the notes to the Maker Financial Statements; and except as otherwise noted
in the Maker Financial Statements, the books and records of the Maker have been
maintained in accordance with applicable law and
12
<PAGE>
otherwise in a manner substantially customary with the industry in which the
Maker is active;
(h) Since December 31, 1996 (a) the Maker has been operated only in
the ordinary course of business consistent with past practice and (b) there has
been no change in the business condition (financial or otherwise), affairs,
operations, assets or properties of the Maker, other than changes in the
ordinary course of business consistent with past practice which have not and
would not reasonably be expected to, in the aggregate, constitute a Material
Adverse Effect;
(i) The Maker is not a party to or subject to the provisions of any
order, injunction, judgment or decree of any court or governmental agency or
instrumentality (other than government decrees of general applicability) except
for those orders, injunctions, judgments or decrees which would not have or
would not reasonably be expected to have a Material Adverse Effect and there is
no action, suit, claim, proceeding or investigation by the Maker currently
pending or to the Maker's knowledge threatened, or which the Maker intends to
initiate except for those actions, suits, claims, proceedings or investigations
which would not result or would not reasonably be expected to result in a
Material Adverse Change;
(j) The Maker has satisfied all judgments required to be satisfied as
of the date hereof and the Maker is not in default with respect to any judgment,
writ, injunction, decree, rule, or regulation of any court, arbitrator, or
federal, state, municipal, or other governmental authority, commission, board,
bureau, agency, or instrumentality, domestic or foreign;
(k) The Maker has filed all tax returns required to be filed in the
Republic of Argentina and any other jurisdiction where it is required to do so
and has
13
<PAGE>
paid all taxes, assessments, and governmental charges and levies thereon
to be due, including interest and penalties to the extent any of the foregoing
have become due and payable, except for such amounts which are being contested
in good faith by appropriate proceedings diligently pursued;
(l) The Maker is not a party to any indenture, loan or credit
agreement;
(m) Neither the Maker nor any of its property has any immunity from
jurisdiction of any court or from set-off or any legal process (whether through
service or notice, attachment prior to judgment, attachment in aid of execution,
execution or otherwise) under the laws of the Republic of Argentina;
(n) As of the date of this Note, except for liabilities (i) reflected
on or reserved against on the balance sheets as of December 31, 1996 of the
Maker or disclosed in any note thereto, (ii) reflected on or reserved against on
the balance sheets as of March 31, 1997 of the Maker, (iii) evidenced by this
Note and the notes referred to in (iv) and (v) of the definition of "Transaction
Documents" herein, (iv) incurred in the ordinary course of the Maker's business,
the Maker has no liabilities (absolute, accrued, contingent or otherwise) which
would be required by Argentine GAAP to be reflected on or reserved against on
the balance sheet of the Maker;
(o) The Maker (i) is not in breach or violation of any term of its
Estatutos, (ii) has or has obtained or made applications or requests to obtain,
as the case may be, all approvals, authorizations, registrations, qualifications
and filings with and under all Argentine authorities and agencies that are
required to enable it or carry on its business as currently conducted other than
approvals, authorizations, registrations,
14
<PAGE>
qualifications and filings the failure of which to obtain would not reasonably
be expected to result in a Material Adverse Effect (the "Operating Approvals"),
-------------------
and all such Operating Approvals are in full force and effect with respect to
the Maker and no suspension of them has been threatened in writing and received
by the Maker, and (iii) possesses all licenses, permits, franchises, patents,
copyrights, trademarks, tradenames or rights thereto to conduct its business
substantially as now conducted and as presently proposed to be conducted, and
the Maker is not in violation of any valid rights of others with respect to any
of the foregoing, other than those licenses, permits, franchises, patents,
copyrights, trademarks, tradenames or rights thereto the failure to possess or
the rights of others the violation of which would not reasonably be expected to
result in a Material Adverse Effect;
(p) The Maker has not been licensed to conduct or transact business
and maintains no office or place of business outside the Republic of Argentina;
(q) Both prior to and after giving effect to the transactions
occurring on the date hereof (i) the fair value of the assets of the Maker at a
fair valuation will exceed the debts and liabilities, subordinated, contingent
or otherwise, of the Maker; (ii) the present fair salable value of the property
of the Maker will be greater than the amount that will be required to pay the
probable liability of the Maker on its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; (iii) the Maker will be able to pay its debts and
liabilities, subordinated, contingent or otherwise, as such debts and
liabilities become absolute and matured; and (iv) the Maker will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and is proposed to be
15
<PAGE>
conducted. For all purposes of clauses (i) through (iv) above, the amount of
contingent liabilities at any time shall be computed as the amount that, in the
light of all the facts and circumstances existing at such time, represents the
amount that can reasonably be expected to become an actual or matured liability.
The Maker does not intend to, nor does it believe that it will, incur debts
beyond its ability to pay such debts as they mature, taking into account the
timing of and amounts of cash to be received by it and the timing of and amounts
of cash to be payable in respect of its Indebtedness;
(r) All of the issued and outstanding capital stock of the Maker is
owned directly or indirectly, legally and beneficially, by Mtel LATAM. The
Maker has no Subsidiaries;
(s) The advances from Mtel LATAM to the Maker evidenced by this Note
are characterized on both Mtel LATAM's and the Maker's financial statements as
intercompany loans and not capital contributions and in fact are intercompany
loans and not capital contributions;
(t) No Lien exists upon or with respect to any of its present or
future assets, properties or revenues; and
(u) As of the Closing Date (as defined in the Stock Purchase
Agreement), there are no capital contributions made to the Maker which are not
yet capitalized, whether made by Mtel LATAM or by other parties.
7. Covenants. The Maker hereby covenants that so long as any
---------
principal, interest or other amount remains outstanding and unpaid under this
Note the Maker shall:
(a) notify the Payee promptly by telephone,
16
<PAGE>
confirmed in writing, or in writing, upon the occurrence of any Event of Default
(as described in Section 9 hereof) or event with the giving of notice or the
passage of time would give rise to such an Event of Default;
(b) except to the extent prohibited by law, take or cause to be taken
all actions necessary to assure the immediate and continued availability of
United States dollars for all payments to be made by the Maker hereunder;
(c) if any amount is required to be deducted or withheld from any
payment in respect of any tax, pay to the relevant authorities the full amount
required to be deducted or withheld on or before the due date for such payment
in accordance with applicable law and promptly after such payment forward to the
Payee an official receipt (or a certified copy), or other documentation
reasonably acceptable to the Payee, evidencing such payment to such authorities;
(d) the Maker shall maintain all Operating Approvals;
(e) preserve and maintain its corporate existence and good standing
in the Republic of Argentina and qualify and remain qualified as a foreign
corporation in each jurisdiction in which such qualification is required except
in such jurisdictions where the failure to so qualify would not reasonably be
expected to result in a Material Adverse Effect;
(f) keep adequate records and books of account, in which complete
entries will be made in accordance with Argentine GAAP, reflecting all financial
transactions of the Maker;
(g) maintain, keep, and preserve all of its
17
<PAGE>
properties (tangible and intangible) necessary or useful in the proper conduct
of its business in good working order and condition, ordinary wear and tear
excepted;
(h) maintain insurance with financially sound and reputable insurance
companies or associations in such amounts and covering such risks as are usually
carried by companies engaged in the telecommunications industry and similarly
situated, which insurance may provide for reasonable deductibility from coverage
thereof;
(i) at any reasonable time and from time to time upon reasonable
notice to the Maker, permit the Payee or any agent or representative thereof to
examine and make copies of and abstracts from the records and books of account
of, and visit the properties of, the Maker, and to discuss the affairs,
finances, and accounts of the Maker with any of their respective officers and
directors and the Maker's independent accountants;
(j) deliver to the Payee, as soon as available and in any event
within forty-five (45) days after the end of each of the first three quarters of
each fiscal year of the Maker, balance sheets of the Maker as of the end of such
quarter, and statements of changes in financial position of the Maker for the
period commencing at the end of the previous fiscal year and ending with the end
of such quarter, and statements of changes in financial position of the Maker
for the portion of the fiscal year ended with the last day of each quarter, all
in reasonable detail and stating in comparative form the respective figures for
the corresponding date and period in the previous fiscal year, and all prepared
in accordance with Argentina GAAP consistently applied and verified by the chief
financial officer of the Maker;
(k) deliver to the Payee, as soon as is available, but in any event
within ninety (90) days after the
18
<PAGE>
end of each fiscal year of the Maker, the audited balance sheet of the Maker as
at the end of, and the related statements of operations, changes in
stockholders' investment and cash flows for, such years, and the comparable
financial statement as at end of, and for, the preceding fiscal year, which
current year financial statements shall be accompanied by a report and opinion
of an independent certified public accountants of nationally recognized standing
which report and opinion shall be prepared in accordance with Argentine GAAP;
(l) furnish to the Payee promptly upon receipt thereof, copies of any
reports submitted to the Maker by independent certified public accountants in
connection with examination of the financial statements of the Maker made by
such accountants;
(m) furnish such other information respecting the condition or
operations, financial or otherwise, of the Maker as the Payee may from time to
time reasonably request;
(n) maintain positive Net Working Capital at the end of each fiscal
quarter of the Maker commencing June 30, 1997; and
(o) cause each Subsidiary not to (i) create, permit or suffer to
exist any Lien, upon or with respect to any of its present or future assets,
properties or revenues without the prior written consent of the Sellers, except
for any Lien referred to in (a), (b), (c) or (d) of the definition of "Permitted
Liens" herein; (ii) engage in any business other than the telecommunications
business; (iii) whether in a single transaction or a series of related
transactions, sell, lease, convey or otherwise dispose of any substantial
portion of its assets or any assets other than in the ordinary course of
business; (iv) enter into, modify or amend any agreement
19
<PAGE>
with any affiliate, or any employee, shareholder, director or officer of the
Maker or any affiliate of the Maker other than in the ordinary course of
business and on terms no less favorable to such Subsidiary than would be
obtained in an arms-length transaction between unaffiliated parties; (v)
reorganize, merge or consolidate with or into, or convey, sell, assign,
transfer, lease, or otherwise dispose of (whether in one transaction or a series
of transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person, or acquire all or substantially all of the
assets or the business of any Person; (vi) incur, create, assume or permit to
exist any Indebtedness; or (vii) make any advance, loan, extension of credit or
capital contribution, or purchase any stock, bonds, notes, debentures or other
securities of, or make any other investment in, any person or entity, in each
case other than on terms no less favorable to such Subsidiary than would be
obtained in an arms-length transaction between unaffiliated parties and in
furtherance of the telecommunications business of such Subsidiary in the
Republic of Argentina.
8. Negative Covenants. The Maker hereby covenants that so long as
------------------
any principal, interest or other amount remains outstanding and unpaid under
this Note the Maker shall not, other than in connection with the Merger:
(a) create, permit or suffer to exist any Lien, upon or with respect
to any of its present or future assets, properties or revenues without the prior
written consent of the Sellers, except for any Permitted Lien;
(b) permit the Debt Service Coverage Ratio at the end of each fiscal
quarter commencing June 30, 1997 to be less than 1.25 to 1.0;
20
<PAGE>
(c) engage in any business other than the telecommunications
business;
(d) whether in a single transaction or a series of related
transactions, sell, lease, convey or otherwise dispose of any substantial
portion of its assets or any assets other than in the ordinary course of
business;
(e) enter into, modify or amend any agreement with any affiliate, or
any employee, shareholder, director or officer of the Maker or any affiliate of
the Maker other than in the ordinary course of business and on terms no less
favorable to the Maker than would be obtained in an arms-length transaction
between unaffiliated parties;
(f) wind up, liquidate, or dissolve itself, reorganize, merge or
consolidate with or into, or convey, sell, assign, transfer, lease, or otherwise
dispose of (whether in one transaction or a series of transactions) all or
substantially all of its assets (whether now owned or hereafter acquired) to any
Person, or acquire all or substantially all of the assets or the business of any
Person; provided, however, that nothing herein shall prohibit the Merger;
(g) redeem or otherwise acquire any shares of its capital stock, or
issue any capital stock or any option, warrant or right relating thereto or any
securities convertible into or exchangeable for any shares of its capital stock,
or split, combine or reclassify any of its capital stock or issue any securities
in exchange or in substitution for shares of its capital stock;
(h) declare, set aside or make any dividends, payments or
distributions in cash, securities or property to the stockholders of the Maker
so long as any portion
21
<PAGE>
of the obligations of the Maker under this Note remain unpaid;
(i) amend, breach or violate its Estatutos or other comparable
organizational document in a manner adverse to the interests of Payee hereunder;
(j) conduct or transact business or directly or indirectly own any
property, either personal or real or have any assets located outside of the
Republic of Argentina other than in connection with cross border roaming on the
"SkyTel Global Messaging Network";
(k) incur, create, assume or permit to exist any Indebtedness other
than (i) intercompany Indebtedness subordinated to repayment in full of all
principal and interest under this Note or the other notes referred to in clauses
(iv) and (v) of the definition of "Transaction Documents" herein, (ii) Capital
Leases for operating equipment in an amount not to exceed individually
$2,000,000 or, in the aggregate together with the outstanding amount of Purchase
Debt (as defined below) at any time, $3,000,000, and (iii) Indebtedness in
respect of the purchase of operating equipment and any refinancing thereof
("Purchase Debt") in an amount not to exceed individually, $2,000,000 or, in the
-------------
aggregate together with the outstanding amount of Capital Leases permitted
hereby at any time, $3,000,000; and
(l) make any advance, loan, extension of credit or capital
contribution, or purchase any stock, bonds, notes, debentures or other
securities of, or make any other investment in, any person or entity, in each
case other than on terms no less favorable to the Maker than would be obtained
in an arms-length transaction between unaffiliated parties and in furtherance of
the telecommunications business of the Maker in the Republic of Argentina.
22
<PAGE>
9. Events of Default. The occurrence of any of the following
-----------------
events shall bean "Event of Default" hereunder:
(a) the Maker fails to pay when due any principal of or interest on
this Note or the other promissory notes, dated the date hereof, and payable to
the order of Mtel LATAM and assigned to BGH and Jacobel which promissory notes
were originally issued by the Maker in connection with intercompany loans made
to the Maker by Mtel LATAM in an aggregate principal amount equal to the
principal sums of such promissory notes, and any such interest on this Note or
such other notes remains unpaid for a period of five (5) Business Days; or
(b) the Maker fails to make any payment on any Indebtedness, or
defaults in the performance of any agreement under which any such obligation is
created if the effect of such default is to cause such obligation to become, or
to permit holders of such obligation, or a trustee on their behalf, to declare
such obligation, due prior to its normal maturity, whether or not such failure
to pay or breach default is waived by such holder or holders of the relevant
obligations; or
(c) the Maker or any subsidiary thereof shall (i) voluntarily
commence any proceeding or file any petition seeking relief under Argentine Law
No. 24,522 or any applicable bankruptcy, insolvency, liquidation or similar law,
(ii) consent to the institution of, or fail to contravene in a timely and
appropriate manner, any such proceeding or the filing of any such petition,
(iii) apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator or similar official for the Maker or for a substantial part of its
property or assets, (iv) file an answer admitting the material allegations of a
petition filed against it in
23
<PAGE>
any such proceeding, (v) make a general assignment for the benefit of creditors,
(vi) become unable, admit in writing its inability or fail generally to pay its
debts as they become due or (vii) take corporate action for the purpose of
effecting any of the foregoing; or
(d) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of the Maker, or of a substantial part of the property or assets of
the Maker under Argentine Law No. 24,522 or any applicable bankruptcy,
insolvency, receivership, trustee, custodian, sequestrator or similar official
for the Maker or for a substantial part of the property of the Maker or (ii) the
winding-up or liquidation of the Maker; and such proceeding or petition shall
continue undismissed for 60 days or an order or decree approving or ordering any
of the foregoing shall continue unstayed and in effect for 60 days; or
(e) a warrant of attachment or execution or similar process against
any substantial part of the assets of the Maker is issued and such warrant of
attachment or execution or similar process remains undismissed, undischarged,
unstayed or unbounded for a period of sixty (60) days; or
(f) any representation, warranty, certification or other statement
made by the Maker hereunder or in any statement or certificate at any time given
by the Maker in writing pursuant to or in connection herewith is false in any
material respect on the date made; or
(g) the Maker defaults in the performance of or the compliance with
or due observance of any covenant, condition or agreement contained in this Note
(other than as set forth in Section 9(a) hereof) for a period of ten (10) days;
or
24
<PAGE>
(h) it is determined by a court of competent jurisdiction in a final
judgment that either (i) any representation, warranty, certification or other
statement made by the Mtel LATAM in any Transaction Document was false in any
material respect on the date made, or (ii) Mtel LATAM has defaulted in the
performance of or the compliance with or due observance of any covenant,
condition or agreement contained in any of the Transaction Documents; or
(i) any of the Transaction Documents for any reason, other than a
partial or full release in accordance with the terms thereof, ceases to be in
full force and effect or is declared to be null and void.
Upon the occurrence of an Event of Default specified in Section 9(c) or (d)
hereof, the unpaid principal, accrued interest and all other amounts payable
under this Note shall automatically become immediately due and payable without
presentment, demand, protest or other notice of any kind, each of which is
hereby expressly waived by the Maker. Upon the occurrence and during the
continuance of any other Event of Default, the Payee may by written notice to
the Maker or by facsimile transmission or by telex declare all or any portion of
the unpaid principal, accrued interest and all other amounts payable under this
Note to be due and payable.
10. Judgment Currency. The obligation of the Maker hereunder to make
-----------------
payments in United States dollars shall not be discharged or satisfied by any
tender or recovery pursuant to any judgment expressed in or converted into any
other currency except to the extent that such tender or recovery results in the
effective receipt by the Payee of the full amount of United States dollars
payable hereunder and the Maker shall indemnify the Payee (and the Payee shall
have an additional legal claim) for
25
<PAGE>
any difference between such full amount and the amount effectively received by
the Payee pursuant to any such tender or recovery. The Payee's determination of
amounts effectively received by it shall be conclusive absent manifest error.
The Payee will provide the Maker with a copy of the Payee's calculations in
connection with making such determination.
11. Expenses. The Maker will bear all the reasonable costs and
--------
reasonable out-of-pocket expenses (including without limitation, fees and
disbursements of counsel) arising in connection with the enforcement of, and
preservation of rights under this Note and the other Transaction Documents.
12. No Waivers, Cumulative Remedies. No action or omission by the
-------------------------------
Payee shall constitute a waiver of any rights or remedies of the Payee
hereunder. No waiver shall be effective unless in a writing signed by the party
making such waiver. Such rights and remedies are cumulative and not exclusive
of any rights or remedies provided by law. Payment of principal of and interest
on this Note shall not discharge the Maker's obligation with respect to any
other amount payable hereunder. The Maker agrees to indemnify the Payee for,
and to hold the Payee harmless from, any loss or expense which the Payee may
sustain or incur as a consequence of default by the Maker in payment of any
principal of or interest on this Note. The Maker hereby waives the right to
demand that the Payee post a performance bond or guaranty in any action
proceeding initiated against the Maker in Argentina.
13. Personal Jurisdiction. The Maker (i) hereby irrevocably submits
---------------------
itself to the exclusive jurisdiction of the courts of the Republic of Argentina
for the purposes of any suit, action or other proceeding arising out of this
Note or the subject matter hereof
26
<PAGE>
brought by the Payee, and (ii) hereby irrevocably agrees that all claims in
respect of such action or proceeding may be heard and determined in such courts.
14. Governing Law. This Note shall be a contract under, and be
-------------
governed by, and construed and interpreted in accordance with the law of the
REPUBLIC OF ARGENTINA.
15. Successors and Assigns. The Payee shall not have the right to
----------------------
assign any of its rights or obligations under this Note except (i) the initial
assignment by Mtel LATAM to Motorola , (ii) the subsequent assignment by
Motorola to BGH or Jacobel, (iii) the subsequent assignment by Motorola to a
wholly-owned Affiliate thereof and (iv) a collateral assignment to a nationally
recognized (in the United States or Argentina) financial institution generally
in the business of commercial lending and reasonably acceptable to the Maker (a
"Lending Institution") in connection with a transaction occurring in the
-------------------
ordinary course of such Lending Institution's business which collateral
assignment constitutes a bona fide pledge (within the meaning of Rule 144 under
the United States Securities Act of 1933, as amended), provided, in the case of
(i) through (iv) above, the assignee executes and delivers to the Maker a
written instrument in the form of Exhibit A hereto, which delivery shall have
the effect of Articles 1459, 1460 and 1467 of the Argentine Civil Code. For
purposes of this Section 15, "Affiliate" shall mean, with respect to any person,
---------
any other person directly or indirectly controlling or controlled by, or under
common control with, such person at any time during the period for which the
determination of affiliation is being made. "Control" shall mean the ability to
-------
direct or cause the direction of the management policies of such person whether
through the ownership of voting securities or by contract or otherwise.
27
<PAGE>
16. Miscellaneous.
-------------
(a) Any notice, designation, declaration, acceptance or approval
required or permitted under this Note shall be effective only if it is in
writing and delivered personally or sent by registered or certified mail,
postage prepaid, addressed as follows:
The Maker:
Mobile Telecommunication Technologies Corp.
200 South Lamar Street
Mtel Centre
Jackson, Mississippi 39201
Attention: Thomas R. Ferguson
and
Mtel Argentina S.A.
Tucuman 633 2nd Piso
Buenos Aires, Argentina 1005
Attention: Eugenio Laris
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: Martha E. McGarry
The Payee:
28
<PAGE>
or at such other address as any such party may designate by notice to the other
party. Any notice, designation, declaration or approval shall be deemed to be
given when it has arrived at the address to which it is delivered or sent,
regardless of whether it has been actually received by the person to whose
attention it is addressed.
(b) All representations, warranties, covenants, agreements and
indemnities shall survive delivery of the Note.
(c) Section headings in this Note are for convenience of reference
only, and shall not govern the interpretation of any of the provisions hereof.
(d) Any provision herein that is held to be inoperative,
unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be
inoperative, unenforceable, or invalid without affecting the remaining
provisions in that jurisdiction or the operation, enforceability, or validity of
that provision in any other jurisdiction, and to this end the provisions thereof
are declared to be severable.
MTEL ARGENTINA S.A.
By:
-------------------------
Title:
[Mtel Argentina S.A. signature to be notarized]
29
<PAGE>
Schedule 1
<TABLE>
<CAPTION>
Unpaid Total Payment
Payment Principal Principal Interest (Principal &
Date Balance Due Due Interest)
- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dec-97 3,200,000 200,000 128,000 328,000
Jun-98 3,000,000 200,000 120,000 320,000
Dec-98 2,800,000 200,000 112,000 312,000
Jun-99 2,600,000 200,000 104,000 304,000
Dec-99 2,400,000 200,000 96,000 296,000
Jun-00 2,200,000 200,000 88,000 288,000
Dec-00 2,000,000 200,000 80,000 280,000
Jun-01 1,800,000 1,800,000 72,000 1,872,000
- -------------------------------------------------------------------
Total - $3,200,000 $800,000 $4,000,000
</TABLE>
30
<PAGE>
Exhibit 10.4
PLEDGE AGREEMENT
This PLEDGE AGREEMENT, dated June 27, 1997 (this "Pledge Agreement"),
----------------
made by Mtel Latin America, Inc., a corporation organized and existing under the
laws of the State of Delaware (the "Pledgor" or "Purchaser"), in favor of The
------- ---------
Chase Manhattan Bank, as collateral agent (the "Collateral Agent"), as permitted
----------------
by Article 3207 of the Argentine Civil Code, for the equal and ratable benefit
of BGH S.A., a corporation organized and existing under the laws of the Republic
of Argentina ("BGH"), Motorola International Development Corporation, a
---
corporation organized and existing under the laws of the State of Delaware,
United States of America ("Motorola") and Jacobel S.A., a corporation organized
--------
and existing under the laws of the Republic of Argentina ("Jacobel", and
-------
collectively with BGH and Motorola, the "Sellers"). Capitalized terms not
-------
otherwise defined herein shall have the meanings ascribed to them in the Stock
Purchase Agreement dated as of June 6, 1997 (as amended, supplemented or
otherwise modified from time to time, the "Stock Purchase Agreement") by and
------------------------
among, the Purchaser and the Sellers.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Sellers wish to sell to the Purchaser, and the Purchaser
wishes to purchase from the Sellers, the Purchased Shares, on the terms and
subject to the conditions set forth in the Stock Purchase Agreement;
WHEREAS, the Purchaser, upon the Closing, will be the legal and
beneficial owner of all of the Purchased Shares;
WHEREAS, as part of the consideration for the purchase of the
Purchased Shares, the Purchaser is assigning and delivering to the Sellers, on
the terms and subject to the conditions set forth in the Stock Purchase
Agreement, promissory notes (the "Notes") in the aggregate principal amount of
-----
$8,000,000 issued by Mtel Argentina S.A., a
<PAGE>
corporation organized and existing under the laws of the Republic of Argentina
and a wholly owned subsidiary of the Purchaser (the "Maker"), which Notes
-----
evidence an intercompany loan from the Purchaser to the Maker;
WHEREAS, to induce the Sellers to sell the Purchased Shares, the
Pledgor has agreed to execute and deliver this Pledge Agreement to secure the
Notes.
NOW, THEREFORE, intending to be legally bound, the parties hereby
agree as follows:
1. Defined Terms. The following capitalized terms shall have the
-------------
meanings set forth below:
"Collateral" means the Pledged Stock and all Proceeds thereof.
----------
"Company" means Radiomensaje S.A.C., a corporation organized and
-------
existing under the laws of the Republic of Argentina
"Event of Default" means an event of default under any of the Notes.
----------------
"Indebtedness" means (1) all indebtedness or liability for borrowed
-------------
money; (2) all obligations evidenced by bonds, debentures, notes, or other
similar instruments; (3) all obligations for the deferred purchase price of
property or services (including trade obligations); (4) all obligations as
lessee under capital leases; (5) all current liabilities in respect of
unfunded vested benefits under employee benefit plans covered by Argentine
regulation; (6) all obligations under letters of credit; (7) all
obligations under acceptance facilities; (8) all guarantees, endorsements
(other than for collection or deposit in the ordinary course of business),
and other contingent obligations to purchase, to provide funds for payment,
to supply funds to invest in any person or entity, or otherwise to assure a
creditor against loss;
2
<PAGE>
and (9) all obligations secured by any mortgage, lien, pledge, or security
interest or other charge or encumbrance on property (other than obligations
secured by Permitted Liens), whether or not the obligations have been
assumed.
"Lien" means any lien, security interest, hypothecation, easement,
----
mortgage, pledge, usufruct, assignment to a trustee, conditional sale or
other title retention agreement, court or official attachment orders or any
other encumbrance having the effect of constituting a security interest.
"Merger" means the merger of the Maker with and into the Company.
------
"Operating Approvals" means all permits, approvals, authorizations,
-------------------
registrations, qualifications and filings with and under all Argentine or
other authorities and agencies that are required to enable the Company to
carry on its One-Way Paging Business as currently conducted and (b) all
other material permits, approvals, authorizations, registrations,
qualifications and filings with and under all Argentine or other
authorities and agencies that are required to enable the Company or carry
on its business as currently conducted.
"Permitted Liens" shall mean:
---------------
(a) Liens for taxes not yet due and payable or which are being
contested in good faith by appropriate proceedings diligently pursued;
(b) mechanics', materialmen's, carriers', warehousemen's and similar
Liens arising by operation of law and in the ordinary course of business
and securing obligations that are either promptly paid in the ordinary
course of business or are being contested in good faith by appropriate
proceedings diligently pursued;
(c) Liens arising in connection with worker's compensation,
unemployment insurance, pensions and social security benefits, in each
case that are not
3
<PAGE>
overdue or are being contested in good faith by appropriate proceedings
diligently pursued; and
(d) imperfections of title, covenants, restrictions, easements and
other encumbrances on real property that (i) do not arise out of the
incurrence of any Indebtedness and (ii) do not interfere with or impair in
any material respect the utility, operation, value or marketability of the
real property on which such Lien is imposed.
"Pledged Stock" means the shares of capital stock of the Company
-------------
listed in Schedule I hereto.
"Proceeds" means all "proceeds" as such term is defined in Section 9-
--------
306(1) of the UCC on the date hereof and, in any event, shall include,
without limitation, all dividends or other income from the Pledged Stock,
collections thereon or distributions with respect thereto.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"UCC" means the Uniform Commercial Code as enacted and in effect in
---
New York State.
2. Pledge; Grant of Security Interest. The Pledgor hereby delivers
----------------------------------
to the Collateral Agent the Pledged Stock and hereby grants to the Collateral
Agent for the equal and ratable benefit of the Sellers a first priority
security interest in and lien and pledge on the Collateral as collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the Notes and the
performance when due of its obligations hereunder.
3. Stock Powers, etc. Concurrently with the delivery to the
-----------------
Collateral Agent of each certificate representing any of the Pledged Stock, the
Pledgor hereby delivers to the Collateral Agent (i) an undated stock power
covering such certificate duly executed in blank, and if the Collateral Agent
so requests, with signatures guaranteed, and (ii) a certified copy of the
registration of security interest, pledge and lien created by this Pledge
Agreement on the Company's stock ledger and on each certificate representing
any of the Pledged Stock.
4
<PAGE>
4. Representations and Warranties. The Pledgor represents and
------------------------------
warrants that:
(a) Schedule I accurately reflects the percentage that shares of each
class of common stock of the Company constituting the Pledged Stock
represents of the issued and outstanding shares of such class.
(b) All the shares of the Pledged Stock have been duly and validly
issued and are fully paid and nonassessable.
(c) The Pledgor is the record and beneficial owner of, and has good,
valid and marketable title to, the Collateral listed in Schedule I, free
and clear of all pledges, security interests, liens, charges,
encumbrances, equities, claims or options of whatever nature, except the
security interest, pledge and lien in favor of the Collateral Agent for
the benefit of the Sellers created by this Pledge Agreement.
(d) Upon delivery to the Collateral Agent of the stock certificates
evidencing the Pledged Stock and registration of the security interest,
pledge and lien created by this Pledge Agreement on the Company's stock
ledger and on each certificate representing any of the Pledged Stock, and
assuming the continuous possession of such stock certificates by the
Collateral Agent, the security interest, pledge and lien granted pursuant
to this Pledge Agreement will constitute a valid, perfected first priority
security interest in and pledge and lien on the Collateral, enforceable as
such against all creditors of the Pledgor and any Persons claiming an
interest in the Collateral.
(e) The name of the Pledgor set forth in the first Section of this
Pledge Agreement is the true, correct and complete name of the Pledgor.
The legal address of the Pledgor and the address of the principal place of
business and chief executive office of the Pledgor is 1350 I Street, NW,
Washington, DC 20005. The Pledgor keeps all records and documents
relating to the Pledged Stock at such address.
5
<PAGE>
5. Covenants. The Pledgor covenants and agrees that:
---------
(a) If the Pledgor shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock
certificate (including, without limitation, any certificate representing a
stock dividend or a distribution in connection with any reclassification,
increase or reduction of capital and any certificate issued in connection
with any reorganization), option or right, whether in addition to, in
substitution of, as a conversion of, or in exchange for any shares of the
Pledged Stock, or otherwise in respect thereof, the Pledgor shall accept
the same as the Collateral Agent's agent, hold the same in trust for the
Collateral Agent and deliver the same forthwith to the Collateral Agent in
the exact form received, duly register, or cause to be registered, the
security interest, pledge and lien created by this Pledge Agreement with
respect to any such certificate on the Company's stock ledger and on such
certificate, together with an undated stock power covering such
certificate duly executed in blank and, if the Collateral Agent so
requests, with signatures guaranteed, to be held by the Collateral Agent
hereunder as additional collateral security and pledge for the Notes. Any
sums paid upon or in respect of the Pledged Stock upon the liquidation or
dissolution of the Company shall be forthwith paid over to the Collateral
Agent to be held by it hereunder as additional collateral security and
pledge for the Notes, and in case any distribution of capital shall be
made on or in respect of the Pledged Stock or any property shall be
distributed upon or with respect to the Pledged Stock pursuant to the
recapitalization or reclassification of the capital of the Company or
pursuant to the reorganization thereof, the property so distributed shall
be forthwith delivered to the Collateral Agent to be held by it, subject
to the terms hereof, as additional collateral security and pledge for the
Notes. If any sums of money or property so paid or distributed in respect
of the Pledged Stock shall be received by the Pledgor, the Pledgor shall,
until such money or property is paid or delivered to the Collateral Agent,
hold such money or
6
<PAGE>
property in trust for the Collateral Agent, segregated from other funds of
the Pledgor, as additional collateral security and pledge for the Notes.
(b) The Pledgor will defend the right, title and interest of the
Collateral Agent in and to the Collateral against the claims and demands
of all Persons whomsoever.
(c) At any time and from time to time, upon the request of the
Collateral Agent, and at the sole expense of the Pledgor, the Pledgor will
promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Collateral Agent may
reasonably request for the purposes of obtaining or preserving the full
benefits of this Pledge Agreement and of the rights and powers herein
granted. If any amount payable under or in connection with any of the
Collateral shall be or become evidenced by any promissory note, other
instrument or chattel paper, such note, instrument or chattel paper shall
be immediately delivered to the Collateral Agent, duly endorsed in a
manner reasonably satisfactory to the Collateral Agent, to be held as
additional collateral security for the Notes.
(d) The Pledgor shall cause the Company to:
(i) conduct its business only in the ordinary course of business
and use its reasonable commercial efforts to preserve intact the current
business organization of the Company, keep available the services of the
current officers, employees, and agents of the Company other than in
connection with the Merger, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, agents, and others
having business relationships with the Company;
(ii) maintain all Operating Approvals;
(iii) preserve and maintain its corporate existence and good
standing in the Republic of Argentina and qualify and remain qualified as a
foreign corporation in each jurisdiction in which such qualification is
required except in such
7
<PAGE>
jurisdictions where the failure to so qualify would not reasonably be
expected to result in a Material Adverse Effect;
(iv) keep adequate records and books of account, in which
complete entries will be made in accordance with Argentine GAAP, reflecting
all financial transactions of the Company;
(v) maintain, keep, and preserve all of its properties (tangible
and intangible) necessary or useful in the proper conduct of its business
in good working order and condition, ordinary wear and tear excepted;
(vi) except with regard to inventory pagers located at the
Company's offices, maintain insurance with financially sound and reputable
insurance companies or associations in such amounts and covering such risks
as are usually carried by companies engaged in the telecommunications
industry and similarly situated, which insurance may provide for reasonable
deductibility from coverage thereof;
(vii) at any reasonable time and from time to time upon
reasonable notice to the Company, permit the Sellers or any agent or
representative thereof to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the Company,
and to discuss the affairs, finances, and accounts of the Company with any
of their respective officers and directors and the Company's independent
accountants;
(viii) deliver to the Collateral Agent, as soon as available and
in any event within forty-five (45) days after the end of each of the first
three quarters of each fiscal year of the Company, balance sheets of the
Company as of the end of such quarter, and statements of changes in
financial position of the Company for the period commencing at the end of
the previous fiscal year and ending with the end of such quarter, and
statements of changes in financial position of the Company for the portion
of the fiscal year ended with the last day of each quarter, all in
reasonable detail and stating in comparative form the respective figures
8
<PAGE>
for the corresponding date and period in the previous fiscal year, and all
prepared in accordance with Argentine GAAP consistently applied and
verified by the chief financial officer of the Company;
(ix) deliver to the Collateral Agent, as soon as is available,
but in any event within ninety (90) days after the end of each fiscal year
of the Company, the audited balance sheet of the Company as at the end of,
and the related statements of operations, changes in stockholders'
investment and cash flows for, such years, and the comparable financial
statement as at end of, and for, the preceding fiscal year, which current
year financial statements shall be accompanied by a report and opinion of
an independent certified public accountants of nationally recognized
standing which report and opinion shall be prepared in accordance with
Argentine GAAP;
(x) furnish to the Collateral Agent promptly upon receipt
thereof, copies of any reports submitted to the Company by independent
certified public accountants in connection with examination of the
financial statements of the Company made by such accountants; and
(xi) furnish such other information respecting the condition or
operations, financial or otherwise, of the Company as the Collateral Agent
may from time to time reasonably request.
(e) The Pledgor shall cause the Company not to:
(i) create, permit or suffer to exist any Lien, upon or with
respect to any of its present or future assets, properties or revenues
without the prior written consent of the Collateral Agent other than the
Permitted Liens and any Liens existing as of the Closing Date;
(ii) engage in any business other than the telecommunications
business;
(iii) whether in a single transaction or a series of related
transactions, sell, lease, convey or otherwise dispose of any substantial
9
<PAGE>
portion of its assets or any assets other than in connection with the
Merger or in the ordinary course of business;
(iv) enter into, modify or amend any agreement with any
affiliate, or any employee, shareholder, director or officer of the Company
or any affiliate of the Company other than in the ordinary course of
business and on terms no less favorable to the Company than would be
obtained in an arms-length transaction between unaffiliated parties,
provided that the Company shall not be prohibited from terminating any
employee;
(v) wind up, liquidate, or dissolve itself, reorganize, merge or
consolidate with or into, or convey, sell, assign, transfer, lease, or
otherwise dispose of (whether in one transaction or a series of
transactions) all or substantially all of its assets (whether now owned or
hereafter acquired) to any Person, or acquire all or substantially all of
the assets or the business of any Person, other than in connection the
Merger;
(vi) redeem or otherwise acquire any shares of its capital stock,
or issue any capital stock or any option, warrant or right relating thereto
or any securities convertible into or exchangeable for any shares of its
capital stock, or split, combine or reclassify any of its capital stock or
issue any securities in exchange or in substitution for shares of its
capital stock, other than in connection with the Merger;
(vii) declare, set aside or make any dividends, payments or
distributions in cash, securities or property to the stockholders of the
Company;
(viii) amend (other than in connection with the Merger), breach
or violate its Estatutos or other comparable organizational document in a
manner adverse to the Sellers hereunder or under the Notes;
(ix) conduct or transact business or directly or indirectly own
any property, either personal or real or have any assets located outside
10
<PAGE>
of the Republic of Argentina, other than existing as of the Closing Date;
(x) incur, create, assume or permit to exist any Indebtedness,
other than Indebtedness existing as of the Closing Date; and
(xi) make any advance, loan, extension of credit or capital
contribution, or purchase any stock, bonds, notes, debentures or other
securities of (other than any short-term government securities), or make
any other investment in, any person or entity, other than in connection
with the Merger.
6. Voting Rights. So long as no Event of Default shall have
-------------
occurred, and the Collateral Agent has not given notice to the Pledgor of the
Collateral Agent's request to exercise its corresponding rights pursuant to
Section 7 below, the Pledgor may exercise all voting and corporate rights with
respect to the Pledged Stock; provided, however, that no vote shall be cast or
-------- -------
corporate right exercised or other action taken which would reasonably be
expected to impair the Collateral or result in any violation of any provision of
this Pledge Agreement or any of the other Transaction Documents.
7. Rights of the Collateral Agent. (a) If an Event of Default shall
------------------------------
have occurred and be continuing and the Collateral Agent shall have given notice
of its intent to exercise such rights to the Pledgor: (i) the Collateral Agent
shall have the right to receive any and all payments of any character paid in
respect of the Collateral and (ii) the Collateral Agent or its nominee may
thereafter exercise (A) all voting, corporate and other rights pertaining to the
Collateral at any meeting of shareholders of the Company or otherwise and (B)
any and all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to the Collateral as if it were the absolute
owner thereof (including, without limitation, the right to exchange at its
discretion any and all of the Collateral upon the merger, consolidation,
11
<PAGE>
reorganization, recapitalization or other fundamental change in the corporate
structure of the Company, or upon the exercise by the Pledgor or the Collateral
Agent of any right, privilege or option pertaining to such shares of the
Collateral, and in connection therewith, the right to deposit and deliver any
and all of the Collateral with any committee, depositary, transfer agent,
registrar or other designated agency upon such terms and conditions as it may
determine), all without liability except to account for property actually
received by it, but the Collateral Agent shall have no duty to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
(b) The rights of the Collateral Agent hereunder shall not be
conditioned or contingent upon the pursuit by the Collateral Agent of any right
or remedy against the Pledgor or the Company or against any other Person which
may be or become liable in respect of all or any part of the Notes or against
any other collateral security therefor, guarantee thereof or right of offset
with respect thereto.
8. Remedies. If an Event of Default shall have occurred and shall be
--------
continuing, the Collateral Agent may exercise, in addition to all other rights
and remedies granted in this Pledge Agreement, all rights and remedies of a
secured party under the UCC or any other applicable law. Without limiting the
generality of the foregoing and as permitted under Article 585 of the Argentine
Commercial Code, the Collateral Agent, without demand of performance or other
demand, defense, presentment, protest, advertisement or notice of any kind
(except any notice required by law) to or upon the Pledgor, the Company or any
other Person (all and each of which demands, defenses, presentment, protest,
advertisements and notices are hereby waived, except any notice required by law)
may in such circumstances forthwith collect, receive, appropriate and realize
upon the Collateral, or any part thereof, and/or may forthwith sell, assign,
give an option or options to purchase or otherwise dispose of and deliver the
Collateral or any part thereof
12
<PAGE>
(or contract to do any of the foregoing), in one or more portions at public or
private sale or sales, upon such terms and conditions and at such prices as it
may deem advisable, for cash or on credit or for future delivery without
assumption of any credit risk. The Collateral Agent shall have the right upon
any such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in the Pledgor, which right
or equity is hereby waived or released. The Collateral Agent shall apply any
Proceeds from time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred therein or
incidental to the care or safekeeping of any of the Collateral or in any way
relating to the Collateral or the rights of the Collateral Agent hereunder,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment in whole or in part of the Notes in whatever order the Collateral
Agent may elect and only after such application and after the payment by the
Collateral Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the UCC, need the
Collateral Agent account for the surplus, if any, to the Pledgor. Pledgor waives
all claims, damages and demands it may acquire against the Collateral Agent
arising out of the exercise by the Collateral Agent of any of its rights
hereunder. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least ten (10) days before such sale or other disposition. The
Collateral Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Collateral Agent may
postpone or adjourn any public or private sale of any Collateral 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
postponed or adjourned. The Pledgor shall remain liable for any deficiency if
the proceeds of any sale or other
13
<PAGE>
disposition of Collateral are insufficient to pay the Notes and the fees and
disbursements of any attorneys employed by the Collateral Agent to collect such
deficiency.
9. Limitation of Liability. Notwithstanding anything to the contrary
-----------------------
contained herein, the Pledgor shall not be liable (whether by operation of law
or otherwise) for any payments due under the Notes except to the extent of its
interest in the Collateral. If an Event of Default shall occur and be
continuing, the sole recourse of the Collateral Agent on behalf of the Sellers
against the Pledgor shall be the exercise of the rights and remedies of the
Collateral Agent hereunder in respect of the Collateral; provided, however, that
-------- -------
nothing in this Section shall limit or otherwise prejudice in any way the right
of the Sellers to proceed against the Maker with respect to the enforcement of
the Maker's obligations (or the enforcement of the Sellers' rights) under the
Notes.
10. Private Sales. (a) The Pledgor recognizes that the Collateral
-------------
Agent may be unable to effect a public sale of any or all of the Collateral by
reason of certain prohibitions contained in the Securities Act and applicable
state securities laws or otherwise, and may resort, as permitted under Article
585 of the Argentine Commercial Code, to one or more private sales thereof to a
restricted group of purchasers which will be obliged to agree, among other
things, to acquire such securities for their own account for investment and not
with a view to the distribution or resale thereof. The Pledgor acknowledges and
agrees that any such private sale may result in prices and other terms less
favorable to the Collateral Agent than if such sale were a public sale and
agrees that such circumstances shall not, in and of themselves, result in a
determination that such sale was not made in a commercially reasonable manner.
The Collateral Agent shall be under no obligation to delay a sale of any of the
Collateral for the period of time necessary to permit the Company to register
such securities for public sale under the Securities Act, or
14
<PAGE>
under applicable state securities laws, even if the Company would agree to do
so.
(b) The Pledgor further agrees to do or cause to be done all such
other acts as may be necessary to make any sale or sales of all or any portion
of the Collateral pursuant to this Pledge Agreement valid and binding and in
compliance with any or all applicable provisions of the certificate of
incorporation and by-laws or other organizational or governing documents of the
Company, and all laws, treaties, rules or regulations or determinations of an
arbitrator or a court or other governmental authority. The Pledgor authorizes
the Collateral Agent to disclose information regarding the Pledgor, Maker and
Company in the Collateral Agent's possession to a potential buyer of the
Collateral in foreclosure sale, provided that such buyer agrees to keep such
information confidential. The Pledgor further agrees that a breach of any of
the covenants contained in this Section 10 will cause irreparable injury to the
Sellers, that the Collateral Agent, on behalf of the Sellers has no adequate
remedy at law in respect of such breach and, as a consequence, that each and
every covenant contained in this Section 10 shall be specifically enforceable
against the Pledgor, and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except for
a defense that no Event of Default has occurred and is continuing or prior
payment or prior performance.
11. Limitation on Duties Regarding Collateral. The Collateral
-----------------------------------------
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the UCC
or otherwise, shall be to deal with it in the same manner as the Collateral
Agent deals with similar securities and property for its own account. Such duty
shall not include any obligation to ascertain or to initiate any action with
respect to, or to inform the Pledgor of, maturity dates, conversion, call,
exchange rights, offers to purchase the Collateral or any similar matters,
notwithstanding the
15
<PAGE>
Collateral Agent's knowledge of these matters. The Collateral Agent shall not
have any duty to initiate any action to protect against the possibility of a
decline in the market value of the Collateral. Neither the Collateral Agent nor
any of its directors, officers, employees or agents shall be liable for failure
to demand, collect or realize upon the Collateral, or any part thereof, or for
any delay in doing so or shall be under any obligation to sell or otherwise
dispose of any Collateral upon the request of the Pledgor, or to take any other
action whatsoever with regard to the Collateral or any part thereof.
12. Collateral Agent Appointed Attorney-in-Fact and Proxy. The
-----------------------------------------------------
Pledgor hereby appoints the Collateral Agent or the Collateral Agent's designee
as the Pledgor's attorney-in-fact and proxy, with full authority and power in
the Pledgor's place and stead, and in the Pledgor's name, from time to time in
the Collateral Agent's discretion from and after the occurrence and during the
continuance of an Event of Default to take any action and to execute any
instrument which the Collateral Agent may deem necessary or advisable to
perfect, protect or enforce any right or security interest hereunder or
otherwise accomplish the purposes of this Pledge Agreement, including, without
limitation, to execute and file alone any financing statement under the UCC and
any document or instrument under any other applicable laws, and to receive,
endorse and collect all instruments made payable to the Pledgor representing any
dividend or other distribution in respect of any of the Collateral and to give
full discharge for the same. The Pledgor ratifies and approves all such acts of
such attorney and proxy. Neither the Collateral Agent nor said attorney and
proxy will be liable for any acts or omissions, nor for any error of judgment or
mistake of fact or law, other than the Collateral Agent's or said attorney's and
proxy's gross negligence or willful misconduct as determined by a final non-
appealable judgment of a court of competent jurisdiction. This power, being
coupled with an interest, is irrevocable until the Notes have been fully
16
<PAGE>
satisfied or the pledge has been terminated, whichever is earlier.
13. Powers Coupled with an Interest. All authorizations and agencies
-------------------------------
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
14. Severability. Any provision of this Pledge Agreement that may be
------------
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by applicable law, the Pledgor
hereby waives any provision of law that renders any provision hereof prohibited
or unenforceable in any respect.
15. Headings. The headings in this Pledge Agreement are for purposes
--------
of reference only and shall not limit or otherwise affect the meaning hereof.
16. Indulgence or Failure Not Waiver; Cumulative Remedies. No waiver
-----------------------------------------------------
of any of the terms and conditions of this Pledge Agreement and no notice to or
demand on the Pledgor in any case shall entitle the Pledgor to any other or
further notice or demand in similar or other circumstances or constitute the
waiver of any rights of the parties hereto to any other or further action in any
circumstances without notice or demand. No failure or delay in exercising any
right, power or privilege hereunder shall operate as a waiver hereof; nor shall
any single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies of the Collateral Agent provided under this Pledge Agreement are
cumulative, may be exercised singly or concurrently and are cumulative to, and
17
<PAGE>
not exclusive of any rights or remedies provided by law or otherwise available.
17. Security Interest Absolute; Successors and Assigns; Governing
-------------------------------------------------------------
Law; Compliance. Subject to Section 20, all rights of the Collateral Agent and
- ---------------
security interests hereunder, and all obligations of the Pledgor under this
Pledge Agreement, shall be absolute and unconditional irrespective of (i) any
lack of validity or enforceability of the Notes or the Stock Purchase Agreement;
(ii) the absence of any attempt to collect the Notes or of any other action to
enforce the same; (iii) any change of the time, manner or place of payment, or
any other term, of the Notes; (iv) any exchange, release or non-perfection of
any collateral securing payment of the Notes; (v) any law, regulation or order
of any jurisdiction affecting any term of the Notes or the Collateral Agent's
rights with respect thereto; and (vi) any other circumstance which might
otherwise constitute a defense available to, or a discharge of, the Pledgor, any
guarantor or any other Person (other than the indefeasible payment in full of
all obligations under the Notes). This Pledge Agreement shall be binding upon
and inure to the benefit of and be enforceable by the respective successors and
permitted assigns of the parties hereto, except that the Pledgor may not assign
without the consent of the Collateral Agent under this Pledge Agreement. THIS
PLEDGE AGREEMENT HAS BEEN DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
INCLUDING SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW BUT EXCLUDING
ALL CHOICE OF LAW AND CONFLICTS OF LAWS RULES OF SUCH STATE, EXCEPT TO THE
EXTENT THAT THE LAWS OF ANY OTHER JURISDICTION MAY BE MANDATORILY APPLICABLE
UNDER THE LAWS OF THE STATE OF NEW YORK.
18. Notices. All notices, demands, requests, consents, approvals and
-------
other instruments hereunder shall be in writing and shall be deemed to have been
properly given if given as provided in the Stock Purchase Agreement.
18
<PAGE>
19. Irrevocable Authorization and Instruction to Company. The
----------------------------------------------------
Pledgor hereby authorizes and instructs the Company to comply with any
instruction received by it from the Collateral Agent in writing (with a copy to
the Pledgor) that (a) states that an Event of Default has occurred and is
continuing and (b) is otherwise in accordance with the terms of this Pledge
Agreement and is within the rights of the Collateral Agent hereunder, without
any other or further instructions from the Pledgor, and the Pledgor agrees that
the Company shall be fully protected in so complying.
20. Termination of Pledge Agreement; Release of Collateral. This
------------------------------------------------------
Pledge Agreement, and all obligations of the Pledgor hereunder, shall terminate
upon the earlier to occur of (i) the indefeasible payment in full of all
obligations under the Notes and (ii) the consummation of the Merger, and all
right, title and interest of the Collateral Agent in and to the Collateral shall
revert to the Pledgor and its successors and assigns. Upon the termination of
the Collateral Agent's security interest and the release of the Collateral, the
Collateral Agent will, at the written request and expense of the Pledgor, (a)
promptly execute and deliver to the Pledgor such documents as the Pledgor shall
reasonably request to evidence the termination of such security interest or the
release of the Collateral, and (b) promptly deliver or cause to be delivered to
the Pledgor (without recourse and without any representation or warranty) all
property of the Pledgor then held by the Collateral Agent or any agent or
nominee of the Collateral Agent pursuant to this Pledge Agreement. If, at any
time prior to the Merger, all or part of any payment of the Notes theretofore
made by the Pledgor or any other Person is rescinded or otherwise must be
returned by the Collateral Agent for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of the Pledgor or any
other Person), this Pledge Agreement shall continue to be effective or shall be
reinstated, as the case may be, as to the portion of the Notes which was
satisfied by the payment to be rescinded or returned, all as though such payment
had not been made.
19
<PAGE>
21. Changes in Writing. Neither this Pledge Agreement nor any term
------------------
hereof may be changed, waived, discharged or terminated except by an instrument
in writing signed by the parties hereto.
22. Counterparts. This Pledge Agreement may be executed in any
------------
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
23. Waivers of Jury Trial. Each of the parties hereto irrevocably
---------------------
and unconditionally waives trial by jury in any legal action or proceeding
relating to this Pledge Agreement.
24. Personal Jurisdiction. The Pledgor (i) hereby irrevocably
---------------------
submits itself to the nonexclusive jurisdiction of the Supreme Court of the
State of New York, New York County, United States of America and, to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York for the purposes of any suit, action or other proceeding
arising out of this Pledge Agreement or the subject matter hereof brought by the
Collateral Agent, and (ii) hereby irrevocably agrees that all claims in respect
of such action or proceeding may be heard and determined in such New York State
court or, to the fullest extent permitted by law, in such federal court.
The Pledgor hereby generally consents to service of process and
additionally, in the event the Pledgor's chief executive offices are not at any
time located in the State of New York, irrevocably designates and appoints CT
Corporation Systems (or any successor organization) with offices on the date
hereof at , United States (the "Process
Agent"), to receive service of process in such action, suit or proceeding, it
being agreed that service upon any such attorney-in-fact shall constitute valid
service upon the Pledgor or its respective successors or assigns. The Pledgor
agrees that (x) the sole responsibilities of its Process Agent shall be (i) to
20
<PAGE>
receive such process, (ii) to send a copy of any such process so received to it,
by mail, certified or registered, with appropriate postage prepaid for first
class mail, at the address listed for it herein, or at the last address filed in
writing by such person with its Process Agent and (iii) to give prompt facsimile
notice of receipt thereof to such person at such address, and (y) its Process
Agent shall have no responsibility for the receipt or nonreceipt by such person
of such process, nor for any performance or nonperformance by such party or
their successors or assigns. The Pledgor hereby agrees to pay to such Process
Agent such compensation as shall be agreed upon from time to time for services
as its Process Agent hereunder. Each party further agrees that a final judgment
against it in any such action or proceeding shall be conclusive, and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law, a certified or true copy of which final judgment shall be
conclusive evidence of the fact and of the amount of any indebtedness or
liability of such person therein described; provided, however, that nothing in
-------- -------
this Section 24 shall affect the right of the other parties hereto or their
successors, subrogees or assigns to serve legal process in any other manner
permitted by law or affect the right of any party hereto or its successors or
assigns to bring any action or proceeding against such person or its property in
the courts of other jurisdictions. In the event of the transfer of all or
substantially all the assets and business of any Process Agent to any other
person, by consolidation, merger or otherwise, such other person shall be
substituted hereunder for such Process Agent with the same effect as if named
herein. The Pledgor further covenants and agrees that so long as this Pledge
Agreement shall be in effect, it shall maintain a duly appointed agent for the
service of summonses and other legal processes in New York City.
25. Collateral Agency Agreement. Any obligation of or terms
---------------------------
regarding the Collateral Agent in this Agreement are subject to the same terms,
conditions and provisions (including indemnity provisions) of the Collateral
Agency
21
<PAGE>
Agreement dated as of the date hereof between the Pledgor and the Collateral
Agent.
22
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Pledge Agreement on
the date and year first above written.
MTEL LATIN AMERICA, INC.
By:
--------------------------
Name:
Title:
Agreed and Accepted as of this
day of June, 1997
- -----
THE CHASE MANHATTAN BANK,
as Collateral Agent
By:
--------------------------
Name:
Title:
Agreed and Accepted for purposes
of Section 19 hereof as of this
day of June, 1997
- -----
RADIOMENSAJE S.A.C.
By:
--------------------------
Name:
Title:
23
<PAGE>
SCHEDULE I
Pledge Agreement
----------------
DESCRIPTION OF PLEDGED STOCK
<TABLE>
<CAPTION>
Class of Certificate No. of
Company Stock No(s). Shares
- ------- -------- ----------- -------
<S> <C> <C> <C>
Radiomensaje S.A.C. A 356
Radiomensaje S.A.C. B 999,644
</TABLE>
<PAGE>
Exhibit 10.5
================================================================================
CREDIT AND SECURITY AGREEMENT
Dated as of July 18, 1997
among
MTEL LATIN AMERICA INC.
and
CREDIT LYONNAIS NEW YORK BRANCH
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. DEFINITIONS............................................................. 1
2. THE LOANS............................................................... 7
SECTION 2.1. Loans.................................................. 7
-----
SECTION 2.2. Making of Loans........................................ 8
---------------
SECTION 2.3. Notes.................................................. 8
-----
SECTION 2.4. Interest............................................... 9
--------
SECTION 2.5. Commitment Fee......................................... 9
--------------
SECTION 2.6. Optional and Mandatory Termination or Reduction of
--------------------------------------------------
Commitment.......................................................... 9
----------
SECTION 2.7. Default Interest....................................... 10
----------------
SECTION 2.8. Prepayment of Loans; Reimbursement of Lender........... 10
--------------------------------------------
SECTION 2.9. Change in Circumstances................................ 11
-----------------------
SECTION 2.10. Manner of Payments.................................... 13
------------------
3. REPRESENTATIONS AND WARRANTIES.......................................... 14
SECTION 3.1. Corporate Existence and Power.......................... 14
-----------------------------
SECTION 3.2. Corporate Authority and No Violation................... 14
------------------------------------
SECTION 3.3. Governmental Approval.................................. 15
---------------------
SECTION 3.4. Financial Condition.................................... 15
-------------------
SECTION 3.5. No Material Adverse Change............................. 15
--------------------------
SECTION 3.6. UCC Filing Information................................. 16
----------------------
SECTION 3.7. Litigation............................................. 16
----------
SECTION 3.8. Taxes.................................................. 16
-----
SECTION 3.9. Compliance with ERISA.................................. 16
---------------------
SECTION 3.10. Agreements............................................ 17
----------
SECTION 3.11. Existing Indebtedness................................. 17
---------------------
SECTION 3.12. Security Interest..................................... 17
-----------------
4. CONDITIONS OF LENDING................................................... 17
SECTION 4.1. Conditions Precedent to the Initial Loans.............. 17
-----------------------------------------
SECTION 4.2. Conditions Precedent to Each Loan...................... 19
---------------------------------
5. AFFIRMATIVE COVENANTS................................................... 20
SECTION 5.1. Financial Statements and Reports....................... 20
--------------------------------
SECTION 5.2. Corporate Existence; Compliance with Statutes;
----------------------------------------------
Maintenance of Properties........................................... 21
-------------------------
SECTION 5.3. Chief Executive Office................................. 21
----------------------
SECTION 5.4. Access to Books and Records; Examinations.............. 21
-----------------------------------------
SECTION 5.5. Further Assurances..................................... 22
------------------
6. NEGATIVE COVENANTS...................................................... 22
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 6.1. Limitation on Indebtedness............................. 22
--------------------------
SECTION 6.2. Limitation on Guaranties............................... 23
------------------------
SECTION 6.3. Changes in Business.................................... 23
-------------------
SECTION 6.4. Sale of Assets, etc.................................... 23
-------------------
SECTION 6.5. Limitations on Liens................................... 23
--------------------
SECTION 6.6. Transactions with Affiliates........................... 25
----------------------------
SECTION 6.7. Dividends and other Restricted Payments................ 25
---------------------------------------
SECTION 6.8. Joint Ventures......................................... 25
--------------
7. EVENTS OF DEFAULT....................................................... 25
8. GRANT OF SECURITY INTEREST; REMEDIES.................................... 28
SECTION 8.1. Security Interests..................................... 28
------------------
SECTION 8.2. Proceeds............................................... 28
--------
SECTION 8.3. Credit Parties to Hold in Trust........................ 28
-------------------------------
SECTION 8.4. Collections, etc....................................... 28
----------------
SECTION 8.5. Possession, Sale of Collateral, etc.................... 29
-----------------------------------
SECTION 8.6. Application of Proceeds on Default..................... 30
----------------------------------
SECTION 8.7. Power of Attorney...................................... 30
-----------------
SECTION 8.8. Financing Statements, Direct Payments, Confirmation of
------------------------------------------------------
Receivables and Audit Rights........................................ 31
----------------------------
SECTION 8.9. Termination............................................ 31
-----------
SECTION 8.10. Remedies Not Exclusive................................ 31
----------------------
9. MISCELLANEOUS........................................................... 32
SECTION 9.1. Notices................................................ 32
-------
SECTION 9.2. Survival of Agreement, Representations and Warranties,
------------------------------------------------------
etc................................................................. 32
---
SECTION 9.3. Successors and Assigns; Loan Sales; Participations..... 32
--------------------------------------------------
SECTION 9.4. Expenses; Documentary Taxes............................ 33
---------------------------
SECTION 9.5. Indemnity.............................................. 34
---------
SECTION 9.6. CHOICE OF LAW.......................................... 35
-------------
SECTION 9.7. No Waiver.............................................. 35
---------
SECTION 9.8. Extension of Maturity.................................. 36
---------------------
SECTION 9.9. Amendments, etc........................................ 36
---------------
SECTION 9.10. Severability.......................................... 36
------------
SECTION 9.11. SERVICE OF PROCESS; WAIVER OF JURY TRIAL.............. 36
----------------------------------------
SECTION 9.12. Headings.............................................. 38
--------
SECTION 9.13. Execution in Counterparts............................. 38
-------------------------
SECTION 9.14. Entire Agreement...................................... 38
----------------
</TABLE>
<PAGE>
CREDIT AND SECURITY AGREEMENT, dated
as of July __, 1997, among MTEL LATIN
AMERICA INC., a Delaware corporation (the
"Borrower") and CREDIT LYONNAIS NEW
YORK BRANCH (the "Lender").
INTRODUCTORY STATEMENT
----------------------
All terms not otherwise defined above or in this Introductory
Statement are as defined in Article 1 hereof, or as defined elsewhere herein.
The Borrower has requested that the Lenders make Loans to the Borrower
of up to $6,500,000 in the aggregate. The proceeds of the Loans will be used to
finance the acquisition of a paging business in Argentina, working capital and
for other general corporate purposes.
As a condition precedent to the initial Loans hereunder and to provide
assurance for the repayment of the Loans and all the other Obligations of the
Borrower hereunder, the Borrower will provide or cause to be provided to the
Lender, a security interest in, and assignment of, the Borrower's rights under
that certain Quota Assignment and Transfer Agreement dated February 5, 1997 (the
"Quota Transfer Agreement") among the Borrower, Mtel International, Inc. and
Vicom Servicos de Radiochamada Ltda., together with the related bank guarantee
issued by Banco Itau S.A.
Subject to the terms and conditions set forth herein, the Lender is
willing to make Loans to the Borrower in the maximum aggregate principal amount
of $6,500,000.
Accordingly, the parties hereto hereby agree as follows:
1. DEFINITIONS
For the purposes hereof unless the context otherwise requires, all
section references herein shall be deemed to correspond with sections herein,
the following terms shall have the meanings indicated, all accounting terms not
otherwise defined herein shall have the respective meanings accorded to them
under GAAP and all terms defined in the New York Uniform Commercial Code and not
otherwise defined herein shall have the respective meanings accorded to them
therein. Unless the context otherwise requires, any of the following terms may
be used in the singular or the plural, depending on the reference:
"Affiliate" shall mean with respect to any Person, any other Person
---------
which, directly or indirectly, is in control of, is controlled by, or is under
common control with, such Person.
<PAGE>
For purposes of this definition, a Person shall be deemed to be "controlled by"
another Person if such latter Person possesses, directly or indirectly, power
either to (i) vote 10% or more of the securities (or other ownership interests)
having ordinary voting power for the election of directors (or the equivalent
thereof) of such controlled Person or (ii) direct or cause the direction of the
management and policies of such controlled Person whether by contract or
otherwise.
"Agreement" shall mean this Credit and Security Agreement, as it may
---------
be amended, supplemented or otherwise modified, renewed or replaced from time to
time.
"Applicable Law" shall mean all provisions of statutes, rules,
--------------
regulations and orders of a Governmental Authority applicable to a Person, all
decisional authorities and all orders and decrees of all courts and arbitrators
in proceedings or actions in which the Person in question is a party.
"Base Rate" shall mean, as determined by the Lender on a daily basis,
---------
the higher of (i) the rate per annum established by the Lender from time to time
as the reference rate (not necessarily the lowest rate) for short-term
commercial loans in United States dollars to domestic corporate borrowers, such
rate to change as and when such reference rate changes or (ii) the overnight
cost of funds of the Lender plus one quarter of one percent per annum.
"Borrowing" means a borrowing of Loans by the Borrower of the same
---------
interest rate type and having the same Interest Period made by the Lender
hereunder on any given day.
"Business Day" shall mean any day other than a Saturday, Sunday or
------------
other day on which banks in the State of New York are permitted to.
"Capital Lease" shall mean, as applied to any Person, any lease of any
-------------
property (whether real, personal or mixed) by that Person as lessee which, in
accordance with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
"Closing Date" shall mean the date on which the conditions precedent
------------
to the making of the initial Loans as set forth in Article 4 hereof have been
satisfied or waived, which shall in no event be later than July 31, 1997.
"Code" shall mean the Internal Revenue Code of 1986 and the rules and
----
regulations issued thereunder, as now and hereafter in effect, or any successor
provision thereto.
"Collateral" shall mean all of the Borrower's right, title and
----------
interest in and to the Quota Transfer Agreement, including without limitation,
all amounts now or hereafter payable to the Borrower thereunder, together with
that certain bank guaranty (carta de fianca) No. D-0011038-7 issued by Banco
Itau and any other collateral security or guaranty supporting the payment
obligations under the Quota Transfer Agreement, wherever located or situated and
whether now owned, presently existing or hereafter acquired or created, and any
products or
- 2 -
<PAGE>
proceeds thereof and income therefrom.
"Commitment" shall mean the commitment of the Lender to make Loans to
----------
the Borrower up to the maximum amount of $6,500,000 in accordance with, and
subject to, the terms of this Agreement.
"Commitment Fee" shall mean the commitment fees referred to in Section
--------------
2.6 hereof.
"Commitment Termination Date" shall mean October 13,1997 or such
---------------------------
earlier date on which the Commitment shall terminate in accordance with Section
2.7 or Article 7 hereof.
"Consolidated Subsidiaries" shall mean with respect to any Person, all
-------------------------
Subsidiaries of such Person that are required to be consolidated with such
Person for financial reporting purposes in accordance with GAAP.
"Controlled Group" shall mean all members of a controlled group of
----------------
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code.
"Default" shall mean any event, act or condition which with notice or
-------
lapse of time, or both, would constitute an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States of
------- -
America.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as heretofore and hereafter amended, and the regulations promulgated
thereunder.
"Event of Default" shall have the meaning given such term in Article 7
----------------
hereof.
"Fundamental Documents" shall mean this Agreement, the Note, the
---------------------
notice of assignment and acknowledgment contemplated by Section 4.1(e) hereof,
and any other ancillary documentation which is required to be or is otherwise
executed by the Borrower and delivered to the Lender in connection with this
Agreement and if any such ancillary documentation is delivered at any time after
the Closing Date, then such documentation which has been designated by the
Lender as a Fundamental Document.
"GAAP" shall mean United States generally accepted accounting
----
principles consistently applied (except for accounting changes in response to
FASB releases, or other authoritative pronouncements).
"Governmental Authority" shall mean any federal, state, municipal or
----------------------
other
- 3 -
<PAGE>
governmental department, commission, board, bureau, agency or instrumentality,
or any court or arbitrator, in each case whether of the United States or a
foreign jurisdiction.
"Guaranty" shall mean, as to any Person, any direct or indirect
--------
obligation of such Person guaranteeing or in effect guaranteeing any
Indebtedness, Capital Lease, dividend or other monetary obligation ("primary
-------
obligation") of any other Person (the "primary obligor") in any manner, whether
- ---------- ------- -------
directly or indirectly, including, without limitation, any obligation of such
Person, whether or not contingent, (a) to purchase any such primary obligation
or any property constituting direct or indirect security therefor, (b) to
advance or supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the primary
obligor or otherwise to maintain the net worth or solvency of the primary
obligor, (c) to purchase property, securities or services, in each case,
primarily for the purpose of assuring the owner of any such primary obligation
of the repayment of such primary obligation, or (d) as a general partner of a
partnership or a joint venturer of a joint venture in respect of Indebtedness of
such partnership or such joint venture which is treated as a general partnership
for purposes of Applicable Law unless such obligation of such Person with
respect to such partnership or joint venture is as a matter of law, or expressly
made, non-recourse to such Person on terms acceptable to the Lender. The amount
of any Guaranty shall be deemed to be an amount equal to (i) the stated or
determinable amount of the primary obligation in respect of which such Guaranty
is made or the amount to which such Guaranty is limited or, (ii) if not stated
or determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder). The term "Guaranty"
shall not include any obligation to make additional Investments which are at the
discretion of the Borrower.
"Indebtedness" shall mean, at any time and with respect to any Person,
------------
(i) indebtedness of such Person for borrowed money (whether by loan or the
issuance and sale of debt securities) or for the deferred purchase price of
property or services purchased (other than amounts constituting accrued expenses
and trade payables (payable within 90 days) arising in the ordinary course of
business); (ii) obligations of such Person in respect of letters of credit,
acceptance facilities, or drafts or similar instruments issued or accepted by
banks and other financial institutions for the account of such Person; (iii)
obligations of such Person under Capital Leases; and (iv) indebtedness of others
of the type described in clauses (i), (ii) and (iii) hereof which such Person
has (a) directly or indirectly assumed or guaranteed in connection with a
Guaranty or (b) secured by a Lien on the assets of such Person, whether or not
such Person has assumed such indebtedness.
"Interest Payment Date" shall mean the last day of each Interest
---------------------
Period and, in addition, the date or dates during each Interest Period that is
or are an integral multiple of three months from the commencement of such
Interest Period.
"Interest Period" shall mean as to any Loan, the period commencing on
---------------
the date of such Loan and ending on the Maturity Date.
- 4 -
<PAGE>
"Investment" shall include any stock, evidence of indebtedness or
----------
other security of any Person, any loan, advance, contribution of capital
(whether such contribution is of cash or another asset, and including
obligations of a partner or joint venturer to satisfy additional capital calls),
extension of credit or commitment therefor (except for current trade and
customer accounts receivable for services rendered in the ordinary course of
business and payable in accordance with customary trading terms in the ordinary
course of business), and any purchase of (i) any security of another Person or
(ii) any business or undertaking of any Person or any commitment to make any
such purchase, or any other investment. Except as otherwise specified herein,
the amount of any Investment shall be the original principal amount, capital
amount or price thereof and shall, if made by the transfer or exchange of
property other than cash, be deemed to have been made in an original principal
or capital amount equal to the book value (exclusive of goodwill) of such
property.
"Joint Venture" shall mean any Person in which no more than 50% of the
-------------
equity interest is, at the time of which any determination is being made,
directly or indirectly, owned or controlled by the Borrower.
"Joint Venture Subsidiary" shall mean (i) any corporation which is a
------------------------
wholly owned Subsidiary of the Borrower and which has no assets other than an
Investment in a Joint Venture, cash, cash equivalents and/or other assets of
nominal value or (ii) any partnership (A) whose general partner is one or more
corporations which are wholly owned Subsidiaries of the Borrower and have no
assets other than the Investment in such partnership and (B) which has no assets
other than an Investment in a Joint Venture, cash, cash equivalents and/or other
assets of nominal value.
"Lending Office" shall mean the branch or branches (or affiliate or
--------------
affiliates) from which any the Lender's Loans or Base Rate Loans, as the case
may be, are made or maintained and for the account of which all payments of
principal of, and interest on, the Lender's Loans or Base Rate Loans are made
from time to time.
"Matched Rate" shall mean, with respect to each Loan, an interest rate
------------
per annum equal to the quotient (rounded upwards to the next 1/100 of 1%) of (A)
the rate determined by the Lender, in its discretion, as being representative of
its cost of obtaining funding for such Loan at a fixed rate for a maturity equal
to the applicable Interest Period in immediately available funds, two (2)
Business Days prior to the commencement of such Interest Period divided by (B)
one minus the applicable statutory reserve requirements of the Lender, expressed
as a decimal (including without duplication or limitation, basic, supplemental,
marginal and emergency reserves), from time to time in effect under Regulation D
or similar regulations of the Board of Governors of the Federal Reserve System.
It is agreed that for purposes of this definition, Loans made hereunder shall be
deemed to constitute Eurocurrency Liabilities as defined in Regulation D and to
be subject to the reserve requirements of Regulation D.
"Lien" shall mean any mortgage, pledge, security interest,
----
encumbrance, lien or
- 5 -
<PAGE>
charge of any kind whatsoever (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and the filing of or
agreement to give any financing statement under the Uniform Commercial Code of
any jurisdiction).
"Loans" shall be as defined in Section 2.1 hereof.
-----
"Material Adverse Effect" shall mean any event or condition that (a)
-----------------------
has a material adverse effect on the business, assets, properties, operations,
condition (financial or otherwise) of any of the Borrower, or the Borrower and
its Consolidated Subsidiaries taken as a whole, (b) materially impairs the
ability of the Borrower to perform any of its obligations under any Fundamental
Document to which it is or will be a party, (c) materially impairs the validity
or enforceability of, or materially impairs the rights or remedies available to
the Lender under, any Fundamental Document or (d) materially adversely affects
the collectibility of amounts due or to become due under the Quota Transfer
Agreement; provided, however, that any event or condition will be deemed to have
-------- -------
a "Material Adverse Effect", if such event or condition when taken together with
all other events or conditions occurring or in existence at such time with
respect to the Borrower and/or any of its Subsidiaries (including all other
events and conditions which, but for the fact that any representation or
warranty contained herein is subject to a "Material Adverse Effect" exception,
would cause such representation or warranty to be untrue) would result in a
"Material Adverse Effect", even though, individually, such event or condition
would not do so.
"Maturity Date" shall mean February 12, 1998.
-------------
"Mtel" shall mean Mobile Telecommunication Technologies Corp., a
----
Delaware corporation and in-direct parent corporation of the Borrower.
"Multiemployer Plan" shall mean a plan described in Section 3(37) of
------------------
ERISA.
"Note" shall be as defined in Section 2.4 hereof.
----
"Obligations" shall mean the obligation of the Borrower to make due
-----------
and punctual payment of principal of, and interest on, the Loans, the Commitment
Fee and all other monetary obligations of the Borrower to the Lender under this
Agreement, the Note, the other Fundamental Documents or with respect to any
Interest Rate Protection Agreement or Currency Agreement or other transaction
which is entered into between the Borrower and the Lender.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
"Permitted Encumbrances" shall mean Liens permitted under Section 6.6
----------------------
hereof.
"Person" shall mean any natural person, corporation, division of a
------
corporation, partnership, limited liability company, trust, joint venture,
association, company, estate, unincorporated organization or government or any
agency or political subdivision thereof.
- 6 -
<PAGE>
"Plan" shall mean an employee pension benefit plan described in
----
Section 3(2) of ERISA, other than a Multiemployer Plan, maintained by the
Borrower or any member of the Controlled Group, or to which the Borrower or any
member of the Controlled Group contributes or is required to contribute or any
other plan covered by Title IV of ERISA that covers any employees of the
Borrower or any member of the Controlled Group.
"Reportable Event" shall mean any reportable event as defined in
----------------
Section 4043(b) of ERISA (other than a reportable event as to which provision
for 30-day notice to the PBGC would be waived under applicable regulations had
the regulations in effect on the Closing Date been in effect on the date of
occurrence of such reportable event).
"Restricted Payment" shall mean (i) any distribution, dividend or
------------------
other direct or indirect payment on account of shares of any class of stock of
the Borrower now or hereafter outstanding, except distributions, dividends or
payments solely in additional shares of stock of the Borrower; (ii) any
redemption, retirement or other acquisition or re-acquisition by the Borrower of
any class of its own stock or other equity interest now or hereafter
outstanding; (iii) any payment made to retire, or obtain the surrender of any
outstanding warrants or options or other rights to purchase or acquire shares of
any class of stock of the Borrower now or hereafter outstanding; and (iv) any
payment of principal of, premium, if any, or interest on, or any redemption,
purchase, retirement, defeasance, sinking fund or similar payment with respect
to, any Subordinated Debt.
"Subsidiary" shall mean, with respect to any Person, (i) any
----------
corporation (whether now existing or hereafter organized) of which at least a
majority of the voting stock having ordinary voting power for the election of
directors is, at the time as of which any determination is being made, directly
or indirectly owned or controlled by such Person and (ii) any partnership, joint
venture, association or other business entity (whether now existing or hereafter
organized) of which more than 50% of the equity interest is, at the time as of
which any determination is being made, directly or indirectly owned or
controlled by such Person.
2. THE LOANS
SECTION 2.1. Loans.
-----
The Lender hereby agrees, upon the terms and subject to the conditions
hereof, to make loans (the "Loans") to the Borrower on any Business Day and from
-----
time to time on or after the Closing Date and prior to the Commitment
Termination Date, in an aggregate principal amount which when added to the
original principal amount of all Loans previously made will not exceed the
amount of the Commitment. Once repaid, Loans may not be reborrowed. Subject to
Section 2.2, the Loans shall be made at such times as the Borrower shall
request.
- 7 -
<PAGE>
SECTION 2.2. Making of Loans.
---------------
(a) The Lender may at its option fulfill its Commitment with respect
to any Loan by causing a foreign branch or affiliate to make such Loan, provided
--------
that any exercise of such option shall not affect the obligation of the Borrower
to repay such Loan in accordance with the terms hereof and of the applicable
Note.
(b) The Borrower shall give the Lender at least three (3) Business
Days' prior written, telecopy or telephonic (promptly confirmed in writing)
notice of each Borrowing. Each such notice in order to be effective must be
received by the Lender not later than 11:00 a.m., New York City time, on the day
required and shall specify the date (which shall be a Business Day) on which
such Borrowing is to be made, and the aggregate principal amount of the
requested Borrowing. Each such notice shall be irrevocable.
(c) The Lender shall disburse the proceeds of each Loan by depositing
them into an account of the Borrower maintained with the Lender or such other
account as the Borrower may direct in writing, with any fees or costs incurred
in depositing funds to such other account to be paid by the Borrower.
(d) The amount of any Borrowing shall be in principal amount of
$2,000,000 (or such lesser amount as shall equal the available but unused
portion of the Commitment then in effect) or such greater amount which is an
integral multiple of $500,000.
SECTION 2.3. Notes.
-----
(a) The Loans shall be evidenced by a promissory note substantially
in the form of Exhibit A hereto (the "Note") in the face amount of the
Commitment, payable to the order of the Lender, duly executed on behalf of the
Borrower and dated as of the date hereof. The outstanding principal balance of
the Loans as evidenced by the Note shall be payable in full on the Maturity
Date, subject to any mandatory prepayment as provided in Section 2.10 hereof and
acceleration as provided in Article 7 hereof.
(b) The Note shall bear interest on the outstanding principal balance
thereof as set forth in Section 2.4 hereof. The Lender is hereby authorized by
the Borrower, but not obligated, to enter on the last page of the Note, the
amount of each Loan made hereunder and the other information provided for on
such last page; provided, however, that the failure of the Lender to set forth
-------- -------
the amount of such Loans, or the other information, or any error with respect
thereto, shall not in any manner affect the obligation of the Borrower to repay
the Loans.
SECTION 2.4. Interest
--------
(a) Interest shall be payable on each Loan at a rate per annum
(computed on the basis of the actual number of days elapsed over a year of 360
days) equal to the Matched Rate
- 8 -
<PAGE>
plus 2%. Interest shall be payable on each Loan on each applicable Interest
Payment Date, on the date of any prepayment thereof and at maturity. The Lender
shall determine the applicable Matched Rate for each Interest Period as soon as
practicable on the date when such determination is to be made in respect of such
Interest Period and shall notify the Borrower of the applicable interest rate so
determined. Such determination shall be conclusive absent manifest error.
(b) Anything in this Agreement or the Notes to the contrary
notwithstanding, the interest rate on the Loans shall in no event be in excess
of the maximum rate permitted by Applicable Law.
(c) Interest in respect of any Loan hereunder shall accrue from and
including the date of such Loan to but excluding the date on which such Loan is
paid.
SECTION 2.5. Commitment Fee and Structuring Fee.
----------------------------------
(a) The Borrower agrees to pay in arrears to the Lender a commitment
fee of 1/2 of 1% per annum (computed on the basis of the actual number of days
elapsed over a year of 360 days), on the average daily amount, if any, by which
the Commitment (as such Commitment may be permanently reduced in accordance with
the provisions of this Agreement) exceeds the aggregate principal amount of
outstanding Loans during the preceding period or quarter. Such commitment fee
shall be payable on the last Business Day of each March, June, September and
December in each year (commencing on the first such Business Day following the
Closing Date), on any date on which the Commitment is reduced or on which the
Commitment or any portion thereof is terminated (in each case, in accordance
with the terms hereof), and on the Commitment Termination Date. Such commitment
fees shall commence to accrue from the Closing Date.
(b) The Borrower also agrees to pay to the Lender on or prior to the
Closing Date, a one-time structuring fee in the amount of $30,000.
SECTION 2.6. Optional and Mandatory Termination or Reduction of
--------------------------------------------------
Commitment.
- ----------
(a) Upon written, telecopy or telephonic (promptly confirmed in
writing) notice to the Lender, which notice must be received by the Lender not
later than 11:00 a.m., New York City time, on the same Business Day, the
Borrower may at any time prior to the Commitment Termination Date permanently
terminate the Commitment in its entirety, or from time to time permanently
reduce the Commitment in part. Each such partial reduction shall be in a
minimum principal amount of $500,000 or an integral multiple thereof.
(b) Simultaneously with each reduction or termination of the
Commitment, the Borrower shall pay to the Lender all accrued but unpaid
Commitment Fees on the amount of the Commitment so terminated or reduced through
the date thereof.
- 9 -
<PAGE>
SECTION 2.7. Default Interest.
----------------
Upon the occurrence of a Default or Event of Default and for so long
as such Default or Event of Default shall be continuing, the Borrower shall on
demand from time to time pay interest, to the extent permitted by Applicable
Law, on all Loans and overdue amounts outstanding up to the date of actual
payment of any such amount (after as well as before judgment) at the following
rates per annum: (i) for the remainder of the then current Interest Period for
each Loan, at 4% in excess of the Matched Rate and (ii) for all periods
subsequent to the then current Interest Period for each Loan, and for all other
overdue amounts hereunder, at 3% in excess of the Base Rate.
SECTION 2.8. Prepayment of Loans; Reimbursement of Lender.
--------------------------------------------
(a) Subject to the terms of Section 2.8(b), the Borrower shall have
the right at its option at any time and from time to time to prepay any Loan, in
whole or in part, upon at least three (3) Business Days' telephonic (promptly
confirmed in writing), written or telecopier notice, in the principal amount of
$2,000,000 or such greater amount which is an integral multiple of $500,000.
Each notice of prepayment shall specify the prepayment date, each Loan to be
prepaid and the principal amount thereof to be prepaid, shall be irrevocable and
shall commit the Borrower to prepay such Loan in the amount and on the date
stated therein.
(b) The Borrower shall reimburse the Lender on demand for any loss
incurred or to be incurred by it in the reemployment of the funds released (i)
by any prepayment (for any reason) of any Loan required or permitted under this
Agreement or (ii) in the event that after the Borrower delivers a notice of
borrowing under Section 2.2(b), such Loan is not made on the day specified in
such notice of borrowing for any reason other than a breach by the Lender of
its obligation hereunder. Such loss shall be the amount as reasonably
determined by the Lender as the excess, if any, of (A) the amount of interest
which would have accrued to the Lender on the amount so paid or not borrowed, at
a rate of interest equal to the interest rate applicable to such Loan pursuant
to Section 2.4 hereof, for the period from the date of such payment or failure
to borrow, to the last day (x) in the case of a payment other than on the last
day of the Interest Period for such Loan, of the then current Interest Period
for such Loan, or (y) in the case of such failure to borrow, continue or
convert, of the Interest Period for such Loan which would have commenced on the
date of such failure to borrow, continue or convert, over (B) the amount
realized by the Lender in reemploying the funds not advanced or the funds
received in prepayment during the period referred to above. The Lender shall
deliver to the Borrower from time to time one or more certificates setting forth
the amount of such loss (and in reasonable detail the manner of computation
thereof) as determined by the Lender in accordance with this Section 2.8(b),
which certificates shall be conclusive absent manifest error.
(c) In the event the Borrower fails to prepay any Loan on the date
specified in any
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<PAGE>
prepayment notice delivered pursuant to Section 2.8(a), the Borrower on demand
by the Lender shall pay to the Lender any amounts required to compensate the
Lender for any loss incurred by the Lender as a result of such failure to
prepay, including, without limitation, any loss, cost or expenses incurred by
reason of the acquisition of deposits or other funds by the Lender to fulfill
deposit obligations incurred in anticipation of such prepayment. The Lender
shall deliver to the Borrower from time to time one or more certificates setting
forth the amount of such loss (and in reasonable detail the manner of
computation thereof) as determined by the Lender, which certificates shall be
conclusive absent manifest error.
(d) All prepayments shall be accompanied by accrued but unpaid
interest on the principal amount being prepaid to (but not including) the date
of prepayment.
SECTION 2.9. Change in Circumstances.
-----------------------
(a) In the event that after the date hereof any change in Applicable
Law or in the interpretation or administration thereof (including, without
limitation, any request, guideline or policy not having the force of law) by any
Governmental Authority charged with the administration or interpretation thereof
or, with respect to clause (ii), (iii) or (iv) below any change in conditions,
shall occur which shall:
(i) subject the Lender to, or increase the net amount of, any
tax, levy, impost, duty, charge, fee, deduction or withholding with
respect to any Loan (other than withholding tax imposed by the United
States of America or any political subdivision or taxing authority
thereof or therein or any other tax, levy, impost, duty, charge, fee,
deduction or withholding (A) that is measured with respect to the
overall net income of the Lender or of a Lending Office of the Lender,
and that is imposed by the United States of America, or by the
jurisdiction in which the Lender or Lending Office is incorporated, in
which such Lending Office is located, managed or controlled or in
which the Lender has its principal office (or any political
subdivision or taxing authority thereof or therein), or (B) that is
imposed solely by reason of the Lender failing to make a declaration
of, or otherwise to establish, nonresidence, or to make any other
claim for exemption, or otherwise to comply with any certification,
identification, information, documentation or reporting requirements
prescribed under the laws of the relevant jurisdiction, in those cases
where the Lender may properly make such declaration or claim or so
establish nonresidence or otherwise comply); or
(ii) except as expressly provided in (i) above, change the
basis of taxation of any payment to the Lender of principal of, or any
interest on, any Loan; or
(iii) impose, modify or deem applicable any reserve, deposit or
similar requirement against any assets held by, deposits with or for
the account of, or loans or commitments by, an office of the Lender
with respect to any Loan; or
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<PAGE>
(iv) except as expressly provided in (i) above, impose upon the
Lender any other condition with respect to any Loan or this Agreement;
and the result of any of the foregoing shall be to increase the actual cost to
the Lender of making or maintaining any Loan hereunder or to reduce the amount
of any payment (whether of principal, interest or otherwise) received or
receivable by the Lender, or to require the Lender to make any payment in
connection with any Loan, in each case by or in an amount which the Lender in
its sole judgment shall deem material, then and in each case the Borrower shall
pay to the Lender, as provided in paragraph (c) below, such amounts as shall be
necessary to compensate the Lender for such cost, reduction or payment.
(b) If the Lender shall have determined that the adoption after the
date hereof of any law, rule, regulation or guideline regarding capital
adequacy, or any change in any of the foregoing or in the interpretation or
administration of any of the foregoing by any Government Authority, central bank
or comparable agency charged with the interpretation or administration thereof,
or compliance by the Lender (or any Lending Office of the Lender) or the
Lender's holding company with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such Governmental
Authority, central bank or comparable agency, has or would have the effect of
reducing the rate of return on the Lender's capital or on the capital of the
Lender's holding company, if any, as a consequence of this Agreement or the
Loans made pursuant hereto to a level below that which the Lender or the
Lender's holding company could have achieved but for such adoption, change or
compliance (taking into consideration the Lender's policies on capital adequacy)
by an amount deemed by the Lender to be material, then from time to time the
Borrower shall pay to the Lender such additional amount or amounts as will
compensate the Lender or the Lender's holding company for any such reduction
suffered.
(c) The Lender shall deliver to the Borrower from time to time one or
more certificates setting forth the amounts due to the Lender under paragraphs
(a) and (b) above, the changes or events as a result of which such amounts are
due and the manner of computing such amounts. Each such certificate shall be
conclusive in the absence of manifest error. The Borrower shall pay to the
Lender the amounts shown as due on any such certificate within ten (10) Business
Days after its receipt of the same. No failure on the part of the Lender to
demand compensation under paragraph (a) or (b) above on any one occasion shall
constitute a waiver of its rights to demand compensation on any other occasion.
The protection of this Section shall be available to the Lender regardless of
any possible contention of the invalidity or inapplicability of any law,
regulation or other condition which shall give rise to any demand by the Lender
for compensation hereunder.
(d) The Lender agrees that, as promptly as practicable after it
becomes aware of the occurrence of an event or the existence of a condition that
(i) would cause it to incur any increased cost hereunder under this Section 2.9
or (ii) would require the Borrower to pay an increased amount under this Section
2.9, it will use reasonable efforts to notify the Borrower of such event or
condition and, to the extent not inconsistent with the Lender's internal
policies, it
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<PAGE>
will use its reasonable efforts to make, fund or maintain the affected Loans
through another Lending Office of the Lender if as a result thereof, the
additional monies which would otherwise be required to be paid or the reduction
of amounts receivable by the Lender in respect of such Loans would be materially
reduced, or such inability to perform would cease to exist, or the increased
costs which would otherwise be required to be paid in respect of such Loans
pursuant to this Section 2.9 would be materially reduced or the taxes or other
amounts otherwise payable under, this Section 2.9 would be materially reduced,
and if, as determined by the Lender, in its sole discretion, the making, funding
or maintaining of such Loans through such other Lending Office would not
otherwise materially adversely affect such Loans or the Lender.
SECTION 2.10. Manner of Payments.
------------------
All payments by the Borrower hereunder and under the Note shall be
made without offset or counterclaim, in Dollars, in Federal or other immediately
available funds, at the office of the Lender located at 1301 Avenue of the
Americas, New York, New York 10019, Attention: Loan Servicing, reference: Mtel
Latin America, Inc., in each case no later than 12:00 noon, New York City time,
on the date on which such payment shall be due. Any payment received at such
office after such time shall be deemed received on the following Business Day.
SECTION 2.11. Foreign Currency Conversion; Withholding.
----------------------------------------
(a) If the net amount of any payment received by the Lender
hereunder, after such amount has (in the case of an amount received in foreign
currency and/or received outside the United States) been converted into Dollars
and transferred to New York in accordance with normal banking procedures, is
less than the amount otherwise then due and owing by the Borrower to the Lender
hereunder, or if the Lender is unable to immediately convert and transfer any
such amount as aforesaid, then the Borrower agrees as a separate obligation to
the Lender to indemnify the Lender against the loss incurred by reason of such
shortfall or delay to the extent but only to the extent such shortfall or delay
is due to (i) the application of any exchange controls or similar laws and
regulations or (ii) the fact that such amount was received in foreign currency
and not in Dollars; and if the amount of Dollars thus received by the Lender,
after such conversion, exceeds the amount otherwise then due and owing, the
Lender shall apply such excess to prepay any Loans then outstanding until the
Loans shall have been reduced to zero, and thereafter shall remit any further
excess to the Borrower.
(b) If any amount is withheld or any deduction is made from any
payment by or on behalf of the Borrower to the Lender by any taxing authority or
Governmental Authority of any jurisdiction inside or outside the United States
in connection with any stamp tax, withholding tax, deposit requirement, duty or
otherwise imposed under any Applicable Law, guideline or order in effect in such
jurisdiction, or if the Lender become liable for any other tax imposed under the
Applicable Law of any jurisdiction in connection with the Loans being made
hereunder (other than any tax payable in respect of the income of any Lender),
the Borrower agrees, as a separate obligation to the Lender, that it will pay
such additional amounts as may be
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<PAGE>
necessary so that after making all required withholdings and deductions
(including withholdings and deductions applicable to additional sums payable
under this Section 2.11), and after the payment of any required taxes, the
Lender receives an amount equal to the sum it would have received had no such
amounts been required to be deducted or withheld and no such taxes required to
be paid.
3. REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to enter into this Agreement and to make
the Loans provided for herein, the Borrower hereby makes the following
representations and warranties to the Lender, all of which shall survive the
execution and delivery of this Agreement and of the Note, and the making of the
Loans:
SECTION 3.1. Corporate Existence and Power.
-----------------------------
The Borrower and each of its Subsidiaries has been duly organized and
is validly existing in good standing under the laws of its jurisdiction of
incorporation or organization and is in good standing as a foreign corporation
or other foreign entity in all jurisdictions where the nature of its properties
or business so requires, except where the failure to be in good standing as a
foreign corporation or other foreign entity would not have a Material Adverse
Effect. The Borrower and each of its Subsidiaries has the corporate or
partnership power (as applicable) and authority (i) to own their respective
properties and carry on their respective businesses as now being conducted, and
(ii) in the case of the Borrower, to execute, deliver and perform its
obligations under this Agreement, the Note and the other Fundamental Document to
which it is a party, to borrow hereunder and to grant to the Lender, a security
interest in the Collateral as contemplated by Article 8 hereof and the other
Fundamental Documents.
SECTION 3.2. Corporate Authority and No Violation.
------------------------------------
The execution, delivery and performance of this Agreement and the
other Fundamental Documents to which it is a party, the grant to the Lender of a
security interest in the Collateral as contemplated by Article 8 hereof and the
other Fundamental Documents by the Borrower, and the Borrowings hereunder (a)
have been duly authorized by all necessary corporate or partnership action on
the part of the Borrower, (b) will not in any material respect, violate or
involve the Lender in a violation of, any provision of any Applicable Law
applicable to the Borrower or any of its properties or assets, (c) will not
violate any provision of the Certificate of Incorporation, By-Laws or any other
organizational document of the Borrower or any Subsidiary of the Borrower , (d)
will not violate any provision of any indenture, any agreement for borrowed
money, any bond, note, debenture or other similar instrument or any other
material agreement to which the Borrower or any Subsidiary of the Borrower is a
party or by which the Borrower or any Subsidiary of the Borrower or any of their
respective properties or assets are bound, in any case where as a consequence
thereof a Material Adverse Effect would occur,
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<PAGE>
(e) will not be in conflict with, result in a breach of, or constitute (with due
notice or lapse of time or both) a default under, any such indenture, agreement
for borrowed money, bond, note, debenture, instrument or other material
agreement, in any case where as a consequence thereof a Material Adverse Effect
would occur, and (f) will not result in the creation or imposition of any Lien
upon any material property or assets of the Borrower or any Subsidiary of the
Borrower other than pursuant to this Agreement or another Fundamental Document.
SECTION 3.3. Governmental Approval.
---------------------
No action, consent or approval of, or registration or filing with, or
any other action by, any Governmental Authority is required in connection with
the perfection of the security interests in the Collateral contemplated by
Article 8 hereof and the other Fundamental Documents, or with the execution,
delivery and performance by the Borrower of this Agreement or the other
Fundamental Documents except for the filing of the UCC-1 financing statements in
each of the applicable jurisdictions listed on Schedule 3.6.
SECTION 3.4. Financial Condition.
-------------------
(i) The audited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of, and the related audited consolidated
statements of operations, changes in stockholders' investment and cash flows for
the fiscal year ended December 31, 1996, and (ii) the unaudited consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at the end
of, and the related unaudited consolidated statements of operations, changes in
stockholders' investment and cash flows for the three-month period ended March
31, 1997, have been prepared in accordance with GAAP consistently applied,
subject in the case of such unaudited statements to changes resulting from year-
end audit adjustments. All of such financial statements fairly present the
consolidated financial position or the results of operations, as the case may
be, of the Borrower and its Consolidated Subsidiaries, at the dates or for the
periods indicated, subject to year-end and audit adjustments in the case of
unaudited statements (and in the case of balance sheets, including the notes
thereto) and reflect all known liabilities, contingent or otherwise, that GAAP
requires, as of such dates, to be shown, reserved against or disclosed in notes
to financial statements.
SECTION 3.5. No Material Adverse Change.
--------------------------
Except as disclosed in Schedule 3.5, since December 31, 1996, no event
or condition has occurred which has, or is reasonably expected to have, a
Material Adverse Effect.
SECTION 3.6. UCC Filing Information.
----------------------
The chief executive office of the Borrower is, on the date hereof, as
set forth on Schedule 3.6 hereto, which office is the place where the Borrower
is "located" for the purpose of Section 9-103(3)(d) of the Uniform Commercial
Code in effect in the State of New York and in
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<PAGE>
any State in which any such Person is so located.
SECTION 3.7. Litigation.
----------
Except as set forth on Schedule 3.7 hereto, there are no lawsuits or
other proceedings pending (including, but not limited to, matters relating to
environmental liability), or, to the knowledge of the Borrower, threatened,
against or affecting the Borrower or any Subsidiary of the Borrower or any of
their respective properties or assets, by or before any Governmental Authority
or arbitrator, which if adversely determined would reasonably be expected to
have a Material Adverse Effect or which involve this Agreement or any of the
transactions contemplated hereby. Neither the Borrower nor any Subsidiary of
the Borrower is in default with respect to any order, writ, injunction, decree,
rule or regulation of any Governmental Authority, which default would have a
Material Adverse Effect.
SECTION 3.8. Taxes.
-----
The Borrower and each of its Subsidiaries has filed or caused to be
filed all federal, state, local and foreign tax returns which are required to be
filed, and has paid or has caused to be paid all taxes as shown on said returns
or on any assessment received by them in writing, to the extent that such taxes
have become due, except where the failure to so file or pay would not have a
Material Adverse Effect.
SECTION 3.9. Compliance with ERISA.
---------------------
The Borrower and each of its Subsidiaries is in compliance in all
material respects with the provisions of ERISA and the Code applicable to Plans,
and the regulations and published interpretations thereunder, if any, which are
applicable to it. Neither the Borrower nor any Subsidiary of the Borrower has,
with respect to any Plan established or maintained by it, engaged in a
prohibited transaction which would subject it to a material tax or penalty
imposed by ERISA or Section 4975 of the Code. No liability to the PBGC that is
material to the Borrower or any Subsidiary of the Borrower has been, or to the
Borrower 's best knowledge is reasonably expected to be, incurred with respect
to any Plans and there has been no Reportable Event and no other event or
condition that presents a material risk of termination of a Plan by the PBGC.
Neither the Borrower nor any Subsidiary of the Borrower has engaged in a
transaction which would result in the incurrence of a material liability under
Section 4069 of ERISA. As of the Closing Date, neither the Borrower nor any
Subsidiary of the Borrower contributes to a Multiemployer Plan, nor has any such
Person incurred any liability that would result in a Material Adverse Effect on
account of a partial or complete withdrawal (as defined in Sections 4203 and
4205 of ERISA, respectively) with respect to any Multiemployer Plan.
SECTION 3.10. Agreements.
----------
(a) Neither the Borrower nor any Subsidiary of the Borrower is
subject to any
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<PAGE>
charter or other corporate restriction, or any judgment, order, writ, injunction
or decree, which if a default, breach or violation thereof should occur, would
result in a Material Adverse Effect.
(b) Neither the Borrower nor any Subsidiary of the Borrower is in
default in the performance, observance or fulfillment of any of the obligations,
covenants or conditions contained in any agreement, instrument or contract to
which it is a party which if the other party thereto enforced its rights
thereunder would result in a Material Adverse Effect.
SECTION 3.11. Existing Indebtedness.
----------------------
Except for this Agreement and as otherwise disclosed on Schedule 6.1
hereto, as of the Closing Date, neither the Borrower nor any Subsidiary of the
Borrower has any outstanding Indebtedness.
SECTION 3.12. Security Interest.
-----------------
This Agreement and the other Fundamental Documents when executed and
delivered by the Borrower will create and grant to the Lender (upon the making
of the first Loan hereunder) a valid and first priority perfected security
interest in the Collateral assuming the filing of the UCC financing statements
listed on Schedule 3.6 hereto. On the date of the first Loan hereunder, no
Person will have any right, title or interest in or to the Collateral which is,
or which shall be, prior, paramount, superior or equal to the right, title or
interest of the Lender (on behalf of the Lenders) therein or thereto.
4. CONDITIONS OF LENDING
SECTION 4.1. Conditions Precedent to the Initial Loans.
-----------------------------------------
The obligation of the Lender to make the initial Loan is subject to
the following conditions precedent:
(a) Corporate Documents. The Lender shall have received:
-------------------
(i) a copy of the Borrower's certificate of incorporation or
other organizational document(s), certified as of a recent date by an
appropriate official of the jurisdiction of its incorporation or
organization;
(ii) a certificate of each such appropriate official, dated as
of a recent date, as to the good standing of, and payment of taxes by,
the Borrower which certificate lists the Borrower's charter or
organizational documents on file in the office of such official; and
(iii) a certificate of the Secretary of the Borrower dated the
date of the
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<PAGE>
initial Loan and certifying (A) that attached thereto is a true and
complete copy of the by-laws (or equivalent document) of the Borrower
as in effect on the date of such certification, (B) that attached
thereto is a true and complete copy of resolutions adopted by the
Board of Directors (or the equivalent thereof) of the Borrower
authorizing the execution, delivery and performance in accordance with
their respective terms of this Agreement, the Note, the other
Fundamental Documents to which the Borrower will be a party, and any
other documents required or contemplated hereunder or thereunder to
which the Borrower will be a party, and the Borrowings hereunder, and
the granting of the security interests contemplated by the Fundamental
Documents, (C) that the certificate of incorporation or other
organizational document(s) of the Borrower have not been amended since
the date of the last amendment thereto indicated on the certificate of
the Secretary of State furnished pursuant to clause (i) above except
to the extent specified in such Secretary's Certificate and (D) as to
the incumbency and specimen signature of each officer of the Borrower
executing this Agreement, the Note, the other Fundamental Documents or
any other document delivered by it in connection herewith or therewith
(such certificate to contain a certification by another officer of the
Borrower as to the incumbency and signature of the officer signing the
certificate referred to in this clause (iii)).
(b) Note. The Lender shall have received the Note, duly executed on
----
behalf of the Borrower, dated the date hereof and payable to the order of the
Lender in the principal amount equal to the Commitment.
(c) Opinions of Counsel. The Lender shall have received the
-------------------
favorable written opinions, dated the date of the initial Loan hereunder,
addressed to the Lender and satisfactory to Morgan, Lewis & Bockius LLP, counsel
to the Lender, of counsel to the Borrower, as to the matters specified Exhibit B
hereto.
(d) UCC Financing Statements and UCC Searches, etc. The Lender shall
----------------------------------------------
have received (i) UCC financing statements executed on behalf of the Borrower
for filing in the applicable jurisdictions set forth on Schedule 3.6 hereto in
order to provide the with a perfected security interest in the Collateral as to
which a security interest may be perfected by filing and (ii) UCC searches
satisfactory to the Lender indicating that no other filings with regard to the
Collateral are of record in any of such jurisdictions.
(e) Notice of Assignment. Written notice of the assignment of the
--------------------
Collateral to the Lender as security shall have been given to (and acknowledged
by) both Vicom Servicos de Radiochamada Ltda. and Banco Itau S.A., such notice
and acknowledgment to be substantially in the form of Exhibit C hereto.
(f) Payment of Fees. All fees and expenses then due and payable by
---------------
the Borrower in connection with the transactions contemplated hereby shall have
been paid.
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<PAGE>
(g) Other Documents. The Lender shall have received such other
---------------
documents as the Lender may reasonably require.
(h) Other Matters. All legal matters incident to this Agreement and
-------------
the transactions contemplated hereby shall be reasonably satisfactory to Morgan,
Lewis & Bockius LLP, counsel to the Lender.
SECTION 4.2. Conditions Precedent to Each Loan.
---------------------------------
The obligation of the Lender to make each Loan (including the initial
Loan) is subject to the following conditions precedent:
(a) Notice. The Lender shall have received a notice with respect to
------
such Borrowing as required by Article 2 hereof.
(b) Representations and Warranties. The representations and
------------------------------
warranties set forth in Article 3 hereof and in the other Fundamental Documents
shall be true and correct in all material respects on and as of the date of each
Borrowing hereunder (except to the extent that such representations and
warranties expressly relate to an earlier date) with the same effect as if made
on and as of such date.
(c) No Event of Default. On the date of (and after giving effect to)
-------------------
each Borrowing hereunder, the Borrower shall be in compliance with all of the
terms and provisions set forth herein to be observed or performed and no Event
of Default or Default shall have occurred and be continuing.
(d) Additional Documents. The Lenders shall have received from the
--------------------
Borrower on the date of each Borrowing, such documents and information as they
may reasonably request relating to the satisfaction of the conditions in this
Section 4.2.
Each Borrowing shall be deemed to be a representation and warranty by the
Borrower on the date of such Borrowing as to the matters specified in paragraphs
(b) and (c) of this Section.
5. AFFIRMATIVE COVENANTS
From the date of the initial Loan and for so long as the Commitment
shall be in effect, or any amount shall remain outstanding under the Note or
unpaid under this Agreement, the Borrower agrees that it will, and will cause
each of its Subsidiaries to:
SECTION 5.1. Financial Statements and Reports.
--------------------------------
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<PAGE>
Deliver to the Lender:
(a) As soon as is practicable, but in any event within sixty (60)
days after the end of each fiscal quarter of each fiscal year, the unaudited
balance sheet of the Borrower and its Consolidated Subsidiaries as at the end
of, and the related unaudited statements of operations, changes in stockholders'
investment and cash flows for, such quarter and for the period from the
beginning of the then current fiscal year to the end of such fiscal quarter and
the comparable financial statements as at the end of, and for, the corresponding
periods in the preceding fiscal year, together with a certificate signed by the
Chief Financial Officer of the Borrower to the effect that such financial
statements, while not examined by independent public accountants, reflect, in
his or her opinion and in the opinion of the Borrower, all adjustments necessary
to present fairly, in all material respects, the financial position of the
Borrower and its Consolidated Subsidiaries as at the end of the fiscal quarter
and the results of its operations for the quarter and the period then ended in
conformity with GAAP consistently applied, subject only to year-end audit
adjustments and to the absence of footnote disclosure;
(b) Promptly upon any executive officer of the Borrower obtaining
knowledge (i) of any Default, or becoming aware that the Lender has given notice
or taken any other action with respect to a claimed Event of Default or (ii)
that any Person has given any notice to the Borrower or any Subsidiary of the
Borrower or taken any other action with respect to a claimed default or event
or condition of the type referred to in paragraph (e) of Article 7, a
certificate of the president or Chief Financial Officer of the Borrower
specifying the nature and period of existence of any such condition or event, or
specifying the notice given or action taken by such holder or Person and the
nature of such Default or claimed Event of Default and what action the Borrower
have taken, are taking and propose to take with respect thereto;
(c) Promptly upon any executive officer of the Borrower obtaining
knowledge of (i) the institution of, or threat of, any action, suit, proceeding,
investigation or arbitration by any Governmental Authority or other Person
against or affecting the Borrower , any Subsidiary of the Borrower or any of
their respective property or assets, including, without limitation, any such
action, suit, proceeding, investigation or arbitration relating to any material
paging license or concessions or any notice, oral or written, of the intention
of any issuing agency to revoke, suspend, cancel, amend or not renew for any
reason any material paging license or concession or (ii) any material
development in any such action, suit, proceeding, investigation or arbitration
(whether or not previously disclosed to the Lender), which might reasonably be
expected to have a Material Adverse Effect, the Borrower shall promptly
give notice thereof to the Lender and provide such other information as may be
reasonably available to it (without waiver of any applicable evidentiary
privilege) to enable the Lender to evaluate such matters; and, in addition to
the requirements set forth in clauses (i) and (ii) of this Section 5.1(c), the
Borrower upon request shall promptly give to the Lender notice of the status of
any action, suit, proceeding, investigation or arbitration covered by a report
delivered to the Lender pursuant to clause (i) or (ii) above to the Lender and
provide such other information as may be reasonably available to it (without
waiver of any applicable evidentiary privilege) to enable the Lender to evaluate
such
- 20 -
<PAGE>
matters;
(d) With reasonable promptness, such other information and data with
respect to the Borrower , any Subsidiary of the Borrower or any Joint Venture
as from time to time may be reasonably requested by the Lender.
SECTION 5.2. Corporate Existence; Compliance with Statutes;
----------------------------------------------
Maintenance of Properties.
- -------------------------
(a) Do or cause to be done all things necessary to (i) preserve,
renew and keep in full force and effect its corporate existence, material
rights, permits and franchises and (ii) comply in all material respects with all
provisions of Applicable Law, and all applicable restrictions imposed by, any
Governmental Authority.
(b) Keep its properties which are material to its business in good
repair, working order and condition consistent with industry practice and, from
time to time (i) make all appropriate repairs, renewals, replacements, additions
and improvements thereto and (ii) comply at all times with the provisions of all
material leases and other material agreements to which it is a party so as to
prevent any loss or forfeiture thereof or thereunder
SECTION 5.3. Chief Executive Office.
----------------------
The Borrower will not change its corporate name or the location of its
chief executive office or any of the offices where such entity keeps the records
concerning the Collateral without (i) giving the Lender thirty (30) days'
written notice of such change and (ii) filing any additional UCC financing
statements and/or such other documents reasonably requested by the Lender as are
necessary or desirable to continue the first perfected security interest of the
Lender in the Collateral.
SECTION 5.4. Access to Books and Records; Examinations.
-----------------------------------------
Maintain or cause to be maintained at all times true and complete
books and records of its financial operations (in accordance with GAAP) and
provide the Lender and its designated representatives access to all such books
and records and to any of their properties or assets during regular business
hours and after reasonable notice, in order that the Lender may make such audits
and examinations and make abstracts from such books, accounts, records and other
related papers and may discuss the affairs, finances and accounts with, and be
advised as to the same by, officers and independent accountants, all as the
Lender may deem appropriate for the purpose of verifying the various reports
delivered to the Lender pursuant to this Agreement or for otherwise ascertaining
compliance with this Agreement.
SECTION 5.5. Further Assurances.
------------------
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<PAGE>
Upon the request of the Lender, at the cost and expense of the
Borrower, duly and promptly execute and deliver, or cause to be duly and
promptly executed and delivered, such further instruments, documents, consents,
authorizations, approvals and orders (in form and substance satisfactory to the
Lender and including, without limitation, the execution, amendment or
supplementation of any financing statement and continuation statement or other
statement for filing under the provisions of the Uniform Commercial Code of any
jurisdiction or any other statute, rule or regulation of any applicable foreign,
federal, state or local jurisdiction) and promptly perform or cause to be
promptly performed, any and all acts, in all cases as may be necessary, proper
or advisable from time to time, in the reasonable judgment of the Lender, to
carry out the provisions and purposes of this Agreement and the other
Fundamental Documents, and to provide, perfect or preserve the Liens hereunder
and under the Fundamental Documents, in the Collateral and any portion thereof.
6. NEGATIVE COVENANTS
From the date of the initial Loan and for so long as the Commitment
shall be in effect or any amount shall remain outstanding under any Note or
unpaid under this Agreement, the Borrower agrees that it will not, and will not
permit any of its Subsidiaries, directly or indirectly, to:
SECTION 6.1. Limitation on Indebtedness.
--------------------------
Incur, assume or suffer to exist any Indebtedness except:
(a) Indebtedness hereunder;
(b) Indebtedness of the Borrower or any of its Subsidiaries, which
Indebtedness is in existence on the date hereof and is listed on Schedule 6.1
hereto, but not any extensions or renewals thereof, unless effected on
substantially the same terms;
(c) purchase money Indebtedness (including Capital Leases), provided
--------
that (i) any Lien granted with respect to such Indebtedness is permitted by
Section 6.6(b) hereof and (ii) the aggregate amount thereof incurred by all the
Borrower and all of its Subsidiaries does not exceed $5,000,000 at any one time
outstanding;
(d) intercompany loans and advances from the Borrower to its
Subsidiaries permitted by Section 6.5(c) hereof;
(e) Guaranties permitted by Section 6.2 hereof; and,
(f) Indebtedness of any Person which becomes a Subsidiary of the
Borrower after the date hereof, and which Indebtedness is outstanding on the
date on which such Subsidiary becomes a Subsidiary of the Borrower (other than
Indebtedness issued in connection with, or in
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anticipation of, such Subsidiary becoming a Subsidiary of the Borrower).
SECTION 6.2. Limitation on Guaranties.
------------------------
Assume or incur any Guaranty except:
(a) endorsements of negotiable instruments for deposit or collection
in the ordinary course of business;
(b) the existing Guaranties listed on Schedule 6.1 hereto, but not
any extensions or renewals thereof, unless effected on substantially the same
terms; and
(c) any Guaranties by the Borrower of the contractual obligations of
its Subsidiaries (other than any obligations relating to Indebtedness of such
Subsidiaries) incurred by such Subsidiaries in the ordinary course of business
which contractual obligations are otherwise permitted by this Agreement.
SECTION 6.3. Changes in Business.
-------------------
Engage in any line of business other than (i) those lines of business
in existence on the date hereof and (ii) other lines of business for the
delivery of advanced messaging services, or other messaging products that are
integrally related to such lines of business.
SECTION 6.4. Sale of Assets, etc.
--------------------
Whether in one transaction or a series of transactions, wind up,
liquidate or dissolve its affairs, or enter into any transaction of merger or
consolidation, or sell or otherwise dispose of all or substantially all of the
property or assets of the Borrower or any Subsidiary, or a majority of the
capital stock of any Subsidiary.
SECTION 6.5. Limitations on Liens.
--------------------
Suffer any Lien on its property, except:
(a) deposits under worker's compensation, unemployment insurance and
social security laws or to secure statutory obligations or surety or appeal
bonds or performance or other similar bonds in the ordinary course of business,
or statutory Liens of landlords, carriers, warehousemen, mechanics and material
men and other similar Liens, in respect of liabilities which are not yet due or
which are being contested in good faith, Liens for taxes not yet due and
payable, and Liens for taxes due and payable, the validity or amount of which is
currently being contested in good faith by appropriate proceedings and as to
which foreclosure and other enforcement proceedings shall not have been
commenced (unless fully bonded or otherwise effectively stayed);
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<PAGE>
(b) purchase money Liens granted in connection with the incurrence of
Indebtedness permitted by Section 6.1(c), to the vendor or Person financing the
acquisition of property, plant or equipment if (i) such Lien is limited to the
specific assets acquired or, in the case of tangible assets, other property
which is an improvement to or is acquired for specific use in connection with
such acquired property or which is real property being improved by such acquired
property; (ii) the debt secured by the Lien is the unpaid balance of the
acquisition cost of the specific assets on which the Lien is granted; and (iii)
such transaction does not otherwise violate this Agreement;
(c) Liens upon real and/or tangible personal property, which property
was acquired after the date of this Agreement (by purchase, construction or
otherwise) by the Borrower or any Subsidiary of the Borrower, each of which
Liens existed on such property before the time of its acquisition and was not
created in anticipation thereof; provided, however, that no such Lien shall
-------- -------
extend to or cover any property of the Borrower or any Subsidiary of the
Borrower other than the respective property so acquired and improvements
thereon;
(d) Liens arising out of attachments, judgments or awards as to which
an appeal or other appropriate proceedings for contest or review are promptly
commenced (and as to which foreclosure and other enforcement proceedings (i)
shall not have been commenced (unless fully bonded or otherwise effectively
stayed) or (ii) in any event shall be promptly fully bonded or otherwise
effectively stayed);
(e) Liens securing Indebtedness permitted by Section 6.1(f) hereof,
which Liens existed prior to the date on which the applicable Subsidiary became
a Subsidiary of the Borrower (other than Liens created in connection with, or in
anticipation of, such Subsidiary becoming a Subsidiary of the Borrower);
(f) Liens created under any Fundamental Document;
(g) Liens existing on the date hereof and described on Schedule 6.6
hereto, without giving effect to any extensions or renewals thereof (except for
such Liens securing Indebtedness expressly permitted to be extended pursuant to
Section 6.1 hereof); and
(h) rights of first offer or similar rights granted in connection
with the equity interests of a Joint Venture.
SECTION 6.6. Transactions with Affiliates.
----------------------------
Except for transactions expressly permitted by the other provisions of
this Agreement, directly or indirectly enter into any transaction with an
Affiliate (other than the Borrower) on terms less favorable (including, but not
limited to, price and credit terms) to the Borrower or any Subsidiary of the
Borrower than would be the case if such transaction had been
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<PAGE>
effected at arms length with a Person other than an Affiliate.
SECTION 6.7. Dividends and other Restricted Payments.
---------------------------------------
Declare, make or incur any liability to make any Restricted Payments
except for Restricted Payments by any Subsidiary of the Borrower to the Borrower
or any other Subsidiary of the Borrower.
SECTION 6.8. Joint Ventures.
--------------
(a) Except as shall be set forth on Schedule 6.8 hereto, be a general
partner of any Person, provided, however, that a Joint Venture Subsidiary may be
-------- -------
a general partner of a non-wholly owned Subsidiary or Joint Venture; and
(b) Except as shall be set forth on Schedule 6.8 hereto, permit a
Joint Venture to incur, assume or suffer to exist any Indebtedness which is
recourse to the Borrower or any of their respective Subsidiaries, other than
the applicable Joint Venture Subsidiary or Joint Venture.
7. EVENTS OF DEFAULT
In the case of the happening and during the continuance of any of the
following events (herein called "Events of Default"):
-----------------
(a) any representation or warranty made by the Borrower in this
Agreement or any other Fundamental Document or any representation and warranty
made at any time after the date hereof by the Borrower or any Subsidiary of the
Borrower in connection with this Agreement, any other Fundamental Document or
the Borrowings hereunder, shall prove to have been, or to be, taken together
with all such other representations and warranties, false or misleading in any
material respect when made or delivered; provided, however, that no Event of
-------- -------
Default shall occur hereunder based on the inaccuracy of any financial
projections unless such financial projections were not prepared in good faith or
when made, did not represent the reasonable, good faith opinion of the
Borrower or Subsidiary of the Borrower of the most probable course of its
business;
(b) default shall be made in the payment of any principal of, or
interest on, the Note or of any fees or other amounts payable by the Borrower
hereunder, when and as the same shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise and, in the case of payments of interest, such default
shall continue unremedied for three (3) Business Days, and in the case of
payments other than of any principal amount of, or interest on, the Note, such
default shall continue unremedied for three (3) days after receipt by the
Borrower of an invoice therefor;
(c) default shall be made by the Borrower in the due observance or
performance
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<PAGE>
of any covenant, condition or agreement contained in Section 5.1(b) (with
respect to notice of Defaults or Events of Default) or Article 6 of this
Agreement;
(d) default shall be made by the Borrower in the due observance or
performance of any other covenant, condition or agreement to be observed or
performed pursuant to the terms of this Agreement or any other Fundamental
Document and such default shall continue unremedied for thirty (30) days after
the Borrower obtains knowledge of such occurrence;
(e) default in payment shall be made with respect to any Indebtedness
(other than the Indebtedness incurred by the Borrower hereunder) of the Borrower
or any Subsidiary of the Borrower in an amount or amounts in excess of
$2,000,000 in the aggregate, or any other default shall occur with respect to
the performance of any other obligation incurred in connection with any such
Indebtedness, if the effect of such other default is, or with the giving of
notice or passage of time or both would be, to accelerate the maturity, of such
Indebtedness or to permit the holder thereof (after giving effect to any
applicable grace periods) to cause such Indebtedness to become due prior to its
stated maturity, or any such Indebtedness shall not be paid when due, whether at
the due date thereof or at acceleration thereof or otherwise, or any other
circumstance shall arise (other than the mere passage of time) by reason of
which the Borrower or any Subsidiary of the Borrower is required (prior to any
scheduled redemption or repurchase) to redeem or repurchase, or offer to holders
the opportunity to have redeemed or repurchased, any such Indebtedness;
(f) the Borrower or any material Subsidiary of the Borrower shall
generally not pay its debts as they become due or shall admit in writing its
inability to pay its debts, or shall make a general assignment for the benefit
of creditors; or the Borrower or any material Subsidiary of the Borrower shall
commence any case, proceeding or other action seeking to have an order for
relief entered on its behalf as debtor or to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking
appointment of a receiver, administrative receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its property, or
shall file an answer or other pleading in any such case, proceeding or other
action admitting the material allegations of any petition, complaint or similar
pleading filed against it or consenting to the relief sought therein; or the
Borrower or any material Subsidiary of the Borrower shall take any action to
authorize any of the foregoing;
(g) any involuntary case, proceeding or other action against the
Borrower or any material Subsidiary of the Borrower shall be commenced seeking
to have an order for relief entered against it as debtor or to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or its debts under any law
relating to bankruptcy, insolvency, reorganization or relief of debtors, or
seeking appointment of a receiver, administrative receiver, trustee, custodian
or other similar official for it or for all or any substantial part of its
property, and such case, proceeding or other action (i) results in the
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<PAGE>
entry of any order for relief against it or (ii) shall remain undismissed for a
period of sixty (60) days;
(h) final judgment(s) for the payment of money in excess of
$2,000,000, in the aggregate, shall be rendered in the aggregate, against the
Borrower or any Subsidiary of the Borrower and within thirty (30) days from the
entry of such judgment(s), it shall not have been discharged or stayed pending
appeal or shall not have been discharged within thirty (30) days from the entry
of a final order of affirmance on appeal;
(i) this Agreement shall, for any reason, not be, or shall cease to
be, in full force and effect or shall be declared, or asserted to be, null and
void, or shall not give, or shall cease to give, the Lender the Liens in the
Collateral purported to be created hereby, in favor of the Lender, superior to
and prior to the rights of all third Persons and subject to no other Liens
(except to the extent expressly permitted herein), or the validity or
enforceability of the Liens granted, to be granted, or purported to be granted,
hereby shall be contested by the Borrower or any of its Affiliates;
(j) a "change in control" shall occur; as used herein a "change in
---------
control" shall mean (i) the failure of Mtel to directly or indirectly own a
- -------
majority of the outstanding capital stock of the Borrower owned by it on the
date hereof, or (ii) "Continuing Directors" shall no longer constitute at least
a majority of Mtel's Board of Directors, and a "Continuing Director" means any
-------------------
individual who at the date hereof was a member of Mtel's Board of Directors and
any new director who was specifically approved by a majority of the directors on
Mtel's Board of Directors who at the time of such individual's initial election
or appointment to such Board, were either directors at the date hereof or whose
election was previously so approved, or (iii) the acquisition by any Person or
group (as defined in the Securities Exchange Act of 1934 and the regulation
thereunder) of ownership and/or voting control of more than 30% of Mtel's issued
and outstanding common stock;
then, in every such event and at any time thereafter during the continuance of
such event, the Lender may take any or all of the following actions, at the same
or different times: (1) terminate forthwith the Commitment and/or (2) declare
the principal of and the interest on the Loans and the Note and all other
amounts payable hereunder or thereunder to be forthwith due and payable,
whereupon the same shall become and be forthwith due and payable, without
presentment, demand, protest, notice of acceleration, notice of intent to
accelerate or other notice of any kind, all of which are hereby expressly
waived, anything in this Agreement or in the Note to the contrary
notwithstanding. If an Event of Default specified in paragraphs (f) or (g)
above shall have occurred, the principal of and interest on the Loans and the
Note and all other amounts payable hereunder or thereunder shall thereupon and
concurrently become due and payable without presentment, demand, protest, notice
of acceleration, notice of intent to accelerate or other notice of any kind, all
of which are hereby expressly waived, anything in this Agreement or the Note to
the contrary notwithstanding and the Commitment of the Lender shall thereupon
forthwith terminate.
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<PAGE>
8. GRANT OF SECURITY INTEREST; REMEDIES
SECTION 8.1. Security Interests.
------------------
As security for the Obligations, the Borrower hereby mortgages,
pledges, assigns, transfers, sets over, conveys and delivers to the Lender, and
grants to the Lender a security interest in, all of its right, title and
interest in and to the Collateral.
SECTION 8.2. Proceeds.
--------
The Borrower agrees to take all steps necessary to cause all sums,
monies, royalties, fees, commissions, charges, payments, advances, income,
profit, and other proceeds constituting proceeds of the Collateral to be applied
to the repayment of the Obligations.
SECTION 8.3. Credit Parties to Hold in Trust.
-------------------------------
The Borrower will, upon receipt by it of any revenue, income, profits
or other sums in which a security interest is granted by this Article 8, payable
pursuant to any agreement or otherwise, or of any check, draft, note, trade
acceptance or other instrument evidencing an obligation to pay any such sum,
hold the sum or instrument in trust for the Lender, and forthwith, without any
notice, demand or other action on the part of the Lender whatsoever (all
notices, demands, or other actions on the part of the Lender being expressly
waived), endorse, transfer and deliver any such sums or instruments or both, to
the Lender to be applied to the repayment of the Obligations.
SECTION 8.4. Collections, etc.
-----------------
Upon the occurrence and during the continuation of an Event of
Default, the Lender may, in its sole discretion, in the name of the Lender or in
the name of the Borrower or otherwise, demand, sue for, collect or receive
any money or property at any time payable or receivable on account of, or in
exchange for, or make any compromise or settlement deemed desirable with respect
to, any of the Collateral, but shall be under no obligation so to do, or the
Lender may, to the fullest extent permitted by Applicable Law, extend the time
of payment, arrange for payment in installments, or otherwise modify the terms
of, or release, any of the Collateral, without thereby incurring responsibility
to, or discharging or otherwise affecting any liability of, any of the Borrower.
The Lender shall not be required to take any steps to preserve any rights
against prior parties to the Collateral, except as may be required by Applicable
Law. If the Borrower fails to make any payment or take any action required
hereunder, the Lender may, after notice to the Borrower, make such payments and
take all such actions as the Lender reasonably deems necessary to protect the
Lender's security interests in the Collateral and/or the value thereof, and the
Lender is hereby authorized (without limiting the general nature of the
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authority hereinabove conferred) to pay, purchase, contest, or compromise any
Liens that in the judgment of the Lender appear to be equal to, prior to or
superior to the security interests of the Lender in the Collateral and any Liens
not expressly permitted by this Agreement.
SECTION 8.5. Possession, Sale of Collateral, etc.
------------------------------------
Upon the occurrence and during the continuation of an Event of
Default, the Lender may enter upon the premises of the Borrower or wherever the
Collateral may be, and take possession of the Collateral, and may reasonably
demand and receive such possession from any Person who has possession thereof,
and the Lender may take such measures as it may deem necessary or proper for the
care or protection thereof, including (without limitation) the right to remove
all or any portion of the Collateral, and with or without taking such possession
may sell, or cause to be sold, whenever the Lender shall decide, in one or more
sales or parcels, at such prices as the Lender may deem best, and for cash or on
credit or for future delivery, without assumption of any credit risk, all or any
portion of the Collateral, at any broker's board or at public or private sale,
without demand of performance or notice of intention to sell or of the time or
place of sale (except 10 days' written notice to the Borrower of the time and
place of any such public sale or sales or of the time after which any private
sale or other disposition is to be made (it being acknowledged by the Borrower
that such notice constitutes "reasonable notification") and such other notices
as may be required by Applicable Law and cannot be waived), and any Person may
be the purchaser of all or any portion of the Collateral so sold and thereafter
hold the same absolutely, free from any claim or right of whatever kind,
including any equity of redemption, of any of the Borrower, any such demand,
notice, claim, right or equity being hereby expressly waived and released. At
any sale or sales made pursuant to this Article 8, the Lender may bid for or
purchase, free (to the fullest extent permitted by Applicable Law) from any
claim or right of whatever kind, including any equity of redemption, of any of
the Borrower, any such demand, notice, claim, right or equity being hereby
expressly waived and released, any part of or all of the Collateral offered for
sale, and may make any payment on account thereof by using any claim for moneys
then due and payable to the Lender by the Borrower hereunder as a credit against
the purchase price. The Lender shall in any such sale make no representations
or warranties with respect to the Collateral or any part thereof, and the Lender
shall not be chargeable with any of the obligations or liabilities of any of the
Borrower. The Borrower hereby agrees (i) that it will indemnify and hold the
Lender harmless from and against any and all claims with respect to the
Collateral asserted before the taking of actual possession or control of the
relevant Collateral by the Lender pursuant to this Article 8, or arising out of
any act of, or omission to act on the part of, any Person (other than the
Lender) prior to such taking of actual possession or control by the Lender, or
arising out of any act on the part of any of the Borrower or any of their agents
before or after the commencement of such actual possession or control by the
Lender; and (ii) the Lender shall not have any liability or obligation to the
Borrower arising out of any such claim except for acts of willful misconduct or
gross negligence or acts not taken in good faith. In any action hereunder, the
Lender shall be entitled to the appointment of a receiver without notice, to the
extent permitted by Applicable Law, to take possession of all or any portion of
the Collateral and to exercise such powers as the court shall confer upon the
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receiver. Notwithstanding the foregoing, the Lender shall be entitled to apply,
without prior notice to the Borrower, any cash or cash items constituting
Collateral in the possession of the Lender to payment of the Obligations.
SECTION 8.6. Application of Proceeds on Default.
----------------------------------
Upon the occurrence and during the continuance of an Event of Default,
the balances in any account of the Borrower with the Lender, all other income
on the Collateral, and all proceeds from any sale of the Collateral pursuant
hereto, shall be applied first, toward payment of the reasonable costs and
expenses incurred by the Lender in enforcing this Agreement, in realizing on or
protecting any Collateral and in enforcing or collecting any of the Obligations
or any Guaranty thereof, including, without limitation, the reasonable
attorney's fees and expenses incurred by the Lender, and then to the Obligations
in such order as the Lender may elect. Any amounts remaining after such payment
shall be remitted to the Borrower or as a court of competent jurisdiction may
otherwise direct.
SECTION 8.7. Power of Attorney.
-----------------
Upon the occurrence and during the continuation of an Event of Default
(a) the Borrower does hereby irrevocably make, constitute and appoint the Lender
and any of its officers or designees its true and lawful attorney-in-fact with
full power in the name of the Lender or the Borrower to receive, open and
dispose of all mail addressed to the Borrower, and to endorse any notes, checks,
drafts, money orders or other evidences of payment relating to the Collateral
that may come into the possession of the Lender, with full power and right to
cause the mail of the Borrower to be transferred to the Lender's own offices or
otherwise, and to do any and all other acts necessary or proper to carry out the
intent of this Agreement and the grant of the security interests hereunder and
under the other Fundamental Documents, and the Borrower hereby ratifies and
confirms all that the Lender or its substitutes shall properly do by virtue
hereof; (b) the Borrower does hereby further irrevocably make, constitute and
appoint the Lender or any of its officers or designees its true and lawful
attorney-in-fact in the name of the Lender or the Borrower (i) to enforce all of
the Borrower's rights under and pursuant to all agreements with respect to the
Collateral, all for the sole benefit of the Lender, (ii) to enter into and
perform such agreements as may be necessary in order to carry out the terms,
covenants and conditions of the Fundamental Documents that are required to be
observed or performed by the Borrower, (iii) to execute such other and further
mortgages, pledges and assignments of the Collateral, and related instruments or
agreements, as the Lender may reasonably require for the purpose of perfecting,
protecting, maintaining or enforcing the security interests granted to the
Lender hereunder and under the other Fundamental Documents, and (iv) to do any
and all other things necessary or proper to carry out the intention of this
Agreement and the grant of the security interests hereunder and under the other
Fundamental Documents and the Borrower hereby ratifies and confirms in advance
all that the Lender as such attorney-in-fact or its substitutes shall properly
do by virtue of this power of attorney.
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SECTION 8.8. Financing Statements, Direct Payments, Confirmation of
------------------------------------------------------
Receivables and Audit Rights.
- ----------------------------
The Borrower hereby authorizes the Lender to file UCC financing
statements and any amendments thereto or continuations thereof and any other
appropriate security documents or instruments and to give any notices necessary
or desirable to perfect the Lien of the Lender on the Collateral, in all cases
without the signature of the Borrower or to execute such items as attorney-in-
fact for the Borrower. The Borrower further authorizes the Lender (i) to notify
any account debtors that all sums payable to the Borrower relating to the
Collateral shall be paid directly to the Lender and (ii) to confirm (which
request for confirmation shall, prior to the occurrence of an Event of Default
or at any time when an Event of Default is not continuing, be directed by the
Lender to the independent public accountants of the Borrower, which independent
public accountants shall request such confirmation from the applicable account
debtor and upon receipt thereof, provide such confirmation to the Lender) with
any account debtors the amounts payable by them to the Borrower with regard to
the Collateral.
SECTION 8.9. Termination.
-----------
The security interests granted under this Article 8 shall terminate
when all the Obligations have been fully paid and performed, and the Commitment
shall have terminated. Upon request by the Borrower following such termination,
the Lender will, at the expense of the Borrower, execute and deliver to the
Borrower such documents (in form and substance satisfactory to the Lender) as
the Borrower shall reasonably request to evidence such termination.
SECTION 8.10. Remedies Not Exclusive.
----------------------
The remedies conferred upon, or reserved to, the Lender in this
Article 8 are intended to be in addition to, and not in limitation of, any other
remedy or remedies available to the Lender. Without limiting the generality of
the foregoing, the Lender shall have all the rights and remedies of a secured
party under Article 9 of the New York Uniform Commercial Code and any other
Applicable Law.
9. MISCELLANEOUS
SECTION 9.1. Notices.
-------
Notices and other communications provided for herein shall be in
writing and shall be delivered or mailed (or if by telecopier, delivered by such
equipment) addressed, if to the Lender, to it at 1301Avenue of the Americas, New
York, New York 10019, Attn: Richard Teitelbaum, Telecopier No.: (212) 261-7147
and if to the Borrower, to it at its address set forth on the signature pages
hereof, or such other address as such party may from time to time designate by
giving written notice to the other parties hereunder. All notices and other
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communications given to any party hereto in accordance with the provisions of
this Agreement shall be deemed to have been given on (i) the fifth Business Day
after the date when sent by registered or certified mail, postage prepaid,
return receipt requested, if by mail, (ii) when delivered, if delivered by hand
or courier service or (iii) when receipt is acknowledged, if by telecopier, in
each case addressed to such party as provided in this Section 9.1 or in
accordance with the latest unrevoked written direction from such party.
SECTION 9.2. Survival of Agreement, Representations and Warranties,
------------------------------------------------------
etc.
- ----
All warranties, representations and covenants made by the Borrower
herein or in any certificate or other instrument delivered by the Borrower or on
its behalf in connection with this Agreement or any other Fundamental Document
shall be considered to have been relied upon by the Lender and shall survive the
making of the Loans herein contemplated and the issuance and delivery to the
Lender of the Note, regardless of any investigation made by the Lender or on its
behalf and shall continue in full force and effect so long as any Obligation due
or to become due hereunder is outstanding and unpaid and so long as the
Commitment has not been terminated in its entirety. All statements in any such
certificate or other instrument shall constitute representations and warranties
by the Borrower hereunder.
SECTION 9.3. Successors and Assigns; Loan Sales; Participations.
--------------------------------------------------
(a) Whenever in this Agreement any of the parties hereto is referred
to, such reference shall be deemed to include the successors and assigns of such
party (provided, however, that the Borrower shall not assign its rights and
-------- -------
obligations hereunder without the prior written consent of the Lender), and all
covenants, promises and agreements by or on behalf of the Borrower which are
contained in this Agreement shall inure to the benefit of the successors and
assigns of the Lender.
(b) The Lender may (but only with the prior written consent of the
Borrower which consent shall not be unreasonably withheld or delayed, and shall
not be required at any time while an Event of Default is continuing) assign to
any commercial lender or financial institution which makes or invests in loans
in the ordinary course of its business, all or a portion of its interests,
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment and the same portion of the Loans at the time
owing to it).
(c) The Lender may without the consent of the Borrower sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment and the Loans owing to it and the Note held by
it); provided, however, that (i) any the Lender's obligations under this
-------- -------
Agreement shall remain unchanged, (ii) such participant shall not be granted any
voting rights or any right to control the vote of the Lender under this
Agreement, except with respect to proposed changes to interest rates, amounts of
Commitment, final maturity of Loans, releases of substantially all the
Collateral and fees (as applicable to such participant), (iii) the
- 32 -
<PAGE>
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iv) the participating banks or other entities
shall be entitled to the cost protection provisions contained in Sections 2.8
and 2.9 hereof but a participant shall not be entitled to receive pursuant to
such provisions an amount larger than its share of the amount to which the
Lender granting such participation would have been entitled to receive and (v)
the Borrower shall continue to deal solely and directly with the Lender in
connection with the Lender's rights and obligations under this Agreement.
(d) The Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.3, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to the Lender by
or on behalf of the Borrower; provided that prior to any such disclosure, each
--------
such assignee or participant or proposed assignee or participant shall agree to
preserve the confidentiality of any information relating to any of the Borrower
received from the Lender.
(e) The Borrower hereby consents that the Lender may at any time and
from time to time pledge or otherwise grant a security interest in any Loan or
any Note evidencing the Loans (or any part thereof) to any Federal Reserve Bank.
SECTION 9.4. Expenses; Documentary Taxes.
---------------------------
Whether or not the transactions hereby contemplated shall be
consummated, the Borrower agrees to pay all reasonable out-of-pocket expenses
incurred by the Lender in connection with the negotiation, preparation,
execution, delivery, waiver or modification and administration of this Agreement
and any other documentation contemplated hereby, the Note, the making of the
Loans and the Collateral, but not limited to, the reasonable fees and
disbursements of Morgan, Lewis & Bockius LLP, special counsel for the Lender,
and any other counsel or consultants that the Lender shall retain, as well as
all reasonable out-of-pocket expenses and all allocated costs of in-house
counsel incurred by the Lender in the enforcement or protection of its rights
and remedies in connection with this Agreement, the Note, or the other
Fundamental Documents (including, without limitation, in connection with any
bankruptcy, reorganization or other similar proceeding), and with respect to any
action which may be instituted by any Person against the Lender in respect of
any of the foregoing, or as a result of any transaction, action or nonaction
arising from any of the foregoing, including but not limited to the fees and
disbursements of any counsel for the Lender. Such payments shall be made on the
date of execution of this Agreement and thereafter on demand. The Borrower
agrees that it shall indemnify the Lender from and hold it harmless against any
documentary taxes, assessments or charges made by any Governmental Authority by
reason of the execution and delivery of this Agreement or the Note. The
obligations of the Borrower under this Section shall survive the termination of
this Agreement and/or the payment of the Loans.
SECTION 9.5. Indemnity.
---------
- 33 -
<PAGE>
Further, by the execution hereof, the Borrower agrees to indemnify and
hold harmless the Lender and its directors, officers, employees and agents (each
an "Indemnified Party") (to the fullest extent permitted by law) from and
against any and all expenses, losses, claims, demands, judgments, damages and
liabilities (including liabilities for penalties) incurred by any of them as a
result of, arising out of, or in any way related to, or by reason of, any
investigation, litigation or other proceeding (whether or not the Lender is a
party thereto) related to the entering into and/or performance of any
Fundamental Document or the use of the proceeds of any Loans hereunder or the
consummation of any other transaction contemplated in any Fundamental Document,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified). If any proceeding, including any
governmental investigation, shall be instituted involving any Indemnified Party,
in respect of which indemnity may be sought against the Borrower, such
Indemnified Party shall promptly notify the Borrower in writing, and the
Borrower shall assume the defense thereof on behalf of such Indemnified Party
including the employment of counsel (reasonably satisfactory to such Indemnified
Party) and payment of all reasonable expenses. Any Indemnified Party shall have
the right to employ separate counsel in any such proceeding and participate in
the defense thereof, but the fees and expenses of such separate counsel shall be
at the expense of such Indemnified Party unless (i) the employment of such
separate counsel has been specifically authorized by the Borrower or (ii) the
named parties to any such action (including any impleaded parties) include such
Indemnified Party and the Borrower, and such Indemnified Party shall have been
advised by its counsel that there may be one or more legal defenses available to
such Indemnified Party which are different from or additional to those available
to the Borrower (in which case the Borrower shall not have the right to assume
the defense of such action on behalf of such Indemnified Party, it being
understood, however, that the Borrower shall not, in connection with any one
such action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees or expenses of more than one separate firm of
attorneys for all such Indemnified Parties). The Borrower shall not be liable
for any settlement of any such proceeding effected without the written consent
of the Borrower, but if settled with the written consent of the Borrower or if
there is a final judgment for the plaintiff in any such action, the Borrower
agrees to indemnify and hold harmless any Indemnified Party from and against any
loss or liability by reason of such settlement or judgment. At any time after
the Borrower has assumed the defense of any proceeding involving any Indemnified
Party in respect of which indemnity has been sought against the Borrower, such
Indemnified Party may elect, by written notice to the Borrower, to withdraw its
request for indemnity and thereafter the defense of such proceeding shall be
maintained by counsel of the Indemnified Party's choosing and at the Indemnified
Party's expense. The foregoing indemnity agreement includes any reasonable
costs incurred by an Indemnified Party in connection with any action or
proceeding which may be instituted in respect of the foregoing by the Lender or
by any other Person either against the Lender or in connection with which any
officer or employee of the Lender is called as a witness
- 34 -
<PAGE>
or deponent, including, but not limited to, the reasonable fees and
disbursements of Morgan, Lewis & Bockius LLP, counsel to the Lender and any out-
of-pocket costs incurred by the Lender in appearing as a witness or in otherwise
complying with legal process served upon them. The obligations of the Borrower
under this Section 9.5 shall survive the termination of this Agreement and/or
payment of the Loans and shall inure to the benefit of any Person who was a
Lender notwithstanding such Person's assignment of all its Loans and Commitment
hereunder.
If the Borrower shall fail to do any act or thing which it has
covenanted to do hereunder or under a Fundamental Document, or any
representation or warranty of the Borrower shall be breached, the Lender may
(but shall not be obligated to) do the same or cause it to be done or remedy any
such breach and there shall be added to the Obligations hereunder the cost or
expense incurred by the Lender in so doing, and any and all amounts expended by
the Lender in taking any such action shall be repayable to it upon its demand
therefor and shall bear interest at 3% in excess of the Base Rate from time to
time in effect from the date advanced to the date of repayment.
SECTION 9.6. CHOICE OF LAW.
-------------
THIS AGREEMENT AND THE NOTE SHALL IN ALL RESPECTS BE CONSTRUED IN
ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK WHICH ARE
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH STATE AND,
IN THE CASE OF PROVISIONS RELATING TO INTEREST RATES, ANY APPLICABLE LAWS OF THE
UNITED STATES OF AMERICA.
SECTION 9.7. No Waiver.
---------
No failure on the part of the Lender to exercise, and no delay in
exercising, any right, power or remedy hereunder under the Fundamental Documents
or under the Note shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
All remedies hereunder are cumulative and are not exclusive of any other
remedies provided by law.
SECTION 9.8. Extension of Maturity.
---------------------
Except as otherwise specifically provided in Article 2 hereof, should
any payment of principal of, or interest on, the Note or any other amount due
hereunder become due and payable on a day other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day and, in
the case of principal, interest shall be payable thereon at the rate herein
specified during such extension.
SECTION 9.9. Amendments, etc.
----------------
- 35 -
<PAGE>
No modification, amendment or waiver of any provision of this
Agreement, and no consent to any departure by the Borrower herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Lender, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice to or demand on the
Borrower shall entitle the Borrower to any other or further notice or demand in
the same, similar or other circumstances. Each holder of a Note shall be bound
by any amendment, modification, waiver or consent authorized as provided herein,
whether or not such Note shall have been marked to indicate such amendment,
modification, waiver or consent and any consent by any holder of a Note shall
bind any Person subsequently acquiring such Note, whether or not a Note is so
marked.
SECTION 9.10. Severability.
------------
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 9.11. SERVICE OF PROCESS; WAIVER OF JURY TRIAL.
----------------------------------------
(a) THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
THE STATE COURTS OF THE STATE OF NEW YORK AND TO THE JURISDICTION OF THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSES OF
ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS AGREEMENT
OR THE SUBJECT MATTER HEREOF, ANY FUNDAMENTAL DOCUMENT OR THE SUBJECT MATTER OF
ANY THEREOF BROUGHT BY THE LENDER. THE BORROWER TO THE EXTENT PERMITTED BY
APPLICABLE LAW (A) HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS
A DEFENSE, OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH
COURTS, ANY CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF THE
ABOVE-NAMED COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR
EXECUTION, THAT THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS
AGREEMENT OR THE SUBJECT MATTER HEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT,
AND (B) HEREBY WAIVES THE RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT OR PROCEEDING
ANY OFFSETS OR COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY OR
OTHERWISE ARISE FROM THE SAME SUBJECT MATTER. THE BORROWER HEREBY CONSENTS TO
SERVICE OF PROCESS BY
- 36 -
<PAGE>
MAIL AT ITS ADDRESS TO WHICH NOTICES ARE TO BE GIVEN PURSUANT TO SECTION 9.1
HEREOF. THE BORROWER AGREES THAT ITS SUBMISSION TO JURISDICTION AND CONSENT TO
SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE LENDER. FINAL
JUDGMENT AGAINST THE BORROWER IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION (A) BY SUIT, ACTION OR
PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND THE AMOUNT OF INDEBTEDNESS OR LIABILITY OF
THE LENDER THEREIN DESCRIBED OR (B) IN ANY OTHER MANNER PROVIDED BY OR PURSUANT
TO THE LAWS OF SUCH OTHER JURISDICTION, PROVIDED, HOWEVER, THAT THE LENDER MAY
-------- -------
AT ITS OPTION BRING SUIT, OR INSTITUTE OTHER JUDICIAL PROCEEDINGS AGAINST THE
BORROWER OR ANY OF ITS ASSETS IN ANY STATE OR FEDERAL COURT OF THE UNITED STATES
OR OF ANY COUNTRY OR PLACE WHERE THE BORROWER OR SUCH ASSETS MAY BE FOUND.
(b) TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE
WAIVED, THE BORROWER HEREBY WAIVES, AND COVENANTS THAT IT WILL NOT ASSERT
(WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN
ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION
ARISING OUT OF, OR BASED UPON, THIS AGREEMENT, THE SUBJECT MATTER HEREOF, ANY
FUNDAMENTAL DOCUMENT OR THE SUBJECT MATTER THEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE
BORROWER ACKNOWLEDGES THAT IT HAS BEEN INFORMED THAT THE PROVISIONS OF THIS
SECTION 9.11(b) CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH THE LENDER HAS
RELIED, IS RELYING AND WILL RELY IN ENTERING INTO THIS AGREEMENT AND ANY OTHER
FUNDAMENTAL DOCUMENT. THE LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF
THIS SECTION 9.11(b) WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
BORROWER TO THE WAIVER OF ITS RIGHTS TO TRIAL BY JURY.
SECTION 9.12. Headings.
--------
Section headings used herein are for convenience only and are not to
affect the construction of or be taken into consideration in interpreting this
Agreement.
SECTION 9.13. Execution in Counterparts.
-------------------------
This Agreement may be executed in any number of counterparts, each of
which shall constitute an original, but all of which when taken together shall
constitute one and the same instrument.
- 37 -
<PAGE>
SECTION 9.14. Entire Agreement.
----------------
This Agreement represents the entire agreement of the parties with
regard to the subject matter hereof and the terms of any letters and other
documentation entered into between the Borrower and the Lender prior to the
execution of this Agreement which relate to Loans to be made hereunder, shall be
replaced by the terms of this Agreement.
- 38 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and the year first written.
BORROWER:
MTEL LATIN AMERICA, INC.
By
----------------------------
Name:
Title:
NOTICES:
-------
Address: 200 South Lamar Street
Security Centre
South Building
Jackson, MS 39201
Attention: Thomas R. Ferguson
Telephone No.: (601) 944-1300
Telecopier No.: (601) 944-7158
CREDIT LYONNAIS NEW YORK BRANCH
By
-----------------------------
Name:
Title:
Address: 1301 Avenue of the
Americas
New York, NY 10019
Attention: Bruce M. Yeager
Telephone No.: (212) 261-7840
Telecopier No.: (212) 261-3318
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Mobile
Telecommunication Technologies Corp. Consolidated Balance Sheet as of June 30,
1997 and Consolidated Statement of Operations for the six months ended June 30,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 17,971,586
<SECURITIES> 0
<RECEIVABLES> 65,330,911
<ALLOWANCES> 17,995,701
<INVENTORY> 0
<CURRENT-ASSETS> 78,439,533
<PP&E> 436,029,588
<DEPRECIATION> 141,288,902
<TOTAL-ASSETS> 770,635,318
<CURRENT-LIABILITIES> 89,306,871
<BONDS> 403,981,795
38,075
0
<COMMON> 544,788
<OTHER-SE> 248,018,740
<TOTAL-LIABILITY-AND-EQUITY> 770,635,318
<SALES> 189,529,744
<TOTAL-REVENUES> 189,529,744
<CGS> 0
<TOTAL-COSTS> 210,576,477
<OTHER-EXPENSES> 2,221,390
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,359,864
<INCOME-PRETAX> (42,159,349)
<INCOME-TAX> 2,418,869
<INCOME-CONTINUING> (44,578,218)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (44,578,218)
<EPS-PRIMARY> (0.94)
<EPS-DILUTED> (0.94)
</TABLE>
